Back to: Common Misconceptions About Publishing: #1 | Forward to: CMAP #3: What Authors sell to Publishers

CMAP #2: How Books Are Made

It is a common misconception — to paraphrase a commenter in the previous post on common misconceptions about publishing, that "the only two people that matter are the author and the reader (one puts creativity in, the other money: the rest add cost)".

This is a bit like saying that in commercial air travel, "the only two people that matter are the pilot and the passenger (the rest add cost)". To which I would say: what about the air traffic controllers (who stop the plane flying into other aircraft)? What about the maintenance engineers who keep it airworthy? The cabin crew, whose job is to evacuate the plane and save the passengers in event of an emergency (and keep them fed and irrigated in flight)? The airline's back-office technical support staff who're available by radio 24x7 to troubleshoot problems the pilots can't diagnose? The meteorology folks who provide weather forecasts and advise flight planners where to route their flights? The fuel tanker drivers who are responsible for making sure that the airliner has the right amount of the right type of fuel to reach its destination, and that it's clean and uncontaminated? The designers and engineers at Boeing, Airbus, Embraer, or the other manufacturers who build the bloody things in the first place ...?

I hope you can see the point I'm trying to make. To be direct: a manuscript is not a book. The author's job is to write the manuscript. The publisher's job is to turn a series of manuscripts originating from different suppliers into consistently produced books, mass-produce them, and sell them into distribution channels.

Note the phrase "series of manuscripts". Small outfits like Golden Gryphon Press (who published the first two of my Laundry novels in hardcover) work on a handful of individual titles (in GG's case, 1-3) in any given year; each book gets special attention and is handled as a separate job. Larger publishers — be they recently-graduated-from-small-press outfits like Subterranean Press or operations like Tor operate on a production line basis. Tor publish 250-300 books a year. Each incoming manuscript goes through a series of production stages, and if there's a hold-up they lose their slot in the publication queue (unless the book is very, very special, for major-bestseller values of special).

What is the production workflow for a book by a professional author working under contract with a publisher?

  1. The author writes a manuscript. Note: a manuscript is not a book. It's a bundle of pages of written text (or a text file on a computer: most big publishers these days insist, for no sane reason, on receiving a Microsoft Word 2003 .doc file — probably because it's the commonest format people use with support for italics, underlining, boldface, and headings). The author may suggest a title (the publisher doesn't have to accept their suggestion). The manuscript has been worked over and polished by the author to the best of their ability, but will inevitably contain typos, grammatical infelicities, continuity errors, factual errors, internal inconsistencies, and muddy bits where the author was typing on autopilot. (And these are the good, publishable manuscripts from authors with a track record. For some insight into how bad the bad stuff can get, read this and weep.)
  2. The author or their agent send the commissioned manuscript to their editor. (I'll write about agents and acquisitions in a future entry.) Note: outsiders often have some strange ideas about what editors do. These days, an editor is a middle manager. Their job is, in conjunction with a marketing manager, to determine what titles to acquire for their list; to negotiate deliverables and deadlines with authors: to provide high-level guidance and feedback to authors: and to ride herd on the production pipeline so that Sales and Marketing receive each quarterly or triannual batch of new titles on schedule. Editors not infrequently enjoy editing, but there's a lot more to the job than that. Here's one editor's perspective on how you wind up in the job.)
  3. The editor reads the MS. If it's in need of more work, they tell the author what they want doing. ("It needs a purple singing dinosaur and a surprise ending. Oh, and get rid of the DEATH guy, he's a downer.") But more often than not, they accept the manuscript. This notifies Accounting to pay the author (or their agent) the second tranche of the book advance (I'll talk about royalties, advances, and how authors make money in a future posting), the Delivery and Acquisition money. They then work out where to slot the MS into their production queue.
  4. Marketing. In general, the marketing spend on a book is around 5% of the dollar value of the books the publisher expects to ship. It may be more if the publisher is trying to build this particular author's sales. An editor talks about marketing, including where the money goes. Note: this activity starts when the book is delivered, before it is published — but the budget is based on expected revenue which won't be known until the orders are in. So to some extent the degree of marketing push depends on the editor's (or marketing director's) best guess as to how well the book will do.
  5. Scheduling. This is hammered out in the rough before the contract commissioning the book is even signed. Generally, large publishers like authors to deliver one MS per twelve months, like clockwork, because their production line is geared to turn manuscripts into published books in twelve months. However, the clock only begins ticking when the MS is accepted by the editor: so the editor looks at the calendar about 12 months ahead, works out where there's room to slot the book in — ideally in a month preceding the summer or pre-Christmas sales peak (if the book's likely to sell well) — then works backward to sort out when the various steps in the process must take place. Note that it doesn't take 12 months to produce every book — but 12 months is ample time to process the slowest book in the queue, by the recluse who doesn't use email, writes with a quill pen, and is always late reviewing the page proofs.
  6. Copy editing. The MS is sent to an external copy editor (usually a freelance editor specializing in the genre in question). The copy editor's job is to keep the author from embarrassing themselves in public. To this end they need to regularize spelling and typography and nomenclature, spot inconsistencies and obvious errors, fix spelling mistakes, and telepathically read the author's mind to ensure that the manuscript reflects the author's pure and original intent rather than looking as if a barrelful of monkeys had a fight for ownership of the keyboard. Traditionally, copy editors work on a paper MS using red pencils to indicate their changes; larger publishers are now switching to all-electronic workflow, hence Word change tracking and notes. The result, a Copy-Edited Manuscript or CEM, is returned to the editor within 2-4 weeks.
  7. The author reviews the CEM. (For some reason my publishers' editorial assistants seem to love to send me CEMs for review the week before Christmas, with a due-back deadline of January 4th. It's especially fun when two publishers pull this stunt simultaneously. Perhaps they think nobody loves me and I welcome the distraction ...?) Alas, copy editors are not, in fact, telepathic. Sometimes they get stuff wrong — rarely, they get lots of stuff wrong. So when the editor receives the CEM they bounce it to the author for review. The author can override the copy editor's changes and, if necessary, add corrections of their own. There are usually multiple changes per page — ranging from trivial stuff (serial comma policy at $PUBLISHER differs from author's usual style) to "you've referred to your hero as Joe sixteen times and Jim fourteen times in the MS — which is right?" The author typically has up to four weeks to review the CEM and return it to editorial. If it's on paper, the author must use a different colour of crayon from the copy editor, otherwise whackiness ensues. Electronic workflow involves change tracking and lots more irate marginalia, followed by hoping that Word or OpenOffice don't corrupt the file.
  8. Advance Reading Copies. If the book is going to be promoted heavily, the editor arranges a production run of ARCs. These are trade-paperback-sized print-outs of the manuscript, sometimes with rudimentary typesetting, and a non-glossy cardboard cover. They go to reviewers (the lead time for a book review in Publisher's Weekly, Kirkus, or another news outlet is several months), other authors (if a cover quote is being solicited), and sometimes to bookstore buyers to promote a title that's expected to sell well. Note that despite its crude appearance, an ARC costs a lot more to produce than a finished hardback — it's laser-printed and hand-bound, in small numbers, so not all books get ARCs. Someone — typically the office intern or editorial assistant — has to mail the ARCs out.
  9. Book design, cover design, front and back flap copy, and cover artwork. The editor pulls together a description of the book and/or the original manuscript. These are used to brief the art director, who if necessary commissions an artist to produce a painting. (Cover paintings may not be necessary if the fashion is currently for abstract/design-driven covers in marketing.) The art director also works out a suitable cover design for the book. A marketing/blurb writing person/editor also writes the flap copy (the text on the back of the book that makes you want to read it). The goal of book design is to motivate shoppers unfamiliar with the author to pick the book up. Nothing more and nothing less. (Retail psychology tells us that shoppers who handle a product are more likely to buy it. Existing loyal fans will buy it anyway. So the book design is aimed at appealing to new readers.)
  10. CEM delivered to Typesetting. Publishers these days own neither internal typesetting departments nor printing presses. What happens at this point is that the copy edited manuscript is sent to an external typesetting bureau, where a typesetter with a workstation running either Quark Publishing System or (increasingly, these days) Adobe InDesign sets up a Book project, imports the styles specified by the publisher's standard book design, and imports and reflows the CEM — making sure that all the changes are incorporated into the DTP file. If the book is still being produced with paper-on-pencil workflow, at this point the poor bloody typesetter has to go through it page by page entering manual corrections (and undoubtedly injecting new and creative errors of their own).
  11. Marketing copy. The editor develops a pitch for the book that will motivate their marketing and sales force. At a company like Tor, internal meetings are held between editorial and sales several times a year, at which the editors present their new and forthcoming titles and explain their selling points, target audience, and special angles. The sales team then go forth and push the book at store buyers (who choose which titles to stock in retail store chains) and wholesale buyers (ditto for wholesale channels). The picture at other publishers may be different; for example Ace (part of Berkley publishing group, part of Penguin, turtles, recursion, etc.) have a smaller number of higher level marketers who liaise directly with the buyers for the big chains (Barnes and Noble, Borders). This stage is critically important, because the retail and wholesale buyers place their orders before the size of the print run is finalized.
  12. Review page proofs. The typeset file is used to generate a PDF image of the book, as it will appear on paper. This is sent to editorial, who send a copy to the author and, hopefully, one or more proofreaders. At this point, the job of the author (and the proofreaders) is to correct errors introduced during the typesetting process, and possibly typos they didn't spot earlier — but not to make substantive changes. Again, around one month is allowed for reviewing page proofs and returning the marked-up chunk of dead trees (or an annotated PDF file, or a list of page/line number/error tuples) to editorial, who pass it back to the typesetters for fixing. (Parenthetical note: there is no such thing as a clean page proof. Authors are blind to their own persistent spelling idiosyncracies, typesetters get stuff wrong, and so on. But in general, the more eyeballs — and more proofreading passes — a set of proofs receive, the fewer errors will be left in the finished book.)
  13. Collate advance orders and order the print run. The sales folks have spoken to the big chain buyers and wholesalers, who guess at how many books they can sell and place orders. If these are trade books they are sold typically on 90- or 120-days net credit, sale or return. (That is: if the bookseller orders a carton of 24 books, they must either return unsold stock or pay up the agreed wholesale price when invoiced after 90 or 120 days. So they're running on credit from the publisher.) If they are mass market books they are sold on net credit, but instead of being returned for credit, the wholesaler/retailer returns the stripped covers and pulps the book block. (Which means that MMPBs unsold after 90 or 120 days are treated like spoiled grocery stock. The mass market pipeline is absolutely insane, but it mirrors how magazines are sold; it was brought in during the 1930s/1940s to sell cheap paperbacks and arguably kept the publishing industry from collapsing, but today ... let's just say I haven't met anybody who's in favour of it. Note that although mass market paperbacks are all C-format in size, not all C-format paperbacks are "mass market" books; in the UK, the sale-or-strip channel died in the late 80s/early 90s, and today — as far as I know — all British C-format paperbacks are sold on sale-or-return terms.) On the basis of these advance orders, and experience which tells them how many extra copies to print for late orders/specialist stores, the publisher orders a print run from a print shop.
  14. The print run: this is the moment of truth. (If the editor has coughed up a $100,000 advance against a 10% royalty on cover price, they need to ship $1M of books (cover price); if the advance orders add up to 2500 hardbacks, senior management are going to start asking difficult questions.) Some rough figures: a typical first SF/fantasy novel in hardback from a major US publisher will ship 3500-5000 copies. Anything over 10,000 is nudging towards the bestseller list; a fiction book that shifts 25,000 in its first month in hardcover is going to be in the New York Times top 20. Mass market paperback runs are much larger — 15,000-30,000 — but 25-50% will be pulped and the profit margin on them is vanishingly narrow compared to those juicy hardbacks. Oh, and the long tail applies: the top 3 on the New York Times bestseller list easily outsell the next 30 combined, and #4 to #30 combined probably outsell the next three million.
  15. The printing process may include multiple stages: ordering of paper (different grades of paper have different properties and costs), then printing of book blocks (containing the pages of the books), trimming, printing of colour cover flats, folding and binding, or printing of signatures, stitching and trimming, binding, printing of dust jackets, and folding (depending on whether paperback or hardback, with variations depending on whether the hardbacks are saddle-stitched — as is still common in the US market — or perfect (glue) bound — as is the case for most British hardbacks). At least the old process of cutting photographic plates is obsolete; most commercial printers these days have machines that take in a properly imposed postscript or PDF image and act (from the user's point of view) like a gigantic Postscript printer (fed by barrels of ink and giant rolls of paper). It takes 2-4 weeks from ordering the print run to the shipping pallet of finished books to appear on the publisher's warehouse loading bay, depending on how busy the print shop and how complex the manufacturing process are.
  16. Shipping. Someone in a warehouse has to ship out several hundred or thousand cartons of books to stores, and a smaller number of larger palletloads to wholesalers.
  17. Invoicing and accounting. I'm going to tip-toe past this particular pit of festering insanity. Let's just say that if you're shipping to dozens of wholesalers, a handful of large bookstore chains, and literally hundreds of small bookshops, it gets hairy fast. (Multiply by 300 titles a year with an average in-print life of 5 years if you're someone like Tor.) Note also that the contracts the publisher signs with their authors dictate that the authors will be paid a royalty (percentage share of the proceeds) based on the number of books sold and the sales channel through which they are sold. The authors almost certainly have a contractual right to order a third-party audit if they think you're screwing with their figures. And if the figures are out, you (the publisher) pay for their audit, in addition to the money you owe then.

