Back and forth the discussions go about pricing. eBookers think ebooks are overpriced if they are priced above the Amazon-imposed $9.99 ceiling, and even at that price point the price is much too high. Publishers cringe at the $9.99 and lower pricing. eBookers say prove that the costs justify the high pricing. Neither side listens much to the other; ebookers give no credence to any publisher claims and publishers dismiss ebookers as being uninformed. On different forums battle lines are drawn between those who see some merit in publisher claims and some value in what publishers do and those who give publishers very short shrift on all counts.
But recently an independent author, Randolph Lalonde, a sci fi/fantasy author who self publishes his work in ebook form, and who has successfully built a following that allows him to devote full-time to his writing and earn a living at it, has chimed in on the debate via his blog with an article about the cost of ebook production. With his permission, his article is reprinted here.
Understanding the Cost of eBooks
Recently I had more than one spirited conversation on a popular eBook forum about the value of an eBook. A vocal number of posters stated that it was a digital file, and, like the air we breathe, it should be free and available to all. Others stated that people work hard to produce an enjoyable eBook, so it was only fair that they be compensated. Since I make a living from my eBook sales, rarely sell in print, and believe that I should be paid like anyone else who works for a living, you can easily imagine which side I was on. I’m not going to extend that debate here. I’d rather state the facts of the matter and let anyone speak their minds in the comments section. I’m here to write about what goes into creating an eBook file. For the most part, it’s much like any conventional book.
Writing
The writer puts the most time into the work, any where from a few months to a few years. Finding and agent or submitting the book to publishers costs money, and there’s no reason why a conventionally published author shouldn’t be compensated for that as well. When the book is accepted, a publisher may issue an advance against royalties, which can be anywhere from $1.00 to $100,000.00 or more. What’s important to remember is that the author won’t receive any royalty payments until that advance is “earned out.” So, if the author received a $1,000.00 royalty, then the book has to earn $1,000.00 in royalties to cover the advance, THEN the author starts seeing royalty checks with their quarterly statements. Royalties are one of the continual costs to an eBook. They never go away and they’re due every time an eBook sells. Most Authors receive between 15% – 25% of the eBook’s suggested retail price as of this writing. That MAY increase, but there’s no guarantee. (Note: Most authors only receive 6-9% of the suggested retail price of their printed books. eBooks have the potential to increase the incomes of many writers who cannot currently afford to write full time).
When you pay for an eBook more of your money goes into the author’s pocket. He/she has to cover their living expenses while they churn out their next masterpiece. Most authors also have to pay an agent with their creative earnings, and some have other people on their payrolls like an assistant or publicist.
Editing
Quality editing costs a great deal of money, but every publishing house or indie author should have access to a good editor’s services. The typical best seller has passed through the hands of one or more editors and several paid proof readers who pass notes on plot, character, setting, and other details back to the author, while they smooth out any grammatical bumps. Most of the typos and such are also caught. There’s a whole staff just in that stage of development, and most Indie Presses treat books the same way with more than two or three sets of eyes on a single work. All these people have to be paid. This isn’t a continual cost, but a high initial investment in any book.
Licensing
Another step involved in getting a book ready involves acquiring the rights to any songs or copyrighted quotes that may be contained within. Some licensing agreements are satisfied with a one time fee, but others require continual royalties to be paid for several years. I’m not a licensing expert, so I don’t know how often either method of payment is employed, but I’ve seen examples of both. That can be another continual expense to publishing an eBook, especially if said book is part of a larger franchise, such as Star Wars or Star Trek.
Design
Cover creation and design costs large publishers thousands of dollars per book on average. It’s true that they’ve found many short cuts and some have staff artists who come at a lower price per cover, but it’s a consideration whether they paid $1,000.00 or $5,000.00. Some publishers buy limited license rights to an image, costing just a few dollars at first and requiring an extra license fee as the book sells more than 500,000 copies. (I entered several agreements like this for some of the more recent Spinward Fringe covers). This can be very cost effective, but most publishers still have to pay an in-house designer even if they do get a steal of a deal on their cover art.
Publisher’s Expenses
They have to keep their doors open if they want to continue providing the books they publish to the public. That means a portion of every sale goes towards just keeping the publisher in business. Publishing is very expensive, a lot of Indie pubs don’t make it through their first year and many others close before their third anniversary. Even Indie eBook companies. If the doors close and the publisher still has the rights to all those books, they will disappear. That’s right. All the books they provide would be pulled from the digital shelves and could simply live out the rest of their contracted rights in the dark, where you can’t get to them. Under ideal conditions another publishing house will swoop in and buy the rights for a bargain price, but the chances are that those books will disappear for several months or years while the new owner accounts for the property, ensures it’s up to their standards and sets it up with their distributors properly.
