e-books and profitability– What we’ve always said and publishers have always denied

04 Jun 2013 2:11 PM | Digital Rights Committee (Administrator)

You may all have seen an article in today’s Publisher’s Lunch discussing HarperCollins’ recent investor’s meeting.

Included was this chart, explaining why e-book editions are more profitable to the publisher than hardcover editions.

This chart illustrates very clearly something that agents have been arguing for several years now, and that publishers have been saying just isn’t true: that their savings on printing, binding and distribution make up for the lower revenue from lower e-book prices– and that increased profitability is coming entirely off the backs of authors.

Look at Harper’s own numbers:

$27.99 hardcover generates $5.67 profit to publisher and $4.20 royalty to author

$14.99 agency priced e-book generates $7.87 profit to publisher and $2.62 royalty to author.

So, in other words, at these average price points, every time a hardcover sale is replaced by an e-book sale, the publisher makes $2.20 more per copy and the author makes $1.58 less. If the author made the same $4.20 royalty on the e-book sale as he/she would have on a hardcover, the publisher would STILL be making an improved profit of $6.28.

We have all heard the additional argument: that for a very large percentage of authors this is irrelevant since their advances don’t earn out– effectively raising their per unit royalty. That may be true, but it logically leads to what seems to me the most unfair aspect of all: That, therefore, the only authors that are financially punished by this system are the ones whose books perform very well. The ones whose books earn out. The big name authors and the celebrities whose books don’t perform to expectation are untouched; the author who gets a reasonable advance and whose book sells much better than expected are the ones who suffer the greatest loss.

How can anyone in this industry see that as defensible?

Publishers Lunch article: http://lunch.publishersmarketplace.com/2013/06/harper-shares-data-on-light-third-quarter-shows-investors-profitability-of-ebook/

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