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What is an eBook? How do Publishers price it?

Earlier this week, Kent Anderson discussed some of the persistent misperceptions that publishers often face from critics or advocates who may not have much hands-on knowledge of the business.

The video below provides another useful refutation of a common misperception, that eBooks should cost vastly less than their print counterparts because no costs for paper, printing, binding, warehousing and distribution are incurred. From the Italian publishing house Gruppo Editorial Mauri Spagnol, the video gives a quick and clear explanation of the costs that go into producing a book, whether electronic or print, and how that impacts the book’s price.

About David Crotty

I am the Editorial Director, Journals Policy for Oxford University Press. I oversee journal policy and contribute to strategy across OUP’s journals program, drive technological innovation, serve as an information officer, and manage a suite of research society-owned journals. I was previously an Executive Editor with Cold Spring Harbor Laboratory Press, creating and editing new science books and journals, and was the Editor in Chief for Cold Spring Harbor Protocols. I received my Ph.D. in Genetics from Columbia University and did developmental neuroscience research at Caltech before moving from the bench to publishing. I have been elected to the STM Association Board and serve on the interim Board of Directors for CHOR Inc., a not-for-profit public-private partnership to increase public access to research.


30 thoughts on “What is an eBook? How do Publishers price it?

  1. Hi David

    How does OUP see their costs for an e-book as represented in this video. In the world before e-books, these costs were amortized over all the print versions, hard back. With the rise of paperbacks, the cost incurred could be amortized over two versions. But with print on demand, it becomes fuzzy. Now enter the e-book version and the costs get further distributed.

    Seldom is a book from an academic press issued only in one version. So this video becomes a self-serving misdirection of costs. It becomes even more problematic when the publishing house needs a volume of product to further amortize costs over its new catalog. There are other factors that need consideration including pricing for various markets that do not necessarily reflect the costs.

    It’s a bit problematic when a publisher simultaneously releases multiple versions and does not hold back until the basic hard bound sells sufficient so that libraries are forced to choose, as many do, to purchase the paperback version. A lot of stuff omitted and/or oversimplified.


    Posted by tom abeles | Jun 27, 2014, 8:25 am
    • I can’t really answer for OUP–I live in the world of journals and have never been part of the pricing process for books at OUP. Given the variety of products we produce–scholarly books, reference, trade, English language training, Bibles, etc., etc., I’m not sure one person could effectively explain all of our pricing strategies.

      I’m not sure that having multiple formats of a book necessarily muddles things that much. In my past experience in the scholarly book world, you base your prices on finding a balance between your costs and the amount of books you can reasonably expect to sell (some books will underperform and lose money, others will overperform and make money and in the end, hopefully you have enough of the latter to make up for the former). Adding in a new format merely means you have to include it in your projections.

      Posted by David Crotty | Jun 27, 2014, 9:45 am
  2. It’s not a fair comparison when the publisher is producing multiple formats. You still have all the costs and overheads of printing.

    Moreover, the video specified a PDF for printing (I infer further use for an ebook). Using a printing-PDF for epublishing is obsolete and inconvenient on any ereader. One of the horrors of ebooks is the PDF (i.e. Google books) that fits no screen and, in some cases, cannot be enlarged to the point of legibility. Ebook formats should be based on some sort of HTML, with fully-hyperlinked notes, contents, etc. rather than scanning the printed product.

    Back to the video comparison: When print is replaced by ebooks, the overhead load for warehouse / distribution for printed books is eliminated. You can also get rid of the cost of the in-house print and reprint buyer. Ebooks need never go out of print.

    On the other hand, royalties are much higher for ebooks – at least for trade publishers. University presses, which tend to keep royalty payments low to non-existent, could share more than they do.

    Posted by Albert Henderson | Jun 27, 2014, 9:38 am
    • It’s been a while, but in my past experience, the final output from the typesetter is a pdf, and that’s the set of files used for printing. If you’re also converting your output into ePub, or Amazon’s proprietary format, that adds more costs, which must be accounted for in your pricing as well. And while perhaps you could eliminate positions by eliminating print, in many cases you’re going to need to add equivalent positions to deal with eBooks. Who’s going to negotiate your contracts with the various eBook resellers, who’s going to do all the technological work converting into the various file formats and making sure that things actually work and look okay? Who’s going to manage your content, update to new file formats as they come along, etc.?