After I hand in an MS, I expect to do another 3-6 weeks' solid work on the book before it is published — mostly in the CEM-checking and page proof-checking stages. After I hand in the MS, I expect my publisher to put in ... well, Tor produce 300 books a year with 60 staff, so it's about ten person-weeks per book in house, but this doesn't include the external copy editor, proofreader, typesetter, printer, and other outsourced tasks, which probably double it again. Overall, the process of turning a manuscript into a book is estimated to cost $7000-$20,000 — an amount comparable to the author's likely earnings from the book. In fact, the actual division of labour on a book is split roughly 50/50 between the author and the publisher.

In summary, while it's true that the author is the one with the creative input, they only do about half the work. And the other half of the job is not optional. The reason publishers exist is to provide for division of labour; if I did the other 50% to bring my rough manuscripts up to published-book-quality, I'd only be able to write half as many novels.

233 Comments

1:

did you just argue for "communist" style factories that keep producing stuff after a market have been sated, just to keep workers with work?

thats one problem here. When any other industry shuts down to relocate or save money, its claimed to be the free market in action. But when it comes to the creative "industries" its suddenly "THINK OF THE WORKERS!!!".

and that comes on top of several decades of having it hammered home that one is not workers, one is consumers. Yay for consistency...

the suits have dug this hole. But as usual the ones that get hurt first are not the suits, but the joe on the street.

2:

did you just argue for "communist" style factories that keep producing stuff after a market have been sated, just to keep workers with work?

What on earth are you talking about?

(And what makes you think I'm a free market fetishist?)

3:

Charlie,

Great post as usual.

One question though: do you (or any authors you know) ever send additional documents, such as a technical bible, to the copy editor to help them keep track of the details in the manuscript they're editing?

4:

do you (or any authors you know) ever send additional documents, such as a technical bible, to the copy editor?

Yes, but rarely.

If it's a multi-book series, part of the job of the copy editor is to compile a list of names (both characters and places or other "special words", and the pages they are used on), and this may be used for subsequent books in the series.

Also, I sometimes include a section up front, along with front matter (like the dedication and acknowledgements) with any notes I feel are important -- but in general, the less said the better. (It's a bad idea to try to tie the copy editor's hands; if you've dealt with them before and think they're incompetent the thing to do is talk to your editor.)

5:

And all that, right there, is why despite the enjoyment I derive from writing, I'll never publish anything. Well, that and the fact that I never finish anything because writing is boring, tedious work, and I actually don't really like the writing part of writing as much as I enjoy the idea-ing part of writing.

Ideas are fun. Taking ideas and shaping them into a narrative and making that narrative readable is as enjoyable (for me) as eating glass.

6:

Tangential comment: as someone who's done steps 9, 10, and 12 as a typesetter/page composer, the Quark Publishing System should be banned under the Geneva Conventions because it makes the baby FSM cry. I know Quark's typography tools made me cry…

7:

I've trained some people in Quark and Pagemaker. My experience is that all publishing apps make the baby FSM cry, and the baby Cthulhu very happy.

8:

t3knomanser: I have a background that involves troff with a custom macro set designed to support semantic markup. Are those the distant howling pipes of Azathoth I hear in the background ...?

9:

Very interesting post, thank you. I think that a lot of the problem with readers' misconceptions is that they simply never see the work except at the end stage. Do you know of any brave author who has ever made various stages of the same work available?

I know that no publisher would likely ever waste their resources doing this, but it would be fascinating to see the results of the same starting manuscript going through two different publishers. The author might have to be more accommodating of editorial suggestions than usual, but I bet the results would have noticeable and important differences.

10:

Based on my limited experience, I'd have to say that a markup based system has to be better than the WYSIWYG applications I've worked with. "NO! I clicked X, why are you doing Y? Oh, because I had to be in mode Z on a Tuesday for that feature to behave that way, and my ruler was in the wrong configuration and I didn't say the magic words before clicking."

11:

If I may respectfully suggest a caution concerning the description provided above by Our Gracious Host:

It applies only to commercial fiction -- in particular, anything that even remotely has a number on it (days, dollars, percentages, whatever). That's not to say that anything about it is inaccurate, because it does appear accurate... for commercial fiction. It just doesn't apply to postsecondary academic textbooks, or to cookbooks and other how-to guides (which are not the same, but for this purpose resemble each other quite closely), or to celebrity autobiographies/memoirs, or to serious nonfiction... you get the idea.

Here's a specific contrast from one particular type of niche nonfiction:

1. About 85% of the time in this niche, MS is commissioned by the publisher, and written to outline.

2. The publisher(s) actually refuse to deal with agented authors. I don't mean "don't want to"; I mean that when the work is being commissioned, any potential author who has an agent get struck from the list of potential authors.

3. (no real contrast)

4. Marketing begins upon acquisition, and often before that when the commission is being considered in the first place.

5. Marketing expenses are ordinarily over 10% (one reason the books are, on a currency-unit-per-word basis, so much more expensive), and usually specifically include conference sponsorship and supplementary audiovisual material while excluding any personal contact between the author(s) and individual end-users.

6. Before copyediting, it goes to a developmental editor for a closely guided second draft (sometimes not even consulting the author!); the art director for design; and the graphics department to begin the laborious process of obtaining interior illustrations. Then, it will go to the copyeditor... who ordinarily must do a helluva lot more work than for commercial fiction, for a wide variety of reasons, and frequently ends up as an uncredited ghostwriter.

7. Before the CEM goes to the author, it goes back to the developmental editor, who does his/her best to get rid of the most-egregious copyediting errors. THEN it goes to the author, and it still looks like a case of blue graphite (or pixels, if done electronically) got dumped on the MS. Further, there's usually a lot more substantive work required than determining whether the hero's name is Jim or Joe, even after that guided second draft.

8. Before the ARCs go out -- an increasingly rare phenomenon in this niche -- an endorsement package goes out from Marketing seeking blurbs. I could write a several thousand words on this process and not even come close to describing it. There's a simple reason for this: This particular niche doesn't rely upon prepublication reviews.

9. Already done during steps 4-6. As an aside, it's not just this niche -- it's pretty well true for all commercial nonfiction.

10. Typesetting is always done in-house, or at least under very close in-house supervision by a freelancer who has previously worked at the publisher. Again, this is uniform in the niche and extremely common in commercial nonfiction. (And if it makes you happier, Mr Donohue, this particular niche abandoned Quark in the early 1990s and has been Adobecentric since -- not just this publisher, but the entire niche -- because Quark didn't/doesn't work well with Hong Kong-based printers.)

11. Never done by the editor. Never. It's always done by the S&M department, frequently without much (if any) editorial input -- largely because it's based on the commission for the work, not the work that is in the production cycle.

12. (no real contrast)

13. Already done during steps 4-8.

14-17. This depends far too much on the particular audience and estimated lifespan of the book. Even in this particular niche, there's a strong tendency to have planned later printings at scheduled-in-advance times... and the only thing that changes based on reality is the number of copies printed.

* * *

Once again, I'm not saying that Our Gracious Host is wrong; his summary, concerning commercial fiction, is both admirably concise and highly detailed, and I intend to steal it borrow it with his permission that I'll get separately. I'm only cautioning that, because commercial fiction is such a small part of the creature commonly known as "book publishing," it's not useful outside its field... just like a table of values of ln(x) isn't that helpful by itself when considering log16(x), even when the literal value of x is the same.

12:

Charlie: "...most big publishers these days insist, for no sane reason, on receiving a Microsoft Word 2003 .doc file "

Could be worse - Word 2007 (new! with screwed up GUI!) or WordCompStarYouNeverHeardOfIt 1987, which was the unknown package first used by the senior editor back in college, from which he refused to change.

Or Adobe!

13:

"if I did the other 50% to bring my rough manuscripts up to published-book-quality, I'd only be able to write half as many novels."

And you're probably not as good at is as some of the specialists. Oh, you're a very bright guy, you could force yourself to do it well, but a lot of that work is fiddly production stuff that authors might hate to do and simply not be wired to do well without a lot of forcing. One of the other reasons a system like this works well is that it allows people to do what they're good at and, to some degree, avoid things that they're not good at (or not interested in or actively dislike).

Oh and before anyone brings up the 'well a lot of those steps involved paper and if we just went to ebooks.....' keep in mind that paper's not about to disappear so ebooks would add work here, not subtract it. Even if some magic wand was waved and we all went to ebooks many of the steps *don't* have to do with paper.

Anyway, brilliant post Charlie and much needed to counter the "oh but just ship the novel yourself" crowd.

14:

Hi Charlie,

How does publishing compare to other industries based on creating intangible goods, such as software development? It seems like publishing breaks down into the same basic steps of development, quality assurance, marketing and distribution -- but then again, I suppose any successful production pipeline is going to be organized that way. Does publishing feel qualitatively different, or is there still a sense of having to methodically going through the steps in order to ensure a good product at the end?

15:

Rick: of the steps I outline in commercial genre fiction publishing, just three (14-16 inclusive) relate to publishing books on paper. The rest are still needed for ebooks.

This is why the folks who think that moving production towards ebooks will drive costs down are so wrong.

A print run of 5000 hardbacks ... each book weighs around 600 grams, but of that, only around 400 grams is paper. So we're talking about 2.5 tons of processed wood pulp. Paper simply isn't that expensive. My understanding is that the physical process of buying the paper and printing those book blocks will cost around $2-3 per unit, or around $10-15,000 ... roughly as much as the other production costs, and the author's advance.

16:

re: mass market...let's just say I haven't met anybody who's in favour of it

Perhaps I'm getting ahead of later posts, but what's the issue? As a consumer, I'm rather in favour of the lower price, and often resent the doubled retail price of trade paper copies that have only a marginal increase in production costs, at least for books that have been in print for years and had previously much more affordable printings.

I don't mind nearly as much when a MM edition simply hasn't been released yet, but as the end-stage "bargain" iteration of a product a la the Â£1/$1 movie rental, it seems like an acceptable market niche

17:

Thank you for this breakdown!

Question, though:

"If it's in need of more work, they tell the author what they want doing. ("It needs a purple singing dinosaur and a surprise ending. Oh, and get rid of the DEATH guy, he's a downer.")"

What happens if the author and the editor disagree significantly on this one? ("Computer science and Cthulhu? Naaah, make Howard a librarian" or somesuch). How does that impact the manuscript-to-book lifecycle?

18:

This is good information to know. Thanks for laying it out like this.

The next question is: how much of this changes with e-books? It sounds like not much, except for physical production. But that, from what I have read, has its place taken by storage and various sorts of computer sorcery that I don't fully understand. But will publishers modify this structure as e-books become more popular? If self-publishing takes off, and it becomes clear that they can be produced more cheaply because they truncate or pass by these steps in the production process, will publishers be forced to cut corners, I wonder?

How will publishers react when companies like Amazon solicit self-pubbed works directly from authors? Can this model last if the market dynamics change in that direction?

19:

I have a background that involves troff with a custom macro set designed to support semantic markup.

$ man 7 Accelerando

That must really give your editors heartburn?

20:

The issue with MM is not the price or form factor, but with the "pulp instead of return" model. What this adds to or subtracts from the cost of the books is unclear -- it would depend on an interaction between the cost of shipping back unsold copies versus the possibility of reslae in other markets which might vary depending on the market -- but it would not be a large part of the paperback price, either way.

21:

Perhaps I'm getting ahead of later posts, but what's the issue? As a consumer, I'm rather in favour of the lower price, and often resent the doubled retail price of trade paper copies

... The issue is the way that up to 60% of the print run end up being pulped!

The mass market paperback refers to a sales channel, not a particular size or shape of book. The book format associated with the mass market channel is the C format paperback.

Printing 30,000 C format paperbacks for mass market distribution at $8 and pulping 50% of them is clearly crazy when the logical alternative is to print 15,000 C format paperbacks for trade distribution at $8 and not pulp any of them.