Advertising
Do I really have to go into detail here? It costs a ton of cash for a conventional publisher and includes advance review copies, magazine, newspaper space etc… Publicists also fall into this category as far as I’m concerned, even though there has been one who disagrees with me on this point. She saw herself as more of an event manager, and hype builder. Maybe she is, who am I to disagree? Still, I’m sticking publicists here because I don’t know where else to put them.
Formatting and Quality Assurance
Finally, we’ve come to one of the last steps. Formatting. A few publishers already outsource this step to cubicle farms in India and other parts of the world, but even then it costs quite a bit of cash to format a single eBook. Most of the pubs, big and small, have designers or outsource to formatting companies that cost hundreds if not thousands of dollars per title. At this point it’s almost a continual cost. As new readers and formats come out some publishers format their entire catalog to fit. I’m assuming this won’t be a continual cost, since we’ve (Apple) pretty much agreed that ePub is an acceptable standard.
Customer Support
This is rarely a large part of a publisher’s infrastructure, but since the arrival of eBooks support staff has increased exponentially for some. Most of the new support teams are dedicated solely to eBooks. For most publishers this growing support staff generally speaks only to retailers who forward problems their users have had with the files they provided.
Distribution and Sales
The biggest continual cost to an individual eBook is distribution and retail sale. Based on the new model introduced by Apple and partially adopted by Amazon in June, 2010, the retailer will be taking 30% of the retail price. Until recently, 65% was standard. Regardless of the size, the vendor wants their cut, and part of what you pay for an eBook keeps their doors open as well. We like to think that “there will always be book stores,” but the closure of many brick and mortar stores has orphaned entire communities who have to order online now. Those stores employed people who are now out of work.
Online retailers who sell eBooks aren’t invincible either. They employ people, sometimes just a hard working few, other times there are dozens or hundreds people who ensure your books are available when you want them, how you want them.
These retailers often provide the customer support services that the publisher doesn’t. Indie Authors, Indie Publishers and large Publishers as well as customers all benefit from a good retailer, and maintaining a quality sales site costs a great deal of money from the development to delivery stages.
A Note On The Indie Author
Hi. I’m an Indie, in case you didn’t already know. In fact, I’m a full time Indie, which is rare! Every morning I remind myself of how fortunate I am that I have readers who pay for my work and that there are enough of them enjoying what I do so I can keep at it full time. I do the writing, publicity, rights acquisition, legal work, digital formatting, accounting, publicity, artwork purchasing, and customer support solo. I don’t have any help on that stuff, but it’s fantastic that readers pay for the time I put in and I enjoy most of it, believe it or not. I get help with editing (which I will be paying for later this year), and my beta readers are intelligent, kind volunteers who took over a year to find. It would be nice to some day provide printed copies of the books they helped with or maybe even something like a poster, or T-Shirt, or a arty! For now they just enjoy reading, thank God, because I can’t afford any other reward.
I don’t pay for advertising since I can’t afford to, and that’s fine, but there are a lot of peripheral things that cost cash, and they often have to be put off to the side until I receive a larger royalty check (it’s happened once so far! It could happen again, right?), or have a personal windfall. Since I don’t have an advertising budget, I have to invest time, and I’m not complaining since I get to meet other authors and many readers that way.
The downside to being an Indie writer is that there’s a common perception that I “sit around and make stuff up all day.” I wish! Most days I only get to work creatively for 2-6 hours, while the rest of the day is spent on administration, direction, peripheral content creation, design, and many, many necessary evils and joys online. In the last week the evils outweighed the joys, however, and resulted in the issuance of legal notices to sites that were hosting pirated copies of my work. Thankfully, both sites removed the pirated copies.
The Paper vs. eBook Argument
I’ll touch on this briefly. All of the above time and money expenses apply to eBooks and paper or just eBooks. eBooks are less expensive to produce, but they do carry continual costs (such as writer royalties – we’ve gotta eat too!) and startup costs.
The Pricing of an eBook
I’m not going to go into what an eBook SHOULD cost, as the readers will have very little to do with the price they pay for eBooks. That’s difficult to hear, I realize, but in the end the big six publishers and their equally large distributors will determine the cost of non-independent works regardless of what readers and indie authors say or do. Recently, MacMillan Publishing (one of the big six, and owner of TOR), forced Amazon to allow them to sell their new releases at $14.99. There’s lot to this story, which is explored very well here.