      And, at least in my experience, the university presses where I’ve worked pay royalties along the same lines as trade presses (in some cases, much higher percentages). The end numbers work out much lower because sales of scholarly monographs and manuals are usually vastly lower than for trade books, but the percentage of sales revenue going to the author was pretty reasonable for the books I’ve worked on (8-15%, escalating as the book sold more copies). It could be that where I was doing books was something of an author-friendly anomaly though.

      Posted by David Crotty | Jun 27, 2014, 9:52 am
      • Typesetter? Typesetters went out long ago for ebook publishers. Revise the ms in WORD (or the equivalent) for style and turn out HTML for epub and mobi (PDF if you really must print).

        You don’t need a second sales manager to deal with ebook distribution, etc.etc.

        Trade publishers are paying 25% royalties on ebooks. The last UP contract I saw offered 5% – and I suspect they planned to use the same PDF they used for print.

        Posted by Albert Henderson | Jun 27, 2014, 10:23 pm
  3. My experience on the consumer publishing side was that the cost of unsold printed copies was a substantial part of the expense. Printing any individual book may not be great but when you only sell one out of three printed, the cost of the returned two books adds up. E-books don’t have this expense, something the video does not acknowledge. Perhaps sell-through for academic publishers is 100% so it is not an issue.

    I have to agree with Mr. Abeles above: “A lot of stuff omitted and/or oversimplified.”

    Posted by David Ball | Jun 27, 2014, 10:28 am
  4. I have to say that most of the comments above totally miss the point and perpetuate the misconception. The point is that people think “most” or at least “a lot” of the costs of a print book go away for an e-book. The video does a great job of pointing out that just the opposite is the case: only a small part of the total cost of publishing the book goes away, and even those costs are offset to some extent by additional costs associated with the ebook. Sure, if the publisher produces both versions, then all costs are amortized across all copies sold (or should be); that is very different from continuing to associate all of the costs with the print and thinking the e-book is just an inexpensive add-on. And often (particularly thanks to Amazon), the ebook is expected to be priced far lower than the print, an expectation that is simply not justified by the actual costs involved.

    Posted by Bill Kasdorf | Jun 27, 2014, 11:12 am
    • Bill is of course correct. Even such print costs as printing, paper, and binding conceal the marketing messages embedded in a print edition, so when you go digital-only you have to spend more on marketing to make up for the absence of physical books in bookstores. If you want to reduce the cost of books in a marked manner, you have to work with a stripped-down editorial model, more like PLOS ONE than the Lancet. But that has nothing to do with format.

      Posted by Joseph Esposito | Jun 27, 2014, 11:19 am
      • I totally agree that this is the case with a trade book but I am skeptical that scholarly books are receiving wide distribution in B&N and independent bookstores. I would think that discoverability is an issue for both the print and e-book versions. However, my background is in consumer books so I am open to being persuaded otherwise.

        Posted by David Ball | Jun 27, 2014, 3:16 pm
  5. I see that creative accounting is not confined to Hollywood. Yes, there are a lot of costly things that can be included in the pricing of an eBook but are those things really necessary? Ask a successful self-published author such as Joe Konrath and you’ll get a much slimmer estimate than is slickly presented here.
    Even where the self-published author feels the need to obtain assistance, such as editing or proofing, these can be gotten in an a la carte fashion. Also take a look at Smashwords to see how an author can reach all major eBook venues at minimal cost.

    Posted by Frank Lowney | Jun 27, 2014, 12:06 pm
    • Perhaps worth noting that when a self-published author does desire those services (editing, cover design, etc.) that all of the costs come out of his own pocket, as opposed to being covered by a publisher who assumes the financial risk. One also must factor in the opportunity costs of spending an inordinate amount of time doing the things one’s publisher does for one, all time taken away from writing.

      Posted by David Crotty | Jun 27, 2014, 12:09 pm
    • Joe Konrath is not an authority on anything concerning publishing economics, but in any event, he certainly has no experience with the kind of peer review that is the defining characteristic of scholarly publishing.