The problem as I understand it is that US booksellers have been trained for eighty years to expect C-format paperbacks to be sold and accounted for as mass-market. To sell paperbacks via the trade channel, the publishers have to make them physically distinctive (bigger) and price them differently, lest the store clerks rip the covers off them and send them back for credit -- (and get pissed off at the publishers when they don't get it).

In the UK, the mass market distribution channel collapsed nearly two decades ago. All paperbacks are now sold on sale-or-return -- as "trade" books -- but you still see shelves stocked with C-format (small) paperbacks and sold pretty much as they were before; the buying public didn't notice the change when the mass market channel went away.

22:

Why are you reading this post, you either have books to write that I want to read, or cats to feed and pubs to drink in?
:p

23:

Ahah! I see. I worked for B&N briefly (and afterwards a scientific publisher where these formats didn't exist) and they drilled the C format == MM routine.

It seems that eBooks as a format could help this area, given the ease with which price elasticity can be toyed with and a sweet spot found even for individual offerings, bypassing consumer misconceptions of What It Should Cost based purely on physical format.

24:

Riffing off of Jim's comment, I wonder if publishers have considered the e-book market as a potential replacement or supplement for the mass market strategy. Publish hardcovers, and maybe trades, and go more with e-books for the lower-cost option? Or will booksellers balk at this?

25:

E-books will not be a replacement for mass-market (or indeed any volume-oriented) distribution until a lot more people have e-book readers and use them as their principal/preferred means of reading. As a long-term strategy, maybe half a generation from now, that might be realistic. They may be released concurrently with paperbacks at a (slightly lower) price which provides the same payback to the publisher over projected sales, but as a replacement they're just not on.

26:

James: ebook sales grew last year by 50% ... to nearly 3% of the market.

If the 50% growth rate is sustained then in another decade they'll be very significant.

But I'd like the folks who want me to go to the mattress with my editors over DRM -- which I hate, but which is imposed by diktat from a level above my publishers -- to bear this in mind: if I went to direct publishing via ebook tomorrow, I'd have to trouser the book production costs ($7-20K per book) that my publisher now handles, but I'd be receiving only 3-5% of the current revenue stream.

You know what? That implicit 70% pay cut is not looking mighty attractive ...

27:

"This is why the folks who think that moving production towards ebooks will drive costs down are so wrong."

But these steps are about 50% of the cover price of the book. Buying inventory is expensive. Storing inventory is expensive. Retail sales clerks are expensive.

In any event, these are great...have you considered bringing them out as an ebook?

28:

On Tuesday I wrote a related blog post called Book Pricing For Dummies that you might be interested in because it relates to everything you write about here, which is quite good, by the way.http://www.markterrybooks.com/2010/02/book-pricing-for-dummies.html

29:

Randolph (27), I'm sure that Our Gracious Host will get to this in detail before long, but there are publishing-industry memes that demonstrate that "50% of the cover price of the book" is waaaaaaay off base.

Whenever one is doing a cost-sales projection (in the fiction end of the industry, it's more often called a profit-loss projection, but it's functionally the same thing), trying to determine whether acquiring a particular manuscript is a good idea, one has to set a list price as part of the projection. That doesn't sound unreasonable, does it? The key point, though, is this: C-S worksheets pretty universally impose two sanity checks on the projected list price. That list price must exceed one or both* of:


  • Ten times the fully extended, per-copy reproduction cost of the finished work in its projected form

  • Six times the nonextended, per-copy production cycle cost of the finished work in its projected form

There's no need to turn this into a math lesson to realize that the inventory element of the cover price comes nowhere near 50%... since it's buried as part of the difference between 1/10 and 1/6.

* Depends on imprint and particular publishing niche, and the whims of management.

30:

The issue is the way that up to 60% of the print run end up being pulped!

One reason for this is that you want there to be an oversupply of mass market books, to some extent. The common feature of MM paperbacks, magazines, and fruit is that they get hard to sell after a couple of months on the shelf. For every slow-burning seller there are (literally) tens of thousands of paperbacks that make most of their sales in the first few months. If for no other reason than that soon they'll be competing for shelf space with the newer releases gushing from the publishers' hosepipes (and those slow-burning consistent sellers that are rare but add up to a sizable amount of spoken for shelf space)

So - during those first few months, you need your new release to be on constant display. Any bookshop that runs out of stock - or even runs out of stock on the shelves because the rest is out back - is a shop that can't sell your book. You need to send out more books than each shop will sell, because you need the books to be face out on the shelf, advertising themselves. So your best case MM run is not 100% sellthrough, it's around 50%. (Andrew Wheeler had a good post about this, I think, but I can't find it now)

31:

@9: Try One Book Five Ways, which details what happens when one manuscript (No Time for Houseplants) is published through five different university presses. [Hat tip to Douglas R. Hofstadter for this one.]

32:

Charlie, maybe you will be going into this in a future post, but how do authors eat at one MS/annum with a paycheck of 15-20k? Is short fiction the only work done on a per word basis?

33:

"In summary, while it's true that the author is the one with the creative input, they only do about half the work. And the other half of the job is not optional."

Chaucer. Shakespeare. Dickens. Tolstoy.

Who did the other half of their work?

34:

Re "It just doesn't apply to postsecondary academic textbooks, or to cookbooks and other how-to guides (which are not the same, but for this purpose resemble each other quite closely), or to celebrity autobiographies/memoirs, or to serious nonfiction... you get the idea."

I'm in the academic business, and most of it looks remarkably familiar to me. We have less marketing, and less fuss about print-runs ("Do you want 400 or 350?"), but the production process is pretty much the same.

35:

Bill: Chaucer. Shakespeare. Dickens. Tolstoy. Who did the other half of their work?

Chaucer: predates the printing press.

Shakespeare: not a novelist (a playwright). Predates copyright in any modern sense, too.

Dickens: predates the modern publishing industry. Went halves on the production costs with his printer, publishing folios -- part-works that were bound into finished books by the purchasers. Suffered from large-scale piracy.

Tolstoy: didn't care, the Count owned half of Russia.

In case you don't get it, you're trying to knock holes in the current system by which authors earn their crust by citing utterly irrelevant stuff. It's like trying to object to modern airline security arrangements by citing the 18th century trans-Atlantic sailing trade.

36:

Chaucer -- Worked in a radically different model, where "publishing" meant either (or both of) "read from manuscript for patron" or "circulated in manuscript".

Shakespeare -- Wrote plays for performance, which is where he made his money. Publication of a few plays ("Good Quartos" -- the "Bad Quartos" were pirated) took place in his lifetime but would not have been much in the way of revenue-generators, and mainly took place to discourage/preempt pirated editions. Most plays were published poshumously in the First Folio (except for Pericles), which was also mainly a "prestige" publication. Most money from publication went to the printers (who held the copyright, not the author), in an environment where typesetting costs were much higher (cold metal type hand set by skilled compositors).

Dickens -- published via a system which is recognizably the ancestor of today's, except that paperbacks didn't exist and serialization was a much more important part of the lifecycle of fiction (and an important source of authorial revenue).

Regarding Tolstoy, I'm not sure.

With everyone except Chaucer, there was a large component of the publishing process which was not the contribution of the author.

And I will point out that for you to read, say, a modern edition of Shakespeare involves a lot of extra input beyond that involved in ordinary fiction publishing in the editorial and publishing process (establishing text, normalizing spelling, apparatus, that sort of thing), unless you read your Shakespeare from the Norton Facsimile of the First Folio.

37:

Daniel: I'll get to that in a future post.

For now: the UK Society Of Authors did a survey in 2000 that determined the average working novelist in the UK earned £4500 a year at the job, and 80% earned less than £17,000 a year. Suffice to say that (a) I am not in that 80%, and (b) that 80% contains a very high proportion of authors who are either hobbyists (publishing a novel once every five years or so) or semi-amateurs (going via small presses or self-publishing). The $15-20K advance is followed by foreign rights sales and royalties after the book earns out, plus hard work on the side, and is not the end of what you see for your book sale (if you're doing the job properly).

38:

Shakespeare.
Who did the other half of their work?

Good Christ. Really? You are familiar with the concepts of actors, directors, theaters, etc?

What are they teaching in the schools these days? Grumblegrumblegrumble.

39:

Great discussion so far.

Another question, though. What crashed the mass market channel in the UK?

It appears to me that it would be good to take books out of the big box stores and put them into the long tail secondary market, rather than pulping and remaking them into something else. Pulp is only partially recyclable, so from an environmental standpoint, this is kind of stoopid as a sustainable business practice.

While I dread mentioning Amazon, I AM thinking off all the empty commercial real estate in the US right now, and thinking that some of it would be good for short to moderate term book storage.

Any way we can crash MM distribution in the US and get them using small-format trade books?

40:

Amazon isn't "empty commercial real estate"; Amazon wants to grow up to be WalMart via mail order. Books do not make Amazon any significant amount of money -- they're a loss-leader to bring the customers in and shove them at the white goods and clothing and suchlike which makes Amazon their profits.

Here in the UK, IIRC Tesco -- the supermarket chain so viciously hyper-competitive that WalMart went whining about them to the Competition Commission alleging monopolistic practices! -- do the same thing with books.

I do not like Amazon. (You probably guessed that already.)

41:

There are a couple of people above arguing that the stuff about pre-modern authors is irrelevant, more or less. But even though they're right, there are still answers to your questions:

Chaucer:
Probably a scrivener by the name of Adam Pinkhurst did a lot of the production work; in addition, he seems to have done serious editorial work, moving the tales into the order we use today, as well as performing line and copy edits on Chaucer's prose--compare the Ellesmere manuscript with the earlier Hengwrt Manuscript to see how Pinkhurst shaped Chaucer's prose. The issues of marketing and distribution were still there, but the problems and solutions really aren't relevant to authors working today, unless they've got, or are looking for, a noble patron.

Shakespeare:
Shakespeare was a playwright. A play, by its nature, is a collaborative effort, and the versions of Shakespeare's plays that we have were shaped by the performances and abilities of the members of the Lord Chamberlain's Men (Later, the King's Men). If William Kempe wasn't good at a certain sort of comedy, there might not be a Dogberry in Much Ado about Nothing. Plays would change after rehearsal and performance to match the strengths of the players, and to reflect editorial concerns.

As far as the First Folio goes, it was compiled by John Hemmings and Henry Condell, and printed by William and Isaac Jaggard. This involved editorial decisions, copy editing and so on, and there was work done in selling the copies of those play that is not entirely different from the work done in selling books today.

Bear in mind, that for Shakespeare and Chaucer, if it weren't for the efforts of Pinkhurst and the assemblers of the First Folio, the works either won't survive today, or would survive in partial and corrupt forms.

Charles Dickens:
For the largest part, he sold his books to magazines, which employed editors and newsboys and much of the exact machinery that is used to produce and sell papers today. It's true that Dickens also worked as an editor, and published some of his novels in Bentley's Miscellany, a paper that he was editing, but the fact that he was doing more than a purely authorial share of the work doesn't mean that he was doing all the work--he might have been editing his own prose, but he wasn't selling papers on street-corners.

Tolstoy went through a similar process, selling his books to papers, who serialized it, and then working with a publisher. He didn't typeset War and Peace, he didn't print War and Peace, and he did extremely little hand selling of War Peace.

Look; obviously, Chaucer, Shakespeare, and so on were geniuses. And yes, they lived a long time ago. But that doesn't mean that they made their books themeselves, and even if they had made their books themselves, those books wouldn't have survived for you to read were it not for a legion of mostly forgotten people who worked very hard on them, and got paid for their efforts.

42:

Charlie, just curious to know why you quoted munny figures in dollahs? Oh, and great coupla articles - certainly highlighted some parts of the process I hadn't previously got into perspective.

43:

I can say from experience that if you bypass the traditional publishing route, and do all the editing yourself, it is immensely time-consuming – and troublesome. It’s amazing the errors that can slip through the net (at least my own personal scrutiny) even after checking for the tenth time.

Then there are the other considerations beyond the minor typos and grammatical errors, such as: did I use a certain word too many times. Then: what about the consistency of the plot – the coherence. Did a theme hold true throughout? Are there too many themes? Too many characters? What about the basic continuity, such as the physical appearance of a character? Are the chapters divided correctly?

But without going the TP route you don’t get that seal of approval. Yet, surely, someone is developing a sophisticated editing program that will one day deal with those issues above. And the printing process itself, with print-on-demand, will make it simple click to order process, rather than stacks of hardcopies returned for pulping.

So I think – with ebooks and reader technology – the publishing process will become a lot cheaper. It will mean many more people could produce a professional-looking novel. Albeit, computer aided.

44:

For another specific example of niche nonfiction: for my graduate-level textbook the typesetting was definitely outsourced, to me. What they offered me was presumably rather less than they would have paid commercially, but I was producing the book in LaTeX anyway, so it was not much extra effort to make the final file.


