At every conference I go to publishers are saying that ebook costs are high because of all the work that goes into them and that publishers don’t save any money when they produce ebooks.  Well, Simon & Schuster seems to have been hoisted by its own petard.

Brad’s Reader caught them out:

Aside from giving specific figures on how much ebook sales have increased, the article also mentions something interesting. I’ve never heard one of the large publishing houses say this (emphasis mine):

“We got out of the gate faster than usual,” said S&S CEO Carolyn Reidy led by sales of e-books that doubled in the quarter and accounted for 17% of revenue with digital audio adding the other one percent (about $28 million). The steep increase in profits was attributed to lower shipping, production and returns costs as well as the “painful” belt-tightening that S&S has implemented over the last 18 months plus the higher sales, Reidy said.

In other words, they are admitting that because ebooks have low production costs, and low shipping and non-existant return costs, ebooks are very profitable.

As Chris Meadows points out “… this makes publishers’ refusal to increase royalty rates on e-books look even more transparent.”


  1. I guess the inevitable was impossible to keep quiet about indefinitely.

    However because everyone and his dog has known about this forever, I don’t see how it really affects the argument for higher royalties. In the end the Publishers are entitled to offer whatever royalty rate they see fit. It is up to the market and the authors to ‘persuade’ them otherwise. Only by this ‘persuasion’ will things change, the costs and earnings of the Publishers are irrelevant.

  2. Argh. Can’t help myself! It’s “hoist WITH one’s own petard,” not by. A petard was the primitive bomb besiegers would try to fling (with a hoist of some kind) over a city wall. If you weren’t careful and got caught up in the hoist, you found yourself hanging in the air with your own bomb.

    Good point, otherwise.

  3. Note, they did mention “painful belt-tightening” at work. Most business don’t like to admit that they have a lot of fat to trim or business practices to alter, either; it’s just generally referred to as “downsizing,” which usually makes resultant layoffs and division axe-ing more palatable for the outside world.

    At any rate, it’s just a confirmation of what we already knew, and a clear indication that this is what it will take for most other publishers to survive into the future.

  4. Of course eBooks have lower costs than paper books. Although paper, itself, doesn’t cost much, it doesn’t cost nothing. Shipping paper isn’t free. Warehousing paper isn’t free. The sheer handling of paper–sending and receiving–isn’t free. From a publisher perspective, eBooks are great from a cost perspective. That doesn’t mean there aren’t significant costs in producing eBooks–just that there are even more costs involved in paper books.

    As for whether these cost savings justify higher royalties… some might argue that they justify lower prices. Using the same cost savings to justify both lower prices and higher royalties might tend to squeeze the publisher. Whether this is a good thing depends on the value you put on publisher services.

    Rob Preece

  5. “The steep increase in profits was attributed to lower shipping, production and returns costs ….”

    The quote doesn’t actually state that these were ebook volume driven savings (although it’s obviously tempting to put 2+2 together etc).

    Having said that it does seem intuitive that e book production costs must be less than physical books – and one big element is better working capital management a unsold stock levels reduce to nil.

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