Another example: Amazon.com is forcing Indies into repricing their books in June. If I price my book at $0.99-$2.98 I’ll receive a 35% royalty, but if my book is priced between $2.99 and $9.99 my royalty will be 70%. This will lead to the near disappearance of the $0.99 eBook. I’m assuming that the main reason behind this is because big publishers can’t keep their doors open while selling their eBooks at a big loss, and they’re angry at the Independents who leap up the top 100 charts with a book priced at $0.99. There could be other reasons, and keep in mind that no one at Amazon or a major publishing house has made a statement verifying my previous assumption, but the fact remains: In June, few Indies will offer their books at $0.99 on Amazon.com. It’s good for authors, who will be encouraged to get a fairer payment for their work, but readers, who didn’t have a say in the decision, won’t be happy.
I hope this has been informative, and that some of you feel better when you’re paying for a digital file in the future, whether the cost is $0.99 or $9.99. I don’t have a huge book budget myself, and I look for bargains. I don’t regret paying for a book I’ve sampled, however, since I know the money I sent out keeps the books coming.
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Perhaps there is more truth than fiction in publisher laments about pricing, but just as Randy Lalonde has taken the time to explain costs in detail, so should publishers. Publishers need to address their consumers — the ultimate ebook-buying ebookers – directly and forthrightly or the war will rage on and ultimately it will be the publishers who suffer most because they take the gamble that someone is interested in their product without truly knowing in advance if book buyers will respond positively.
Editor’s Note: Rich Adin is an editor and owner of Freelance Editorial Services, a provider of editorial and production services to publishers and authors. This is reprinted, with permission, from his An American Editor blog. PB
Related: Henry Melton talks self-pub book and e-book pricing
This article would be a lot more convincing with more hard numbers in it. We’ve got a few numbers here for royalties and cover art, but no where else. This is part of the problem of publishers and/or authors making the case that publishing is soooooooo expensive and ebook prices should be higher, none of them really seem to be willing to lay their cards on the table and open their account books. Mr. Adin says, “ebookers give no credence to any publisher claims and publishers dismiss ebookers as being uninformed.”, then educate us. Educate us, open your books and show us why these higher prices are justified. Don’t make abstract claims and expect us to credulously believe them.
As a customer with little visibility into the industry it just confirms my thinking. The author / publisher split is backwards with ebooks and the last people that I want fixing prices is the party with declining value.
The big variable is advertising and I would bet that for over 80% of the authors a publisher has under contract they spend almost nothing and rely on the author’s name and previous work to sell the book.
It’s the publishers job to understand the cost, understand the potential market for a book and pick authors that will make a profit based on the going price in that market. If they do a bad job they lose money. That’s business.
An interesting and enlightening discussion. I fully agree with the importance of good editors. (I’m a little leary of non-professional editors as Lalonde uses.) I do think that he can do conversions to ebook formats in-house, but could probably use non-porfessional proof-readers to check on typos and formatting errors in each format. For that, he could use friends, or even readers as volunteers.
Although I agree that most self-published books will sell for $2.99 at Amazon to take advantage of the 70% royalty, I still think that many indie authors will sell the FIRST book for as low as possible ($.99 and get only 35%) in order to get their name and work out there. Then the later ones will be $2.99 and going up. And that works.
Nothing here would indicate ANY need for prices above $9.90 for any author. if the books are good enough, and the author works on self-publicity (facebook, blogs, etc), the author should be able to sell enough to make decent money. Check J A Konrath’s self-publishing blog for further info on that including $. (http://jakonrath.blogspot.com/)
One thing that is continually left out of these discussions is the expected volume of sales at each price point. I know that I buy many ebooks priced below $10 (impulse buys perhaps) but anything over $10 receives much stronger scrutiny before purchase. If I really want to read it and know that I will read it immediately I will pay more than $10, otherwise I will almost always pass.
And then I think we need to throw the used book market into the equation. Before I started reading ebooks I rarely bought any book for more than fifty cents. Of these books the publishers and authors made virtually nothing. Being that we can’t resell or give away our ebooks after we read them, this actually helps the publishers’ profit margins even more than the original sale price of the ebook as compared to that of a paper book.
Dear Authors, Publishers, Retailers
In order to get people to spend more for e-books, there has to be some perception by the purchaser that they are really getting something of value. If I spend $8-30 on a paper book, I can read it anywhere I want, if I lug it around, lend, give or sell it to someone else.
For me to spend that same amount on an e-book, I need more freedom of use of the file. Specifically, I want the ability to read the file on any device I own, now or in the future. If I share the e-book, it is only with my wife, who uses the exact same physical devices that I do, which strikes me as being no different than letting her read a book I have finished.