On the Chaucer issue: I can think of one modern author who has self-published (nonfiction) truly successfully -- with bookstore placement, reviews in important publications, etc -- but only one, Edward Tufte. In his case, he *wanted* to do all the work because he was a control freak about graphics quality. Other people who have tried to do the same thing in the same field, such as Bill Cleveland, haven't had that sort of success, even with really good books.

45:

Mike: I use dollars because (a) I earn about 75% of my income in that currency, and (b) probably 75% of my audience use it as their own currency of choice. (I'm published primarily in the US.)

46:

Thanks for the interesting article "telling it like it is" in publishing these days. Feel like posting a followup article "telling it like it should be"?

Or do you think that this is the best process that anyone could ever come up with?

47:

And occasionally the editors make spectacular errors and change the entire meaning of a sentence by correcting something that was correct to begin with.

The famous, "The children should have been spared" line in Mote in God's Eye. Which was supposed to be "The children should have been spaced .

Jerry Pournelle to this day hand corrects every copy he is handed to autograph.

48:
Books do not make Amazon any significant amount of money -- they're a loss-leader

Where's your source for that? From what I can tell, Amazon does not generally sell (physical) books at a loss -- they sell them for significantly less than the cover price, but the cover price is typically twice the wholesale price, as you have repeatedly pointed out yourself, and I've only very rarely seen books at more than a 50% discount. The latest information I found had CDs, DVDs, and books all lumped together, and Amazon made a hefty amount of money from there -- about 50% of their revenue, in fact.

Their Kindle software (aka ebooks) seems to often, but not always, be sold at a loss, however. They seem to be making significantly more profit on the hardware than I thought they would be.

49:

Step nine makes me feel vindicated. I have often finished a book and thought Did you cover artist even read this book?!

There is that overuse proverb about a book and its cover, but I felt that surely they were not just decorating the cover. After reading your article, I can appreciate why it doesn't matter if the cover has anything to do with the story. Thanks.

50:

Once more into the typesetting tangent: For any text-manipulating toolset, knowing the tool thoroughly & planning your workflow before diving in eliminates a great deal of pain down the road. The real problems come in later: when the toolset requires complex workarounds to fix its deficiencies; its final document format is some proprietary nightmare; and my favorite, when the document structure has been borked by some idiot who didn't keep semantic structure & visual styles strictly separated. Can you tell I've seen the horror of bad formatting? It burns, it does. But otherwise, work with the tools you like.

(troff and TeX disciples: you can work in those if you want, but I reserve the right to check you for extra-dimensional possession before I drink with you. ;P )

51:

Sorry for bringing up Amazon. That wasn't the point

I'm more interested in the question of how to get the US to stop pulping returns. What happened in the UK? Does anyone know?

52:

Charlie: I'm published primarily in the US.

Again, for a future post...but what make the market so different for fiction in say the US vs UK? Why are you so much more successful here in the US when culturally you are much more familiar with the UK? And yet, theoretically, we share the same language.

53:

AFAIK books are still pulped in the UK. In the US (and in the UK until the mid-90's), the retailer strips off the cover and sends that back for credit. The cover-less book is unsaleable and disposed of.*
In the UK, the publishers receive a whole book back. This is, in principle, a sellable object**. But in practice? The book went on the market, the market threw it back. Publishers can't afford to warehouse thousands of returned books against the day when tastes change. Far cheaper to do another print run, if demand suddenly picks up. So, a lot of the returns are pulped.

* ie, rifled through by bookshop employees who line their walls with stripped books they'll read eventually
** and some of them are sold on the remainders market etc

54:

Bill@33: Chaucer. Shakespeare. Dickens. Tolstoy.

Who did the other half of their work?

The work involved in turning an author's text into final product has changed form over the centuries, but it has always existed. We have no copy of the Canterbury Tales in Chaucer's own hand -- even the earliest texts were produced by scribes, which is to say specialists who had to be in some fashion compensated for their work; some of the early texts, like the Ellesmere MS, had value added, as it were, in the form of illuminations, produced by yet more specialists. The Tales were popular enough that Caxton himself, once he got his press set up, brought out the first print edition.

A modern edition of the Tales, in addition to standing on the shoulders of the abovementioned giants, requires the work of a scholar or scholars of Middle English just to deal with the peculiarities of medieval handwriting, (inconsistent) spelling, and (scant) punctuation in such a way that modern typesetting can handle them. A good edition will also have an introduction, foot or end notes, a glossary, a bibliography, and all sorts of other "extras". And of course, all of the steps others have described here for producing a hardbound book will apply to a Chaucer edition as well.

And all that is long before you get around to translations of Chaucer into modern English, which add to the labor described above the work of a translator (often a poet in his or her own right) followed by yet another round of hardcopy production.

55:

Superb article; puts into prespective the attitude of Google who expect a significant cut of the sales (and all of the advertising revenue) for merely putting the pdf online.

I just a quick question regarding your figures on the average hard back/paperback book sales, are these numbers from the US sales only or do they include the rest of the English speaking world?

56:

I keep hearing this meme that "because there are many people in the supply chain, the price of books is justified"

how does that make any sense?

Everything in the electronic supply chain other then the author and the marketing is a fixed cost and a complete commodity on top of it.

I've seen analysis that says the whole kit and kaboodle is a $20,000 / book or less. The impact it should have on the price per item of any kind of large sale is negligible.

At the worst it requires an author to have some kind of investor relationship with some entity.

If the investor does not believe the book will generate a positive ROI, the book will not get published, that I grant you. However I will also argue a book that cannot recoup author salary +20K + electronic distribution costs probably should not be published.

Marketing, you pay as much as you think you will get back, that I grant you.

57:

Ebooks are up 50% to 3% of the market, hm? You reckon they might be significant if they sustain that rate of growth for a decade? Let's see.

3*(1.5^10) = 115.33%.

Yup. At a 50% growth rate, they'll have over 115 percent of the market in a decade. I'd call that somewhat significant.

More likely will be that the rate of growth will taper off; it wouldn't surprise me to see ebooks take 25-50% of the market (yes, huge margin there, I know) in a decade. Even that much would be significant. They could even wind up expanding the market somewhat, and end up with a smaller proportion of a bigger market for a much bigger overall sales value.

Of course, I'm just an unemployed professional computer geek, so the above figures are pulled out of *ahem*, and if they bear any resemblance to reality at all, it's purely coincidental. Just having a little fun with maths.

58:

>>However I will also argue a book that cannot recoup author salary +20K + electronic distribution costs probably should not be published.

That's the sort of attitude that makes only "safe" books get published. A lot of publishers want to take risks and produce niche book--stuff that only a lover of autobiographical zombie haiku could love--but they're dependent on the bestsellers to cover the inevitable loss.

59:

I don't think many editors will choose to publish a book unless they think it could recoup the advance and production costs while making a decent profit for the publisher. They know they won't always get it right (and get it wrong too often they'll be looking for another line of work), but that's the aim. They don't commission books that they know won't sell.

Well, except for the poetry editors.

60:

@56: UHG: There's a bunch problems with this idea. Let's use the manuscript I'm supposed to be working on right now as an example. It's a bit non-traditional. What does that do to costs? Not a clue. Most SF books (and certainly all of Charlie's) are non-traditional in various aspects. Does it affect the amount of effort put into the editing and copy editing? Probably. If so, it will be unpredictable.

In other words, neither editing nor copy editing nor sales are necessarily fixed costs, because the needs are different for each book.

Additionally, if it costs $20,000 to create a book that will optimistically sell 5,000 copies, that's $4.00 sunk before the book ever sees daylight. Sell that book at $7.99, and as Charlie noted, the profit margin is pretty damn thin.

Finally, how can you tell whether a book will have good ROI? I don't know. No one knows. It's always a gamble.

Go back and re-read the first Harry Potter. Good story, right?
--18 publishing houses rejected the manuscript.
--The first run of the first book sold a few thousand copies, and is quite valuable due to its rarity.
--it took off through word of mouth and finally achieved success through reprintings, not on the original run.

This is probably the best selling series in history. If Rowling had given up after 16 rejections, she'd still be a welfare mom.

This is the problem with the publishing industry. It's extremely unpredictable, and it has a 90% failure rate to produce positive ROI. Not the kind of thing sane investors go for, unless they can invest in tens to hundreds of books per year. That's what publishers already do.


61:

I'm a copyeditor with a stable day job (for which I'm grateful; many newspaper and magazine copyeditors, at least in the USA, are being let go or taking buyouts). A few years ago I got myself involved in copyediting the Virginia Edition (see paragraph about the VE at http://en.wikipedia.org/wiki/Robert_A._Heinlein_bibliography) - that is, the first attempt at publishing it. I worked from scans of the first-edition hardcovers and was able to query someone with access to the original MSs (which have since become publicly available at the online Heinlein Archives). During my time with the project I worked on seven novels, and it became clear that errors introduced in galleys are sometimes not caught even by an experienced author; Heinlein had no children or other major distractions (until his health worsened) and even so, he missed errors that were introduced by typesetters. One example in Starship Troopers is when Johnnie is about to request officer training: His commanding officer "dropped his feet to the desk" (the feet had been "up on a table"). How, or why, would he have dropped his feet to some other piece of furniture? When I queried, it turned out that the word was originally "deck," which of course makes much more sense. Publishing being what it is, and the Virginia Edition being as screwed-up a project as it continues to be, probably only a few hundred people will own a copy with the corrected sentence - but that's another story.

My point is that even though typesetters are unlikely to introduce errors of this sort today - that is, they aren't typing a MS character-by-character into a typesetting program - there will always be opportunities for human error to find its way in. I don't expect ever to become an e-book purchaser, but if e-books have any advantage at all, it would be in the possibility of correcting errors discovered after publication - although any such process could also lead to the content of books mysteriously changing over time, as in Philip K. Dick stories such as Galactic Pot-Healer and "Not By Its Cover."

62:

UnHolyGuy @56

you do realize that (I think) 12 of the 17 steps our host outlined above would still be needed to produce a quality e-book?

and that only about 15% of the cover price of the book is for paper/printing/marketing?

and that producing a (quality) e-book replaces some of the steps that it eliminates (producting kindle/ nook/etc. edition may still take 14 of the 17 steps outlined above)

so assuming that the author still gets royalties for the books sold, and that the seller still makes a profit, and that the publisher still covers thier costs (and makes a profit)- how cheap do you think ebooks should be?

a new paperback (MM) is between $7-8 where I live - most kindle editions are between $7-10 on amazon - some as low as $5 - I don't see the big savings

63:

56, 60

Heteromeles is vastly understating the problems with UHG's statement. To begin with, the "$20,000 per book" analysis is self-serving BS (if it's one of the two that I'm familiar with)... and it goes downhill from there, because even that assumes casebound trade publication with an initial print run of 7,500 copies. Change any of those variables and the final number changes drastically.

Then, too, there's a huge problem with comparing books to any commodity: Books are not fungible. In particular, The Maltese Falcon is not an adequate substitute for Saturn's Children, and vice versa. Virtually every economic and financial measuring instrument available for determining supply-chain costs and efficiencies assumes fungibility... and it's trivial (said in the snooty voice of that math professor we all hated as undergraduates) to show that nonfungibility introduces multiple division-by-zero errors into the equations used to estimate prices and measure efficiency in a supply chain.

64:

if it is an ebook there is no "print run". I didn't say "cost to publish a book" I said "cost to publish an ebook".

I don't care how much it costs to publish a physical book, nor do i think those costs should be passed on to ebook buyers, at least not once ebooks reach a critical mass.

By "fixed cost" i mean "does not scale as the number of units scale". i.e. the cost to do editing is the same whether i produce 10 copies of the book or 100,000

The system i have described is very similar to how VC funding of startups works, only the upfront cost is a million times smaller. The problems, and the ways of minimizing the risks are very similar to how software is produced. Only a lot easier. The ways of getting funded could be very similar. only a lot cheaper.

65:

@64: As for the $20,000, I'm using the upper end from Tobias Buckells' analysis, but it doesn't matter, because the costs of each part of the production chain vary by at least a factor of 2.

UHG, even if you're going strictly electronic, you lose only the cost of printing and moving the paper. Also, if you want to get the per-unit cost down, you have to get a lot of people to pay to read it online, which takes a scaling marketing effort. I'm not a marketer, but I'd suggest costing out the campaign you'd need to, say, double sales. That cost is going to scale per unit. Additionally, server costs are going to scale if you get substantial traffic to the sales site.

No matter how you do it, I suspect that the electronic cost is going to have trouble beating the $7.99 mass market paper cost.

66:

Speaking of insane publishing initiatives, there is the Vance Integral Edition, VIE, fully performed by volunteers, and now there is a Compact Vance, or CVIE, published by Afton House at an insane price. But then again, it is the full oeuvre, spanning decades. And I'm silly enough to buy a set...

