“Lovers of print are simply confusing the plate for the food.”
― Douglas Adams
You can’t tell the full story of the impact to publishers with just a cost-of-goods chart. The big difference between ebooks and print books is that a publisher is only paid for an ebook at the time a reader purchases it. Publishers sell print books to bookstores and wholesalers not readers. That means they are paid whether the book sells or remains on the shelf. It is true unsold merchandise can be returned for credit but the publisher generally is paid for that inventory before retailers eventually decide to return them. This float inventory of unsold stock represents a significant amount of cash flow for a publisher and offsets a lot of overhead from office space,sales force, reading slushpiles, attending trade shows planning author tours. This shrinking float inventory also means smaller print runs which increases unit costs for each book which the publisher can’t increase the retail on becasue they have to be competitive with ebook prices and so instead the print books become less profitable.
So the problem for traditional publishers is not the cost of making an ebook but the loss of the middle man transaction for unpurchased shelf stock to retailers and wholesalers. As the percentage of ebook sales increases and ebook retails decrease publishers are losing more and more revenue used to cover overhead. ~ eP
This graph from the New York Times helps answer the common question “Why do ebooks cost so much?”
I will be examining this graph in more detail in the coming days.