Should you respect my wishes, I will respect yours and keep tight control over the e-books that I purchase, and not allow them on devices I do not CURRENTLY own. Nor will I attempt to sell, loan, give the files to be used on devices that are not mine.
What this requires, I think, is an industry standard file format. I will leave it to the more technically adept to figure out what that should be.
@Josh — I’m curious as to why publishers should open their books to justify their prices but, say, insurance companies, bankers, automakers, movie theaters, groceries, gas stations, TV manufacturers, or nearly any other industry business doesn’t need to open theirs. I am not suggesting that I like paying the prices publishers are asking, but when I don’t like it, I simply don’t buy the book. But this demand for publishers to justify their pricing with specific numbers strikes me as unfair when consumers do make the same demands on more fundamental products like groceries.
Although I am not a publisher, I understand their resistance to such demands and even think the resistance is justified. I would be more inclined to the open book argument if I saw the same fervor being put into getting my medical insurance carrier to justify its rates. I consider medical insurance a more fundamental need than buying a particular book. Don’t you?
Funny thing is he talked at length about the cost of editing, formatting, proofreading, advertising, customer support et al but NO MENTION of PRINTING cost. WAREHOUSING cost. DISTRIBUTING cost. All of which are gone or almost gone in ebook ecosystem. Yes they are replaced by data centers, which costs very little nowadays. Don’t they amount to something too??
A very nice article on indie e-publishing. Within the larger context, however, indie e-publishing bears pretty much the same relationship to corporate e-publishing that indie print-on-demand publishing does – none at all.
Rich,
Actually, if the company is a publicly traded company, they do have to open their books. That being said, I agree that publishers are free to charge what they want for books, they don’t need to justify it to their customers. However, as you indicated for youself, the customers may decide not to spend the money on the product if they think it is too expensive. That ultimately is the problem with ebooks. Publishers can get away with selling hardbacks for considerable premium over paperback books in part because the hardback is perceived to be a higher quality product — many hardbacks will remain readable decades after they have been first read, in contrast many mass market paperbacks start falling apart after a few reads. In other words people feel that the higher quality of the hard back justifies the higher price.
E-books may have an indefinite life span (at least without DRM), but they are seen by the public as being something that should not cost a lot. Therefore, it gets hard for consumers to justify (to themselves) paying a premium for an e-book over what the paper back will cost a year from now. In other words, ultimately consumers will have the final say in how much they are going to pay for books simply because they will stop buying them if the publishers over price them.
One final thought, the basic problem with most of the arguments from the publisher’s side about the cost of books essentially rests on the assumption that the publishing model needs to be essentially the same as it has been over the last 50 years or so. Personally I don’t see things that way. Guys like Randolph Lalonde , Steve Jordan and others are plotting the future of publishing. The professional publishing houses big and small always essentially had far more authors willing to write for them than they could profitably publish. Self-Publishing was possible but very expensive and it was difficult to convince book stores to stock the book. All of this meant that many authors never had a chance to publish their work. Already more and more authors are bypassing the big publishers to self publish on the internet. Yes, much of the stuff published is horrible, but so was most of the stuff published by the Big publishers. Amazon, smashwords and others are likely going to allow many more authors to get published in some form and bypass the traditional publishers all together.
This is a little bit of a jumbled presentation. Ebooks should be high because the publishers need to make money, and indie ebooks should be high because Big Six ebooks are high?
I am a freelance editor and I usually get $400-$600 for a regular-sized novel. I can format for Amazon’s DTP and send a file through Smashwords and get all major ereader files in an hour. Covers can be had for between $50 and $150 in general. Even if you go to the pros for outsourcing, you’re going to have maybe $750 tops in the production of a professional-quality ebook. And no more overhead ever, if you don’t count having to drive to the bank to withdraw a royalty check.
Sell 1,000 copies at $1.99 and you are in the black for the rest of your life.
Of course, many indies can learn the skills themselves, swap eyeballs on peer manuscripts, and have nothing but time invested.
This model has nothing to do with corporate publishing, though. I just wish people would quit acting like making an ebook was some arcane secret on the level of turning lead into gold.
@Rich
Banks already do open their books quarterly. Financial institutions numbers are published here, http://www2.fdic.gov/Call_TFR_Rpts/ , and anyone can have a look! Certainly Macmillan and friends can charge as much as they like for their books, but if they don’t justify the extra costs then I and many other readers will choose to give our money to more reasonable publishers. Many others will probably choose the darknet, and when they do I won’t take any pity on the publishers who priced themselves out of existence!