67:

Sean, my source is my editor at (PUBLISHER REDACTED).

Amazon sell to the public at a 33% (or larger) discount. They don't get that much bigger a discount from the publisher, and it costs them money to warehouse and ship the books. He says he's done the numbers and they don't add up. He's got no obvious reason to lie.

68:

ChrisM: these figures are for North American rights only (USA plus Canada). Rest of world is ... different, and I hope to get to that in another essay (later).

69:

Honored host: My apologies for this being somewhat aside the point, but as I write audioplay scripts in, well, troff with a custom macro set etc etc (and that's also how I used to write short stories, and indeed my one and only novel draft, come to think of it), I now feel a sense of very, very nerdy camaraderie. Whether with you or with Azathoth, though, I'm not sure.

70:

It seems that people get hung up on the marginal cost of producing the physical embodiment of a product that is really IP. Books, music CDs, movie DVDs, computer software, pharmaceuticals, computer chips - the modern world isn't cabbages and bricks, it's IP that is often delivered in a physical form that's made as cheaply as possible.

If a pharmacy had some neat nano-assembler that could make any drug instead of carrying stock they would still have to pay the licensing fees to the patent holder.

71:

Thanks, Mr, Stross. This was very useful.

As for the recluse at the bottom of paragraph 5, who always uses a quill pen -- I have his latest blockbuster book both in hardcover and on my reader. Another use for an ebook reader - the original is horribly cumbersome to haul around.

72:

Argh! It ate my response! And I spent a lot of time on it. Blast it.

Your editor doesn't have to be lying; your editor may not even be wrong. But your editor -- as you and everyone else in the publishing industry have made clear -- definitely has a reason to be distrustful of Amazon, and view any numbers with distrust. That can easily colour the interpretation.

Everyone has been claiming that the wholesale price of a book is, on average, 50% of the list price. So those are the numbers I'm using. If it's wrong, please feel free to correct me -- but I will have to ask why everyone has been using those numbers, including you. But that's what I'll go with for now.

Even with a 33% discount of the list price, Amazon is selling the book at 67% of the list price, which is still a profit over the wholesale price of about 34%.

For the most part, Amazon gets warehouse space in the middle of nowhere. They have some warehouse space in Seattle and New York City, I'm told, and a couple of other places, but for the most part, they're leasing cheap land with cheap labour. (Still paying market rate at the places in question, mind you. And at least for their holiday seasonal labour, they reportedly ship in employees from other areas, and pay more than the local rate for them.)

They also get very favourable rates from the shippers -- I do seem to recall a deal announced with UPS, four or five years ago. That's just my memory, so I fully admit I could be wrong. However, it's pretty clear that they do get a favourable rate from UPS, based on their volume.

Low warehouse costs combined with low shipping costs means that they can get a low profit-per-unit and, with enough volume, make a fairly large profit. That's economies of scale.

As for complaining about the discounts, I looked on Amazon.com and BarnesAndNoble.com. The mass-market paperback of The Revolution Business is US$7.99 on Amazon -- that's the list price. At B&N, it's also US$7.99 -- but members get it for US$7.19. That's a 10% discount there.

I also looked at The Trade of Queens, which is an unreleased hardcover. Amazon has it for US$16.49, which is a 34% discount. B&N however, has it for US$18.74 -- but members can get it for US$16.86.

TRB is the first book for you that I found on Amazon, and I looked it up on B&N for comparison. I went looking for TToQ, because I knew it was a new, hardcover book.

The prices are comparable. B&N membership costs US$25/year, and gets a flat 10% discount at their stores, and a varying discount online (usually 10% as well, but I've seen it both higher and lower).

So, no, I don't think that a discount price of 33% off the list price is proof that Amazon considers books to be a loss-leader at all. The prices are comparable to B&N, and they have a much better distribution method than B&N does (since they don't have to have a physical store).

I won't deny that they sell some books at a loss. I'd be utterly shocked if they didn't. But it's true of B&N and Borders as well (both of which offer coupons and sales).

That's all for physical books, of course.

73:

C.E.Petit: I think you're using numbers from a different part of the industry. Ingram's wholesale trade discount 55%? I also have a great deal of difficulty believing in a mass-market retail channel that doesn't cost around 50% of the retail price of the product. I can't imagine how anyone could make money selling, well, any mass market product with less than 20% markup in the retail channel. Something doesn't add up.

This is turning into YAEbPD (Yet Another Ebook Pricing Debate), sigh.

74:

Charlie, is Amazon perhaps using a pricing model similar to retail grocers? Typically, in the USA, those make a tiny profit (the number I hear is about 1%) on a very large volume.

75:

I think a lot of the disparaging of eBook costs stem from the notion that if it is digital, and in the case of a book it is only words, this is a perfect way to illustrate the rationality of markets in terms of setting a price. However if something is worth producing it's worth producing well.

One of the comments talked about the concept of loving the ideas but not the additional work of fleshing out a compelling narrative in which to showplace the ideas - or as I strongly suspect on the part of the authors I love, the ideas simply create a great reason to write a story in the first place. Hey man, it's what they do. The particular kind of stuff we love is abstract, idea driven, and an artifact that is pleasant to own. Viral digital phenomenon is powerful and it can convince many into a self-fulfilling-prophecy and induce many a person to believe and change behavior a certain way. Personally I feel greatly chuffed that so many hands are a part of and go into the end user experience of acquiring/owning a book. Because the hands of craftsmen and professionals are involved and they have all given the thumbs up to my purchase and may even as a brand have me coming back for more. As a consumer I have to have these basic needs met to my satisfaction.

What makes this entire debate exist is that books in order to deliver their maximum value are inherently the rocks and navigation hi-lights in the rivers and streams, IE, genres, and not just the fractal flow of the water itself.

76:

We're in violent agreement Charlie, I just shouldn't post comments before the coffee's kicked in... I was trying to forestall the "but ebooks change this' argument, but wasn't clear.

77:

@65 the marketing i cannot speak to either. However the fact that labels sell songs for 99 cents and market them heavily tends to suggest otherwise.

Also, marketing again is fixed in the sense that is irrespective of number of units produced/sold

The cost of servers is minuscule to the point of ludicrousness though, that i can promise you.

For an electronic book there effective is NO "per unit" price, it's meaningless. There is only upfront, one time IP creation costs.

I think the record labels have proven beyond a shadow of a doubt that IP holders cannot dictate IP costs if the IP is easily pirated. The price they can charge trends toward the value of the distribution service they are providing (see iTunes, etc).

78:

Over and over I see people stepping into the argument about ebooks with the point of view that pushing inventory around, storing it, and managing it is all stuff that would be the equivalent of free if everything were digital. With the number of closet sysadmins wandering the comments section most days, you'd think this wouldn't hold water.

Yeah, you can rent space in the cloud. It's still not free. No, the actual size of each book (or even the total size of the 1,500 books -- remember 300/yr x 5 years for Tor) is not the size of your iTunes collection. You might think that the storage, memory, cpu, and network requirements are small, but do it cheap and you can lose all of your customers or enough of your livelihood to put you out of business. If Microsoft can make headlines screwing over a whole bunch of Sidekick customers with a crappy data recovery plan, think of the damage an e-publisher can do to themselves if their whole list gets taken out by a disk failure.

So what makes people think it's going to be free?

80:

'"I don't care how much it costs to publish a physical book, nor do i think those costs should be passed on to ebook buyers, at least not once ebooks reach a critical mass."

You're misusing the term publish to denote production. ALL of the steps above are needed to produce any book with the exception of the print production steps for ebooks (which have their own production steps). Ebooks need to bear their share of the other costs, otherwise you end up arguing that they should be subsidized by the paper books.

Oh and you ignored the fungability issue raised by others. But hey, if it' so easy... do it. Go raise $200k and show us how easy this is. After all, $200k is nothing from a group of angel investors and if it's easy the 10 books is enough to go cash flow positive, so...

81:

i downloaded the entire collection of project gutenberg by the way. 30,000 books, 4.4gigs and it fits on a usb drive. Books are SMALL

82:

What I'm interested in is why publishing houses have outsourced operations like copy editing or printing to outside operations instead of keeping them in-house.

While I haven't actually been aware of all these steps, aside from 11, 8, and 9, I consider them all very valuable, especially anything involving editing. I have seen sometimes rather significant errors in some rather expensive books (talk to me about the quantum physics book my school wanted to use sometime) to be anything but very respectful of that art.

83:

@80 I am not sure where $200K comes from. $20K, yes authors need access to some form of investment capital to help them with that. It's probably not going to be angels, it's probably going to be a lot more like publishing houses. Or maybe it will be like startups, with everyone taking a cut. Or all three. The options are limitless

I imagine what will happen is

1: The price of books will drop
2: Alternate mechanisms will exist to fund book creation, giving authors more control
3: More books, not less will get published
4: The whole value chain will become a lot more efficient.

84:

Project Gutenberg is not free. It's simply freely available to download, which is not the same thing at all. PG isn't as in your face with the begging bowl as Wikipedia is, but they run on charitable donations -- of money, of server space, of people's time.

And for the majority of the texts they host, they are piggybacking on the editing/proofing/marketing steps carried out when the book was originally published.

Pirate sites are also not free. They make money by carrying advertising, and by asking for donations to "keep this resource free".

85:

@79

You're honestly suggesting that as a model for a commercial enterprise aimed at publishing new works digitally? In the first place, all of their works are physically represented elsewhere (ie. the process is not a fully digital one), which means the digital copy isn't the master copy. In the second place, the infrastructure for hosting this content is operated and managed on behalf of the foundation through the University of North Carolina. So, let's be clear about that. The hosting, storage, management, and connectivity aren't free. They're carried at least in part by a state institution who may be either donate public resources to it or are paid (at less than market rates I'd wager) by a charitable foundation.

Your notion of free is skewed. How does this translate into salary for the author? His hosting in this model is only free if he's not being compensated.

86:

Some people are being a little sloppy in their discussions of pricing, and referring to both "margin" and "profit" as "profit".

The difference between the wholesale price Amazon pay, and the retail price which Amazon charge their customers is the "margin", or sometimes the "mark-up". It isn't "profit".

And then you get taxes, and tax accounting, which can screw with a lot of the alternatives. US Tax Law is apparently one of the things which drove the shift to Just In Time systems in US manufacturing. It doesn't sound crazy that the US MM system for books has the same tax laws affecting the choice-space for an alternative. Tax treatment of warehouse stocks, as I recall it.

And then there are the national variations in tax systems. Be careful when you start comparing companies operating in different countries.

87:

Question re pulping, and the UK
Do outlets like The Works (Book Depot retail) affect this process at all? Are they significant to authors/publishers? I know 92.3% of all the books they stock (especially MMPB) are utter dross (I wouldn't pick 'em), but there are occasional goodies in there.

88:

Another eye-opening post, CS! Since I discovered your blog, you've had quite an impact on my view of the ebook market - and certainly lowered my resistance to paying near-dead-tree prices for ebooks (though I still find total pricing parity a step too far).

One frustrating issue (for me) with ebooks continues to be that the vast majority of legitimate ebooks are only available to purchasers in specific markets. That goes for B&N, Amazon, Feedbooks, and others I've tried. As a resident of a central European country I cannot buy legitimate ebooks. I can buy pretty much anything physical, so I can buy dead tree books (even from America, where cover prices are cheaper than Europe - if you ignore the 50% premium for the postage!) but ebooks? No. (It's not universal, either, which is perhaps the oddest thing; around one in ten of my attempted ebook purchases have been fine, the rest blocked.)

Is there any chance you could (briefly!) explain this? (It's a real bugger for me, actually; I want to read your books, for example, but (a) I only read ebooks these days and (b) the postage premium on dead-tree copies is a serious barrier. So so far I've only read Accelerando.)

89:

It seems like part of the problem is that paper books are too cheap. I'm assuming that it's down to previous price wars forcing the price of books down to the lowest supportable margin.

Maybe paper book prices will have to rise before ebook prices _feel_ correct.

90:

An irrel/rev/erent insertion....
Purple singing Dinosaur ?
Well, if it is a SMALL Dinosaur, with Feathers (as many apparently were): and then the Cat eats it, anyway.
Erm, this is giving me ideas ....

91:

Insightful. Thanks, dude.

92:

Geographical rights restrictions on book sales is something I need to talk about, in the context of foreign sales and book contracts, in a future post ...

93:

Humza asked about what happens with editors and authors significantly disagree regarding a book's content (the dinosaur and the DEATH guy).

It depends on the degree to which they disagree. If it's not a huge disagreement, the author wins, in a normal situation. Let's say this is serious, earth-shattering disagreement. Each will attempt to have her/his way, of course. If they cannot reconcile the disagreement, then one of two things will likely happen:

1. The editor gives up and accepts the manuscript as-is, and the publisher releases it with lackluster support. It's possible the author will never publish with this press again.

