Karen Coyle <kec[_at_]stubbs.ucop.edu> wrote:
>
> However, I want to disagree slightly with another statement of John's -
> that the cost of printed materials today are primarily production and
> distribution. I have heard figures (I wish I had hard data, but don't,
> sorry) that the actual printing/binding cost for a hard-bound book is
> about $2.50. The majority of the cost is actually editorial. I don't
> know what proportion is distribution & advertising.
>
> Mass production is amazingly efficient. Cheap, mass market paperbacks
> can apparently be turned out for $.50-$1.00 each. {...}
If you're an independent publisher, you need to use wholesalers to distribute your books. You're lucky to get 50% of the cover price back from the wholesaler. If you do sell direct to bookstores, they need 33% - 40% of cover price on "trade titles" -- and did you ever meet a rich independent bookstore owner? For mass-market pulp, the retail discount can be as low as 25% (and big chains can discount out of that margin as loss-leaders, hurting independent bookstores).
You as a publisher also have costs of storage and capital for books not yet distributed. Early-1980s technology made it feasible to print books in sub-editions of as few as 1500 and reprint when necessary -- but then there's the press-startup cost instead of storage and the cost of capital.
When I worked for such a publisher in 1986-89, the rule of thumb was that, to stand an evens chance of breaking even on a small first run (of ca. 2000), you set the cover price for books as follows:
This works for books assumed to have a shelf-life of ca. 18 months. (Said publisher did go bust in 1995, though...)
The royalty available to the author is typically 5% of gross sales. Canny unknown authors write in "escalators": say 5% to 5000 copies; 7.5% to 10k; 10% thereafter. Joan Collins just writes herself a cheque :-)
You can see why bean-counters force publishers' editors to skimp on profraeding and to neglect indexing.
The marginal cost of printing one extra copy may be very low -- certainly of order $1 for a 256-page paperback -- but printing is a minuscule proportion of total edition cost, unless you're lucky enough to have a million-seller.
For academic volumes with necessarily a longer shelf-life, apply a higher multiplier, like 10 or 12, for storage and cost of capital.
If the author has waived royalties AND guarantees a minimum sale, you can get away with a multiplier of 6.5 -- but then, read Umberto Eco's Foucault's Pendulum :-)
For books with a very short, fixed shelf-life -- law reports, notoriously -- use a _much_ higher multiplier, for uncertainty over how many you pulp in the absence of a remainder market.
For an on-line publication, you still have the majority of the first-copy cost items: add up
line-editing,
proofreading,
"indexing" (largely a sub-function of HTMLing)
design,
original graphics,
rights clearance for re-used graphics,
HTMLing (largely done by designer & line-editor),
direct promotion
BUT: you have no wholesaler's or retailer's cut;
the cost of storage is negligible;
there are no first-copy costs for "reprint" sub-editions --
you never have to gamble on an edition size.
You already know qualitatively that you'll be able to charge readers less, so you can assume a larger "run".
As a very rough, one-significant-digit example:
Take a smallish, strictly minority-interest, barely-illustrated first-edition paperback publication, with promotion through catalog only (no direct promotion costs).
Start with a run of 2000. Printing: $4k. Other first-copy: $4k
(if you farm out your line-editing to a Third World city like
London, you can get ca. 20 days' freelance work for that -- just
about do-able).
Cover price: $(4k+4k)*8/2k = $32.00 !
Run of 10k, for comparison -- run-on printing cost is $1 each:
Cover price: $(4k+4k+8k)*8/10k = $12.80 (publisher gets $6.40)
BUT loss if it still sells only 2k @ $12.80 >> $4k (+ storage, capital)
Or, hope for a mere 10,000 Web hits. Guess that the "multiplier" is 2; you can absolutely justify halving it for the lack of distribution or discounts, and _probably_ halve it again for lack of storage, etc. Per-download price: $4k*2/10k = $0.80
So, assuming you do get 10k hits, you have $4k to divide between the author, cost of doing business and pure profit, for a _direct_ (i.e. non-CODB) investment of $4k.
On the _next_ 10k hits, you get $8k in hand, less just a few dollars for the work's share of the host facilities.
A "royalty" of 25% of gross to the author(s) seems reasonable... with an escalator to 50% after 50k hits, or something.
Iterate to work out what the actual multiplier for Web publication is, and to explore the economics of heavier design/illustration and associated rights clearances.
I emphasise that these are physicists' order-of-magnitude numbers, not accountants' integers. And I am aware of many complicating factors which I don't have time to write, and you don't have time right now to read.
(C) 1996 Mike Holderness
X-authors-rights: Licensed for unlimited non-profit use to advance
the intellectual-property debate. Anyone I find re-selling
this argument, prepare to meet thy nemesis in the English High Court,
wigs'n'all... $100 REWARD for first notification of such breach
of license.
<A HREF="mailto:mch[_at_]cix.compulink.co.uk>Mail me</A> to ask about consultancy.
Mike Holderness
<mch[_at_]cix.compulink.co.uk>
Received on Tue Apr 16 1996 - 16:10:38 GMT
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