      Posted by Joseph Esposito | Jun 27, 2014, 12:44 pm
      • This post is not about scholarly publishing, though, is it?

        I have to agree with Frank Lowney that what we’re seeing here is a whole stack of processes and gatekeepers that do not in all cases have much value for the author. The whole acquisition and filtering chain is about allocating scarce print resources among more manuscripts than can be published — something that makes no sense in a digital world where there is no limit on what can be published.

        If that video was meant to make authors more inclined to go the traditional route rather than self-publishing, I doubt it’s going to achieve its purpose. What I see here is additional hoops to jump through, and in exchange getting a royalty of about 1/10th what Amazon’s direct-publishing platform offers.

        Posted by Mike Taylor | Jun 28, 2014, 9:21 am
        • There are differences between the specifics shown here and the costs incurred in publishing scholarly monographs and manuals (for one example, the editing and fact-checking process is often much more involved for scholarly works and hence much more expensive).

          But you’re missing the point and making a different argument than that which is made here. You’re arguing that the value added by a publisher is not worth enough to authors to bother with engaging the services of a publisher. This video is not about authors (though a good post on the value of editors here if you’re interested Instead the video addresses pricing for ebooks, and is more an explanation to readers that the costs involved in an ebook are mostly identical to those of a print book.

          As a reader, I want those services, they’re important to me. I want a book that’s not filled with typos that distract me and take me out of the story. I want a book that tells a consistent story or a non-fiction book that contains accurate facts. I want a book that is well-written, and a good editor goes a long way toward that. I value the curation offered by the selection process at a publishing house. Your life may be different from mine, but my time is worth more than the small amount of money I pay for a book. I cannot waste my valuable time digging through the slush pile of unedited, unfiltered, and frankly mostly awful books that are self-published. I’m willing to pay someone else to do that work for me.

          Posted by David Crotty | Jun 28, 2014, 9:52 am
          • You’re right that I’m making a different point to the one the video is making. It’s telling readers that there’s a good reason for e-books to be so expensive. What I’m taking out of it is that there’s no good reason for authors to accept such a rotten deal on either e-books or physical books. I guess the same data supports both conclusions.

            “Sorry I cannot waste my valuable time digging through the slush pile of unedited, unfiltered, and frankly mostly awful books that are self-published. I’m willing to pay someone else to do that work for me.”

            It’s odd how often I hear this line of argument. There seems to be an assumption that the only ways of finding books is by making a linear pass across a vast list of candidates, or by having a professional do it for me. It completely ignore the emergence of the social Web — Twitter, Amazon reviews, book blogs and a hundred specialised services.

            Posted by Mike Taylor | Jun 28, 2014, 12:51 pm
            • I think you’ll find that many, if not most published authors are quite fond of their publishers and are very pleased with the value the publisher adds. You’ll note how many of the great proponents of the open web and DIY culture like Cory Doctorow, Neil Gaiman, Charlie Stross, John Scalzi, etc., all work with publishers to put out their books, and all of this group have written explanations of the tremendous value they gain from those partnerships. I tend to trust the opinions of those who do this for a living very successfully over those just speculating from afar.

              It should be noted that (at least last I checked) Amazon’s much higher royalty rates (which are not 10X what one receives from a traditional publisher for an ebook by the way) come with a tremendous number of restrictions requiring a price range set by Amazon and giving up certain rights to Amazon (allowing them to discount your book or give it away to Prime customers for example). If you want more control over your own work, the royalty rate falls back much closer to that offered by traditional publishers.

              And your argument still fails to offer authors the services of a professional editor, designer, marketer, etc. Yes, all of those things can be purchased separately by the author, but that puts the author on the hook for the costs which may or may not be recouped through book sales, whereas a publisher assumes the financial risk on behalf of the author. And authors self-publishing must spend a significant amount of their time managing these activities rather than writing. Much like running a lab, you don’t spend time washing test tubes instead of doing experiments–you pay someone else to do the scut work for you so you can do what you want to do with your time.

              There seems to be an assumption that the only ways of finding books is by making a linear pass across a vast list of candidates, or by having a professional do it for me. It completely ignore the emergence of the social Web — Twitter, Amazon reviews, book blogs and a hundred specialised services.