2. The publisher attempts to release the author from the contract, messily or otherwise, or the author attempts to flee her/his contract, without giving back any money if possible.

This is a very tricky issue and it's much, MUCH more complex than it appears here. But in most cases, it is difficult or impossible for an editor to make significant changes without the author's permission. This is because the publisher has entered into a contract to purchase the manuscript the author provided, not a speculative version of this manuscript that the author has not provided. A smart author will seriously consider an editor's comments for a variety of reasons, rather than stubbornly reject them out of hand, but ultimately the author has the right (usually) to reject the editor's suggestions and cause problems for her/himself.

94:

I'll be looking forward to it... and thanks for responding!

(Google tells a story of a lot of frustrated international readers, btw. From all over the world - from countries like Canada and Australia, of course, where it is reasonable to assume at least that alternative ebook distributers will emerge at some point; but also from many poor benighted souls like myself who live in countries that will never, ever get their own English-language ebook markets. So I'm hoping your post will contain some glimmer of hope for us!)

95:

I'm hoping your post will contain some glimmer of hope for us!

It won't, but at least you'll understand why you're being screwed (inasmuch as anyone in the publishing biz understands it), and possibly pick up a few clues as to how to get around the blockade. (Hint: look for ebook stores that accept gift cards ...)

96:

I think some of the "eBooks should be nearly free" people might want to go directly from the author's manuscript to production of an ebook - and their concept of "production" is a DOC to ePub converter programme.

If it was an eBook-orientated production process - in perhaps fifty years time, when paper is a minor part of the market - then I can maybe see proof reading (not copy editing) getting dropped from the process. eBooks can be sold at the ARC stage - the ARC is a saleable eBook, as Baen's eARCs have demonstrated - and I suspect that proof-reading is one of the very few parts of the process that is amenable to being crowdsourced to the (early) readers.

Oh, and, of course a good eBook toolchain will make typesetting a lot easier; the imperatives with eBooks where things like the fonts and pagebreaks are determined by the device, mean that there is much less control in the hands of the typesetter, and therefore the typesetter has fewer decisions to make. Having seen the present toolchains, though, I'd rather typeset for paper!

Even the most truncated process, though, will definitely need an editor and a copy-editor, plus marketing and distribution, so at the very least steps 1-9, a simplified 10, 11 and then an electronic replacement for 13-16 and 17 is (obviously) still needed.

And Charlie hasn't mentioned the acquisition process (for a future post) - the fact that I can rely on any book I buy being written by someone with at least a passing acquaintance with the English language and with the concepts of plot, setting and character is attributable to a lot of hard work by editor and agents at that early acquisition stage.

97:

Not only was Shakespeare a playwright rather than a novelist (and novels hadn't been invented yet), he wasn't only a playwright (and actor, and director) but also a producer - his actual business was showbiz, not books.

98:

Is this an urban legend? 'Cos I checked my copy of 'Mote' and it's 'children should have been spaced.' (page 485 bottom).
FYI, this is a paperback from Pocket Books.

99:

The point about gutenberg is not that it is any kind of publishing model, but that the server/hosting overhead is minimal. since gutenberg can do it based on donations. Other sites do it based on ads. No need to pass any cost on to a consumer.

The theoretical floor price of an ebook, the minimal price that it could be sold for is

(authors salary + $20,000) / (units sold *unit price)

assume 70K sales, $50K salary, solve for the unit price

unit price is $1

Less sales then that force a higher unit proce and/or make the book unprofitable. More sales make the author richer.

I doubt they will ever get that low.

100:

Gutenberg, as a free service which does not require secure financial transactions as part of the download process, is an order of magnitude simpler to implement and manage than a full-scale e-commerce site.

Also, 70K sales is just not on for any normal fiction book except the very luckiest -- did you pay attention to Charlie's information re print runs?

And you might want to note that Chalie has extensive experience from the inside with what is involved in handling e-commerce transactions.

101:

Phenomenal series of information.

Echoing dolohov @9, is there any chance of seeing an excerpt (a page or two, perhaps) of one of your books, Charlie, in raw MS and final product for comparison purposes?

102:

"the physical embodiment of a product that is really IP"

Taking one example, pharmaceutical drugs: the physical thing is the product, and the physical thing effects the cure or alleviates the symptoms.

Of course, owning the IP might be what guarantees the drug company its income (see Gaviscon), but it's not what has value for the end user. See also food, in which there may be IP.

Same goes for computer chips.

Reproducible works of art are slipperier, but "physical embodiment" is still important: a printed copy of a novel enables one to read it, which is, after all, the approved form of consumption; the score of sonata enables one to sight play it, to analyse it, and to learn it.

Physical things have functions, and so value. Of course, there is also knowing how to produce the physical things, but that's not to say that physical things owe all their value to an abstract thing, the technique for producing them.

103:

There was a special version of Anansi Boys by Neil Gaiman that had his notes for the book as a special "DVD extra" feature after the main text. Needless to say, for fans of his work that was AWESOME.

104:

@100 those things you mention are pretty well commodizied and not overly expensive at this point. I'd maybe grant you a few cents on the dollar. Apple certainly seems to not mind it, nor does amazon.

Yes, if you sell less then 70K you need to charge more. If you think about how the current publishing business works, what is basically happening is that the successful books are subsidizing the unsuccessful ones.

My argument is that since this is not good for the majority of consumers, it probably won't be able to compete with alternate models that don't work this way. It's very similar to how the one good song on the albulm subsidized all the crappy ones (up until digital distribution)

Though this is a bad thing for the long tail of consumers, and is maybe even bad for the majority of low consumption authors, it is probably where we are going. The consumer is in the drivers seat

105:

3*(1.5^10) ≠ 115.33%

3%*(1.5^9) = 115.33%

You're welcome.

106:

Unholyguy: assume 70K sales, $50K salary, solve for the unit price

There's your problem in a nutshell: 70K sales is New York Times top 10 bestseller list territory!

A really good high-end-of-midlist/bubbling-under-bestseller run in the North American market is more like 10K hardback and 35K paperback today. In the UK/rest-of-world English language markets it'd be 2.5-3.5K hardback and 8K paperback.

95-98% of SF/F authors don't stand a hope in hell of getting within spitting distance of 70K sales.

Also note that for microbilling purposes -- anything under about $1 -- credit cards are a very sub-optimal payment solution; typical charges to retailers are around $0.5 per cc transaction, or 2.5-5% on higher value transactions. (I'm ten years out of the internet credit card settlement business, hence vagueness on the current costs; but I'll note that the iTunes Store, which sells items costing $0.99 a pop, hits up your credit card on a monthly basis (pre-auths the first transaction then settles your orders for a month as a single transaction, near as I can figure it out from my bills).

PS: You also underestimated my salary ($50K? Feh!).

107:

I think all the debates about the price and/or cost of ebooks is beside the point. Ebooks should cost X, should cost Y .... how about: ebooks should be GOOD. They should be things worth paying ANYTHING for, which they (generally) aren't at the current time. We should be debating how to improve the technology and aesthetics and overall QUALITY of ebooks, the price/cost debate being secondary, since we must first determine what would constitute a quality electronic book before we begin to determine its cost of "manufacture" and price point.

108:

@UHG: Your statement: "The theoretical floor price of an ebook, the minimal price that it could be sold for is (authors salary + $20,000) / (units sold *unit price). Assume 70K sales, $50K salary, solve for the unit price. Unit price is $1 Less sales then that force a higher unit proce and/or make the book unprofitable. More sales make the author richer."

From our host (see posting at top, #15):

"a typical first SF/fantasy novel in hardback from a major US publisher will ship 3500-5000 copies. Anything over 10,000 is nudging towards the bestseller list; a fiction book that shifts 25,000 in its first month in hardcover is going to be in the New York Times top 20. Mass market paperback runs are much larger â€” 15,000-30,000"

So, a typical first novel will run 18.5K copies. Assuming $50k in salaries, Unit cost per book (your calculation)=$3.78.

High end (e.g. NY Times Best seller) is where your $1 kicks in. Any publisher pricing his average product as if it was a best seller is going to go out of business.

This also assumes that all internet sales are free (giggle),that your average publishing house can easily set up a website to handle 20k downloads of each of its products without incurring any additional expenses (giggle), and that internet marketing costs (e.g. having the download find its audience, especially for a new author who has no following) are the same as selling a list of new titles to a set of bookstores through an ongoing relationship (giggle).

109:

I'm not sure where the meme of "common misperceptions about publishing" comes from. While I appreciate the steps outlined in te post, these are hardly that different in principle from almost any large business, once you substitute names and roles.

All this shows is that publishers have a chunk of overhead that may or may not be fairly efficiently priced.

However, what is clear is that many books do not need many of the cost and time intensive steps outlined, e.g. a new edition of an old book, and yet the price of these editions is not markedly different than a new book.

This is directly analogous to the costs and pricing of branded drugs vs. generics, a subject our host is well familiar with from his pharmacy days.

Case in point. Randomly choosing an old classic, "For Whom the Bell Tolls (Scribner Classics) (Hardcover)" [a 1996 reprint of a 1940 book] Amazon has the list price at $30 which they discount to $20.45. This is the same price as a new hardcover book. So what I'd like to know is which steps in the publishing process really produce most of the costs and what else contributes to the costs, e.g. copyright fees to the Hemingway estate, that result in such a high price. Now if someone tells me that the IP costs are the reason, and not the rest of the production and distribution costs, then I think the discussion could move on to the length of patents vs copyrights. Of course it could be that the sales of this copy is mainly to literary students and takes forever to recoup the fixed costs of the 1996 production cost, but I doubt it.

110:

UHG also implicitly assumes that it's possible to determine in advance what will be successful and what will not. If it were the fiction publication business would have a very different shape.

Just as one minor example of the failure of forecasting: LOTR was published under a profit-sharing agreement which was designed to insulate the publisher against the (expected) probability of a low number of sales. It ended up giving Tolkien a significantly larger income than he would have recived from a standard royalty agreement.

111:

what is basically happening is that the successful books are subsidizing the unsuccessful ones.

But... that's unpossible!

It's very similar to how the one good song on the album subsidized all the crappy ones

No, no, no no no - it's similar to the way the band that sells well (albums or singles, it doesn't matter) is subsidising all the bands that were signed but didn't earn back their costs.

112:

@99: There are a lot of built in assumptions in your statements that aren't necessarily so, but your basic premise is that the hosting environment can be bought in slices as a commodity. I think I agree with that although I have reservations about it.

I also wouldn't underestimate the purchasing power of donations or overestimate the income generated from hosting ads. The truth is in the middle and there's a lot of range. One end of that scale might break the bank and the other end might not be robust enough for real commerce.

113:
"However, what is clear is that many books do not need many of the cost and time intensive steps outlined, e.g. a new edition of an old book, and yet the price of these editions is not markedly different than a new book."

Price in a free market is determined by what customers are willing to pay, not production costs. A seller generally won't lower prices unless there is competition, and an old book that's still popular enough to require a new edition doesn't face much competition.

The only thing we can infer from your example of For Whom the Bell Tolls is that the cost to produce the new edition, including IP costs, is probably below $20.45. I say probably because a seller may sell items below cost in order to attract customers who may buy additional, more profitable items. I doubt that's the case here, but many people suspect that was the reason behind Amazon's desire to sell Kindle format ebooks for less than the publishers' suggested prices.

114:

@113: Here's an important question. Assuming the costs of making a $20 hardcover are on order $5, most of which is the salaries for the manager, shippers, and accountants running the project.

Now, if I sold it at cost ($5), would you buy it? Or would you assume that the $5 version had something wrong with it, and I was trying to dump it?

Let's say I put up two identical copies, one priced at cost ($5) and one at market ($20), which one would you buy? What if it was a gift for someone else?

The price is part of the marketing. So is appearance. Especially for gifts, it's important to spend some money demonstrating that you care.

An example: I got my mom hooked on the Laundry series. I can guarantee that she will be getting a gift hardcover, probably next Christmas (or whatever holiday follows its release date), and if I can get the beast signed, so much the better.

I can also imagine the crap I'd catch if I gave her a ripped pdf of the same novel as a present, even if I photoshopped Charlie's signature onto the title page. Really, it's the same thing, right? Come on you eBook advocates: it's all the same information, and that's all that matters, right? Give me a break.

115:

Bzzzt! Thank you for playing! You don't get the case of TurtleWax, year's supply of Rice*a*Roni, or any of the other prizes awarded to contestants!