              That social web that may be emerging is still largely filtering an already professionally filtered set of content as far as books go. So it’s unclear to me how it might work should everything just turn into an unfiltered free-for-all from the start, rather than using social media as a secondary filter.

              While I will freely admit to being a snob, I prefer relying on experts over seeking an average opinion from the masses. Looking at the best selling lists of self-published books on Amazon, or the most viewed videos on YouTube or the most played songs on Spotify, I don’t see anything that would appeal to me. As the founder of Slashdot famously said, if you let the masses decide, you get “man hit in crotch with football” as the pinnacle of entertainment. No thanks.

              Posted by David Crotty | Jun 28, 2014, 2:08 pm
              • “That social web that may be emerging is still largely filtering an already professionally filtered set of content as far as books go.”

                Really? That’s not what I see at all. Amazon’s reviews are just as open for self-published books as for legacy-published ones.

                “I prefer relying on experts over seeking an average opinion from the masses.”

                Who’s interested in average opinions? That’s what gives us Justin Bieber and Lady Gaga. The point is that the much richer and more granular recommendation data we’re getting now lets us find recommendations on what people like us recommend.

                Posted by Mike Taylor | Jun 28, 2014, 4:22 pm
              • Perhaps I wasn’t so clear in this statement. What I meant was that any filtering system we have in place now is dominated by books/movies/music that have already been filtered through experts in publishing/movie studios/music industries. So to some extent, you’re already starting with a pre-filtered population of material that’s feeding into social filtering systems (not to mention that so many of these include paid placement for items being marketed). You’re more likely to see “The Hunger Games” crop up than one of the hundreds or thousands of fanfic imitators. So if instead you started with a completely unfiltered pool of material, would they work as well?

                Who’s interested in average opinions? That’s what gives us Justin Bieber and Lady Gaga. The point is that the much richer and more granular recommendation data we’re getting now lets us find recommendations on what people like us recommend.

                Yet I don’t know anyone exactly like me, nor have I found any online recommendation system to be of much use. I can browse on Amazon for an hour, looking at what other people bought and come away with nothing interesting, yet I can walk into a bookstore for 20 minutes and come out with a stack of new things to read. Repeated studies show that this behavior is the norm, and that for books, discovery remains heavily reliant on physical bookstores. This is a problem that Amazon, Google and their ilk have yet to crack.

                Posted by David Crotty | Jun 28, 2014, 5:16 pm
              • It’s great that this worked out so well for those four authors. Now ask some of the 40,000 who didn’t roll six sixes in the all-or-nothing game of Try To Get Picked By Gatekeepers. Or the 40,000,000 who never got to read the book that was right on target for their own specific interests because gatekeepers who have to cater to the widest market segment didn’t see it being enough of a hit.

                Posted by Mike Taylor | Jun 28, 2014, 4:19 pm
              • Could there be a reason why those 40K authors have not made it past the “gatekeepers”? Could it be that it’s really hard to write a really good book? Is a system based on democratizing everything worthwhile for what really needs to be a meritocracy?

                Beyond that, as you note, having a publisher has worked out very well for these authors (and the many more who remain working with publishers rather than going on their own), so clearly suggestions that publishers offer authors “a rotten deal” seem incorrect, when so many authors are content with the deals they have been offered.

                I do agree that for an author who has been unable to pass the review process of publishers that self-publishing is a good option, and that the growing availability of this option is a really good thing. It is also perhaps indicative of the value of publishers that many of those who do succeed through this channel sign on with traditional publishers as quickly as they can.

                Posted by David Crotty | Jun 28, 2014, 5:02 pm
              • “Could there be a reason why those 40K authors have not made it past the “gatekeepers”? Could it be that it’s really hard to write a really good book?”

                That’s certainly one reason. For sure, some of those 40k authors simply wrote bad books. But the more interesting cases are those who wrote books that are good, but appeal only to a niche too small to interest a publisher. Books like Andrew Hickey’s detailed analysis of Grant Morrison’s Seven Soldiers comic series would never find a publisher, because they’re just too narrowly focussed. The world is much richer for their existence.