I get incredibly torqued off when I see this assertion. I am ethically prohibited from going into the details... but there's a reason that the primary hosting of Project Gutenberg shifted away from the University of Illinois several years back. OK, there are several reasons, many of them extremely abstruse and having to do with the litigation strategy the PG folks believe will benefit them most when the time comes; the most important factor, though, is that the cost to the University of hosting PG was definitely a nontrivial sum of money. The U of I couldn't get away with burying line items and relying on donations in the same way as the present "host" can. And remember, the PG library now is somewhat larger than it was then...

Of course, now I'll be accused of being one of those "But I have millions of supporters in e-mail!" types. So be it. Make the accusation. It's wrong; sometimes people who have access to private information actually keep that information private and sanitize their conclusions so that they don't reveal private information. Just like PG does itself regarding... ok, that's too close to a personal attack, so I'm stopping there.

116:

My own take on the "the current model is necessary to support basic standards of quality, and the greedy consumers don't understand that" thing is not to disagree that standards of quality would take a hit, but to question whether it's really the case that the consumers don't *understand* that so much as the consumers (or, at least, many consumers) don't actually care that much about quality.

It may be the opinion of many professionals within the field that they *should*, but that has no bearing on whether they actually *do*, and if they stop being willing to pay the price for "quality" books because they don't want "quality" books, the market will follow.

117:

Okay, classic hardback.

You can skip steps 1-3, 6-8, and ... er, that's it. No editing/copy editing stage, unless you're working from the original manuscript of a novel which was hacked up by an earlier publisher and trying to put back the bits they botched (this happens quite a lot). It still needs typesetting and proofreading, because unless it was published in the past decade the odds are high that there's no electronic copy of the document to work from.

A common trick is to buy an older edition, scan and OCR it, and correct the OCR output. Trouble is, this is time-consuming and requires just as much work as copy editing, because OCR software is imperfect. (Apparently Amazon Kindle ebooks are notorious for OCR errors; seems they frequently scan books -- badly -- and don't bother to proof them before shoveling them into the ebook store, rather than coughing up the $150-250 the typesetting bureau will charge for the DTP files.)

But really, a new hardback edition of a Hemingway is not in the same market as a first edition release of a midlist novel -- it's a special collector's edition of an existing bestseller. Different rules apply; you might as well compare it to a textbook.

118:

The idea that consumers don't care about quality, which prevails only in the arts industries (supposedly the domain of intellectuals), is absurd.

119:

a seller may sell items below cost in order to attract customers who may buy additional, more profitable items. I doubt that's the case here, but many people suspect that was the reason behind Amazon's desire to sell Kindle format ebooks for less than the publishers' suggested prices.

My current hypothesis is that Kindle is a stalking-horse: Amazon want to use it -- if necessary as a loss-leader -- to destroy any rival commercial ebook sales channels before they grow large enough to threaten Amazon's distance-selling business model for books, which are in turn the loss-leaders that bring customers to their storefront. Lashing out because Macmillan refused to agree to let Amazon set the price on their ebooks, while undertaking not to undercut whatever price Amazon picked to sell them at is a bit of a giveaway for "let's you pay for me to stifle your other sales channels".

120:

Come on you eBook advocates: it's all the same information, and that's all that matters, right? Give me a break.

It's possible to be an eBook advocate without being a fool. Please don't assign identical positions to everyone that doesn't agree with you.

121:

I certainly agree with the first part of that -- I think Amazon was trying to get a monopoly going quickly, before anyone else could get into the mass-market business. Apple was almost certainly the one they were afraid of (and it seems to be a justified fear). (Let me edit to add: I think that Amazon was also trying to push for a price point of $9.99, even for same-day-as-hardcover. They were willing to take a loss on this for a while, but I believe -- based on comments made during all of this -- that they were attempting to negotiate a lower wholesale price once that contract was up. This is somewhat akin to Apple insisting on a price point of US$0.99 for songs for so many years, although Apple got a negotiated wholesale price -- external sources said about US$0.86 I seem to recall -- rather than selling for below wholesale.)

I do disagree, however: I think Amazon would have lashed out at any publisher who tried to dictate what prices Amazon could sell at. Nobody else does that; even the ones who require minimum advertised prices don't dictate an actual price. (Possible exception: video games. But those could be sold at such a high wholesale price that there's no margin for Amazon.) Remember, Macmillan's "generous" model means that Amazon may very well be losing money anyway, with no way to recoup it on the ebooks, since they can't set the price.

(The one setting the model here, Apple, doesn't care about profits on the content items. They don't want to sell at a loss, but that's about it. And unlike Amazon, Apple won't be paying for the delivery bandwidth.)

122:

Charlie Stross (re: becoming self-published, in ebooks only):

"You know what? That implicit 70% pay cut is not looking mighty attractive ."

But you'd be a martyr! They'd honor you at Cons!

123:

SEF: It's not well-known, but Amazon tested the stunt they pulled on Macmillan on Hachette UK about a year earlier. And of the Big Six in the US, Macmillan is the smallest (and therefore was probably perceived as the weakest).

124:

"question whether it's really the case that the consumers don't *understand* that [cutting the editorial process would reduce quality] so much as the consumers (or, at least, many consumers) don't actually care"

The problem is, in my experience, very much the former, in that most of the people who've expressed the latter opinion (that they don't care about the quality drop) don't have any idea how much difference the editorial process makes. I don't know of any author whose books I voluntarily read who would be happy to have the editorial stages dropped from the process. And that's because the author gets to see the book both before and after editing, but the readers don't, so they don't see the differences. (I might add that when I got the edited copy of my first published work to check over - Charlie's stage 7 - I read it through and then emailed my editor to say "Thanks for your hard work on this; I hadn't realised how much stuff still needed doing to it" in pretty much those words. Sure, we argued about details here and there, but a good editor can really help a writer in many ways.) Publishers try to recognise promising manuscripts and turn them into good books, and there's a lot of difference between the two.

125:

I think you're going too far here - the Kindle is certainly a loss-leader, as Amazon tries to lock people into the format and store, and some books may sell at a small loss. But most of the books Amazon sell aren't priced at a loss-making point, they're selling for roughly the same as in a physical shop. A little cheaper, because they have lower costs and can make up in volume what they lose on margin, but about the same.
Supporting evidence
- Amazon turned its first profit in 2001, when it was still predominantly a books and CDs business*
- Amazon charge about the same prices as companies like play.com and bookdepository, which don't have white-goods departments

* might still be, in terms of sales volume and profit

126:

Er... successful books subsidizing unsuccessful ones is not good for the consumers? News to me.

Or do you not subscribe to the theory, repeated multiple times in the threads over the last couple of weeks, that subsidizing marginal books is the only way we get anything written beyond blockbusters, tell-all biographies, and other guaranteed bestsellers?

If you want to read something other than lowest-common-denominator bestseller hits, you want the publisher to take a chance on books that aren't guaranteed hits.

127:

Leaving aside the slush pile, since most people will probably never see one (and the world sanity quotient takes a big sigh of relief): for a good idea of what books would look like without the editing process, why not take a look at fanfic.net? (And then shudder.)

There's a reason why writing (or more accurately, 'making available for reading') fanfics is as 'popular' as it is; fanfic authors have a built-in potential audience from their chosen series' fandom. Take away that built-in audience, and how many of these stories would get any attention at all?

128:

Apparently Amazon Kindle ebooks are notorious for OCR errors; seems they frequently scan books -- badly -- and don't bother to proof them before shoveling them into the ebook store, rather than coughing up the $150-250 the typesetting bureau will charge for the DTP files.

But this is exactly what I was talking about. People still pay for these ebooks littered with OCR errors.

The idea that consumers don't care about quality, which prevails only in the arts industries (supposedly the domain of intellectuals), is absurd.

"Don't care about quality", as in are completely indifferent to quality, is indeed absurd.

"Are not willing to pay for quality", as in would rather pay $5 for a badly-edited book rather than $20 for a well-edited one, I think, is arguable.

You say the ardent Kindle defenders in this conversation are merely ignorant of the costs of quality standards in publishing; I submit that this is unfair. If someone really wants to pay $10 rather than $26 for a book and is willing to forgo a large amount of editing, copyediting, typesetting, etc. for the privilege, why not take them up on it?

People keep saying "No one would ever pay for a manuscript that hadn't been through the editing process", but I wonder -- has this hypothesis really been tested? And *how much* payment are we asking for? Is it really true that people wouldn't pay, say, $2 or $0.50 for a copy of a straight Word document that would be considered "unpublishable" by industry standards? Is there a reason for some people out there not to offer such "bargain basement" prices for "bargain basement" work, other than professional pride?

129:

You've left out a variable here, I'm afraid; and it's the variable that gets left out most often when discussing the economics involved with books. I think what you really mean is:

[S]ubsidizing anticipated to be marginal during the first eighteen months after publication books is the only way we get anything written beyond blockbusters, tell-all biographies, and other guaranteed bestsellers

I have yet to see verifiable, documented evidence in any niche of publishing that either:
(a) justified publication of a work on the basis of income beyond that eighteen-month horizon and actually resulted in acquisition of that book absent a compelling other reason (e.g., it was an option book that enabled the publisher to stop taking slush from an author who had gotten lazy); or
(b) rejected publication of a work because too much of the work's income would be during that eighteen-month window, and that the work would therefore not contribute to backlist sales
That's not to say that it has never happened; I've just never seen any documents demonstrating that it has, and I have a fairly broad and deep experience with this sort of thing.

130:

There's a reason why writing (or more accurately, 'making available for reading') fanfics is as 'popular' as it is; fanfic authors have a built-in potential audience from their chosen series' fandom. Take away that built-in audience, and how many of these stories would get any attention at all?

Well, it depends on how much "attention" counts as "attention". It's a sliding scale of two competing factors, after all -- effort invested vs. attention you want to garner (assuming that all you actually want is attention and not to make a living).

If you aren't interested in putting in the phenomenal amounts of effort required to become a published author, then you won't get the same amount of attention as a published author, sure, but it also means that you might get about 500 people over the course of a few years who read your story and go "Cool story, buddy!", and what's so bad about that?

I think one reason I have a negative emotional reaction to the narrative going on right now is the constant denigration of fan-based or amateur writing as though if you're not a published writer, not making a living at what you're doing, not up to the standards of the professional markets, etc., then you're a "failure" and what you're doing is a complete waste of time. I really dislike that attitude.

131:

Er... successful books subsidizing unsuccessful ones is not good for the consumers? News to me.

Or do you not subscribe to the theory, repeated multiple times in the threads over the last couple of weeks, that subsidizing marginal books is the only way we get anything written beyond blockbusters, tell-all biographies, and other guaranteed bestsellers?

If you want to read something other than lowest-common-denominator bestseller hits, you want the publisher to take a chance on books that aren't guaranteed hits.

What this is really saying is that you want all the mouth-breathers who only buy books once in a while at Wal-Mart to subsidize *you*, the discerning and educated reader.

This is certainly a point of view that the class of self-identified discerning and educated readers in society would sympathize with. The question is how long the mouth-breathing Wal-Mart patrons -- who do, after all, read the news and vote and do other troublesome things -- will consent to doing the subsidizing.

The real reason the Net Book Agreement collapsed in the UK, after all, is that breaking down the gentleman's agreement of across-the-board price supports for all books meant that a vast majority of consumers who really did only want the bestsellers you can get at Tesco could now afford to get the books they wanted -- *without* having to pay artificially high prices that would then be shuffled back into paying to support midlist authors they have never heard of.

You could argue from the point of view of us smart educated literary types that this is a terrible thing and the dumbing-down of society bla bla bla, but the people actually pouring most of the money into the book market for these guaranteed bestsellers are not going to be an easy sell for the argument "Your purchases should subsidize my purchases because my purchases are smart and yours are stupid". *More importantly*, stockholders of the firms that control distribution are not going to be amenable to the argument "We should greatly contract the total amount of money we actually make selling books to people because we want to sell smart books to smart people instead of selling stupid shit to dumbasses".

I'm purposely being provocative about the whole value judgment of "But we SHOULD support midlist authors!" and making it sound uglier than it may be in the minds of its supporters because honestly, my emotional sympathies are with the "I don't want to read a fucking Tiger Woods tell-all!" crowd, but I am deeply suspicious of cultural snobbery and attempts at cultural engineering ESPECIALLY when members of my own socioeconomic class try to twiddle my classism buttons to gain my sympathy for a cause, and in this regard I see the free market doing exactly what it's supposed to do -- give people what they actually want rather than what a cultural elite thinks they should want.

132:

I'm not saying the $1/70K number is a reasonable number, I am just using them as examples, feel free to plug in whatever you like. Trying to separate the equation from the constants is useful.

It is still possible for an investor to "take chances" on a book. You can say, fund 10 books, have 9 fail, assuming the 10th is a big enough success to make up for the other 9. It is possible to have models to quantify this risk. It's still a risk.