                Posted by Mike Taylor | Jun 28, 2014, 5:15 pm
              • Sure. As said in my comment above, this is a good thing. But the availability of small niche material via self-publishing doesn’t make the deals that publishers offer to authors for material of broader interest bad deals for those authors or for readers.

                And personally, I thought the Seven Soldiers series was crap. Now, Morrison’s “The Invisibles”, that’s something I can get behind.

                Posted by David Crotty | Jun 28, 2014, 5:19 pm
  6. Ebooks are not necessarily digital versions of the printed pages. One could argue that multimedia to accompany text and static images is more likely to be commissioned for ebooks and thus the overall costs of ebooks for publishers can be higher than for print.

    Posted by Dorothy | Jun 27, 2014, 1:42 pm
  7. Unfortunately, there is no clear correlation between the cost to produce, regardless of format and the price charged to the consumer. We know this for academic journal bundles from the recent study and the same differential holds for books.

    The very clever video is a nice piece of marketing misdirection. It is a perfect example of Khaneman and Tversky’s “endowment theory” which is a subset of their Nobel Prize winning work, “Prospect Theory”.

    It would be useful for anyone in the publishing business, whether academic or trade, journals and books in any format to think on this, as well as consumers- worthy of serious discussion since the academic publication arena is dealing with products that are unique and not, in many ways, able to be substituted- the fight over copy rights and more- a bottle of fine wine, a Picasso or a ticket to a single event.

    Posted by tom abeles | Jun 28, 2014, 10:54 am
  8. The data presentation is disingenuous at worst. But the principle being described in the video is at least partially valid and makes its point, even if the graphics are clearly designed to get a biased view across. The question should really be why some scholarly and academic publishers feel it acceptable to charge more for individual ebooks distributed to libraries, rather than ‘ebooks should cost vastly less than their print counterpart’ in the presentation above. The claim is that ebooks offer added value and justify these higher prices when they are merely pdfs passed on to aggregators with little extra in the way of metadata never mind the additional functionality that is claimed. Where the inflation from paper to cloth was sometimes challenged in the print world there seems to be little challenge for the inflation from print to ebook in this new phase of distribution.

    Posted by Steven Bell | Jul 9, 2014, 6:55 am
    • “Where the inflation from paper to cloth was sometimes challenged in the print world there seems to be little challenge for the inflation from print to ebook in this new phase of distribution.”

      Presumably it’s being bypassed rather than challenged. Predatory pricing of e-books and piracy of e-books surely have a causal link.

      Posted by Mike Taylor | Jul 9, 2014, 7:16 am
      • “Predatory” is a strong word to use here. Is charging $12.99 for an ebook version of a hardcover that lists at $27.99 to be considered “predatory”? Is $7.99 predatory as well?

        Posted by David Crotty | Jul 9, 2014, 9:16 am
        • Maybe I should have avoided the word “predatory”, since it’s already a hot-button word in other areas of publishing. But it does express what I mean pretty well. What I have in mind are the many books that cost more in the e-book edition than for a printed copy. I do realise that a part of the reason for this is that VAT is payable on e-book but not printed books in the UK, but even taking that into account the situation is absurd.

          Posted by Mike Taylor | Jul 9, 2014, 10:09 am
    • There is a considerable history of pricing differentials, higher for libraries and lower for individuals, in the world of research journals. Beginning with association journals, libraries assumed the economic load of production based on potential usage by more readers for a longer time. Individual members in some cases were forbidden to pass their journals to a library. In the 1980s, universities complained bitterly about this and suddenly the IRS questioned the practice at American Chemical Society.

      Why not for ebooks? Why shouldn’t a university pay more than an individual for the purchase of one ebook with potentially unlimited uses (and risks of piracy)? It might need one or two dozen printed copies for reference, special library, and back office availability. Moreover, the ebook takes virtually no space and its administration can be automated.

      On the other hand, if one favors dissemination over profits, why not pass all savings along to libraries and permit them to offer more books to their readers?

      Posted by Albert Henderson | Jul 9, 2014, 10:50 am

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The mission of the Society for Scholarly Publishing (SSP) is "[t]o advance scholarly publishing and communication, and the professional development of its members through education, collaboration, and networking." SSP established The Scholarly Kitchen blog in February 2008 to keep SSP members and interested parties aware of new developments in publishing.
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