As far as "good for consumers" think greatest benefit to greatest number of people, not "taxing the masses to support the privileged few" unless you specifically WANT to do that

133:

Hi:

Could you provide the titles of some of the niche nonfiction you're referring to? Are you thinking of computer books, media tie-ins, or books put together by packagers and then sold to publishers?

Thanks.

134:

People still pay for these ebooks littered with OCR errors.

Then they complain to the poor bloody author, who has nothing to do with the errors! And there's no feedback channel from the author to Amazon's Kindle folks, because AIUI the interface between Kindle and the publishers consists of a contract and regular accounting reports -- Editorial don't get a nose in (and often don't even know the ebook rights to a book have been sold on for Kindle publication).

That's because Amazon insist that the Kindle store is a publisher who is licensing the right to republish the book, not a bookshop selling someone else's product. If you disagree with them, that's fine; you don't get to sell via the Kindle channel.

This really sucks from an author's point of view because at least if there's a typo in a dead tree book we can annoy our editor with it and, when the next edition is due, ask for it to be fixed.

135:

You can still annoy your editor -- if Amazon is scanning the books, that is because the publisher did not send them a MOBI file (or a file that could easily be converted to MOBI). That is something that the publisher could do. (As you may recall, I did get some ebooks from Amazon that were not MOBI. I was decidedly not happy with them -- among other things, they were large, and very slow on the iPhone app. Yuck!)

Or that's my take on it. As this actually relates to how books (ebooks, in this case) are made, I think it's a good question: how does Amazon (and B&N, and Sony, and soon Apple) get the electronic version? Is there a standard solution in place, or is it different for each publisher-distributor pair? Does it vary based on the brand (e.g., Tor vs some other Macmillan subsidiary)?

136:

Sean, they appear to be scanning and OCRing a dead tree copy then converting it to MOBI with DRM without a human-eyeball proofing check for errors.

137:

Holy cow. That's nuts. Is that what B&N are doing as well?

I certainly hope that changes with Apple. And if Macmillan is going to insist on controlling the price, I certainly hope they'll supply the electronic version!

138:

Charlie,

I'm afraid that, despite the extensive description you wrote and the comments that touched on this, I still don't see how the numbers add up. Please understand that I am not pushing any "books should cost $X" argument. I simply don't understand enough to hold a firm position on that. I'm still just trying to understand what's going on.

Taking some numbers from your post that I think are relevant:

From your point 14, it seems that the low end of hardback + paperback sales would be about 10,000 copies (2500 + 7,500).

From the next to last paragraph of the post, you say that the high end of total cost to turn a manuscript into a book is $20,000. In the same paragraph, you say that the author's total earnings from a book is about the same, so say $20,000 for the author.

Unless there are other things not covered in your post, I think that means total cost and author's earnings are about $4 per copy sold. Given that books cost a lot more than that, there must be something wrong in this simple analysis. Can you point out where I've gone wrong in interpreting what you wrote?

139:

If you're aware of the collapse of the NBA, then surely you're also aware that when a "guaranteed bestseller" is sold to Walmart the margins per copy are paper-thin? The mouth-breathing hordes of sports autobiography buyers are already buying at a discount. And the cost of producing a celebrity autobio is much higher, because of the advances you have to pay to secure the book.

The economics of publishing is complicated. Publishers don't sit down and say "Well Simon Cowell is writing a book for us this year - we'll take the millions of pounds profit from that and publish twelve darling little novels that are bound to be complete flops". Celebrity books are expensive gambles, first novels are cheap gambles, and you don't know where (or if) the money is going to come from in any given year.

140:

In 119 Our host wrote in part
"Kindle is a stalking-horse: Amazon want to use it -- if necessary as a loss-leader -- to destroy any rival commercial ebook sales channels"

I note that one of the smaller of the major US SF publishing Houses - Baen - has for more than 10 years been selling in eBook format (almost) everything they sell in dead tree format.

That is when they publish a Hardcover, Trade or mass market paperback, they also sell it as an eBook.

And they sell the eBooks at well below mmp price, from the start, and they sell the eBooks before the dead tree editions reach the shelves.

None of this Hardcover pricing for eBooks, or even $10 pricing - all their new individual eBooks are in the order of $5 or $6 not $10.

I don't think they are loss-leaders.
Baen seem to be making a profit from their eBooks,
(and are passing on reasonable royalties to their Authors) and in the past they have said it has helped dead tree sales.

Of course Baen are selling their eBooks via a eCommerce site that is run by their own Webmaster (Arnold Bailey), and is I think essentially a one man operation.

But my impression is that a major dead tree SF publisher can and does make a profit on eBook sales with the eBooks at $6 individually, and $15 for bundles of upto seven books (including 4 new ebook ones).

I think I read recently that royalty income to a typical Baen author comes about 90% from Dead Tree editions and 10% from eBook editions.


Interestingly the monthly bundle eBook price originally was $10 but increased to $15 some years ago when their CUSTOMERS asked them to put their prices up.

Of course more recently they now also sell an earlier
draft unedited version of the same eBooks for $15 each - an electronic Advanced Readers Copy.


Admittedly they keep some of their eBook costs down by making eBooks from the typeset copy of the simultaneous dead tree editions.

But I was wondering why Charlie says the Amazon $10 price is a loss leader, when the Baen $6 or less price seems to be profitable - is it the combined publication and low overheads and direct sales ?


Martin.

141:

Keith Dick: Unless there are other things not covered in your post, I think that means total cost and author's earnings are about $4 per copy sold. Given that books cost a lot more than that, there must be something wrong in this simple analysis.

So far I haven't written a "Common Misconceptions About Publishing" essay about wholesale and retail channels. Suffice to say, the wholesale and retail channels eat 45-70% of the cover price of a book. Your $4-5 is what the publisher and author split between them -- other parties take $10 on top.

See also: Amazon and Macmillan: an outsider's guide to the fight for just one particular angle on what happens when publishers and sales channels collide.

142:

Note that Baen have also started selling "advanced reader copies" for US$15.

(This has upset some people, because they don't like calling them ARC's if they're for sale. I don't care, personally, although I find it somewhat strange that they're charging more for what is essentially a beta, and don't offer the final version at a discount. I've bought two of them, I think.)

143:

I don't think Charlie is counting the materials cost of printing the physical copies of the book in that 20k, he's counting the labour cost.
And when you've worked out your production cost per book, you have to double that figure to get the retail price.

144:

I have no doubt that hosting a major online ebook operation is expensive. Still--as expensive as warehousing, shipping, and selling printed books? That seems unlikely. As Charlie points out, the retail channel is expensive.

But, generally, I'd say that the tendency is to assume that an ebook is bought and read in the same manner as a printed book and that pricing can be expected to behave as though an ebook is another kind of printed book. So far as I can tell, is wrong. Problem is, no-one seems to know what is right.

145:

In 142 Sean Eric Fagan wrote in part
"I find it somewhat strange that they're charging more for what is essentially a beta, and don't offer the final version at a discount."

My understanding is the pricing of the eARCs is intended to represent a bargin - for the general public - compared to the price of paper ARCs.

That is, paper ARCs are bound drafts marked "not for sale" that publishers distribute for free to reviewers and retailers, and other industry insiders well in advance of publication.

Some of these people sell their ARCs via used book shops, or these days eBay, where members of the public pay tens or hundreds of dollars for them.

So I think that the $15 eARC isn't intended to compete with the $6 eBook, rather with the $500 ARC via eBay.

A Hardcore fan who will pay big money for a paper ARC, wouldn't expect to also get a Hard cover included for the same price.
It is assumed that sort of fan will also be buying the HC and later the pb.

Plenty of People seem to be willing to buy the eARC to get into the book early, and also to later buy the HC and/or eBook.


Martin.

(I better declare my bias - I am in favour of Baen selling lots and lots of eARCs as I am in the unusual and very lucky situation of having prepaid for all the Baen eBooks and eARCs via an eBay auction.
I just wish that more of our Host's books were included - 3 eBooks and one eARC - before Tor's parent company cancelled the deal between Tor and Baen/Webscriptions)

146:

The publishing industry, like most arts industries, caters to so-called "mainstream" consumers, or "average" book buyers -- people who, yes, care less about quality (however you define it) than more "serious" readers. I put the quotation marks here because the terms are loaded and I'm not trying to make grand intellectual claims for reading this or that.

The thing I want to point out is this: that the business model is to cater broadly to people WHO DON'T SPEND MUCH MONEY ON BOOKS. It seems odd to me!

They certainly don't cater to someone like me, who spends, yearly, thousands of dollars on books. Even though I shouldn't (I'm not that well-off). Instead of catering to people like me, the industry caters to those who buy a handful of books in their lifetime, who won't spend, in their lives, what I spend in one or two years (on books).

I won't purchase an e-reading device, as much as I want to, for one single reason -- and it has nothing to do with DRM or expense or any of the current debates in publishing re: ebooks. It's because ebooks are pieces of shit. They're full of errors, like Charles points out, their typographical design is hideous, as Robert J. Sawyer is fond of pointing out on his blog, and there is a narrow range of titles available, mostly garbage. Never mind that they are currently an emulative technology, not a real step forward for art in any significant way.

147:

Do you have any idea how many volunteers have worked to get those books on Gutenberg and in a reasonable form to read? I know several of them and if you had to pay them, you'd be expending a lot more money than even MMPBs.

148:

If Gutenberg were to sell their books, I'm sure the current volunteers who do the layout, proofreading, etc., would insist on being paid.

Do you plan to volunteer for Gutenberg?

149:

This thread discusses a book and you can read extracts here.

The author clearly had no editor and now that he's deceased, his estate is suing J.K. Rowling for plagiarism. Of course, the things the estate wants to sue for are actually from much much earlier. Magical fantasy has pretty standard tropes.

Do you think people would buy that book?

150:

Dave H @113, Charlie @117

Businesses produce until, at the margin, the cost of production equals price. This is normal practice.

I fully accept that both of you are saying that books, as a category, are priced at what the market will bear. In which case the argument about publishing costs is only relevant to estimating the price floor, not teh actual retail price. If books were truly priced according to some cost plus model, reprints should be cheaper than first printings. The only case where this occurs is in the used book market, which I think is the only true reflection of the value of a book.

Which really turns the discussion away from costs and back to prices and retail price maintenance (aka price fixing).

151:

I don't think it's odd that a significant chunk of the publishing industry is dedicated to selling books to the people who only buy one or two books a year. Sure, they only spend a fraction of what you or I do in a year, but there are an awful lot of them, and they reliably want the same thing year after year*. They're predictable, and they buy - in aggregate - an awful lot of books.

*of course, so do I, in a way - I reliably want new and different stuff that does new and different things in new and different ways year after year, like (I suspect) many other people here. As well as comfort-reading of old familiars :)

152:

heteromeles@114:

"Here's an important question. Assuming the costs of making a $20 hardcover are on order $5, most of which is the salaries for the manager, shippers, and accountants running the project.?

"Now, if I sold it at cost ($5), would you buy it? Or would you assume that the $5 version had something wrong with it, and I was trying to dump it??
"Let's say I put up two identical copies, one priced at cost ($5) and one at market ($20), which one would you buy? What if it was a gift for someone else?"

If both copies are truly identical to me (and I'd look carefully - with that big a price discrepancy I'd expect missing pages), I'd buy the $5 one. Part of the "willingness to pay" I mentioned includes the presence of competition, and in your scenario the two copies are clearly in competition. But if they were different - one being a mass market paperback and the other being a hardcover - I'd buy the $5 copy for myself but the $20 copy as a gift. Wanting to not look cheap to my mom factors into the "willingness to pay" decision as well.

153:

Actually, the reprint market -- from J.M. Dent and Everyman's Library to today's "Wordsworth Classics" -- are cheaper than normal books (the latter are usually displayed along with remainders). But they are a different market again, marked by avoiding copyrighted works; at the low end they involve reprinting editions completely out of copyright by photo-offset.

154:

@150: Having sold used books, I can say that the cost is usually a percentage of the cover price, readjusted if there's something unusual about the book (such as a first edition or high quality). So the secondhand price is not an accurate reflection of the price of the book, either, in part because it also impinges on the collector's market.

Here's another problem with the free market: the cost of making it free. It's pretty expensive to derive and maintain an accurate price signal, and the price wouldn't necessarily reflect the quality of the book.

An example: Ms. Plotworthy turns in a publication-ready book as her first novel. Her associate Joe Hackmore turns in something that needs substantial revision before it is equivalent to Ms. Plotworthy's opus. Based on cost of production (more editing) Joe's would have a higher price, even though, by any subjective measure, they are equivalent books and, if priced equally, would sell exactly the same number of copies.

Furthermore, the cost of the free market book would change over time, with subsequent printings, as you pointed out. Of course, someone has to estimate that cost and get it onto the cover and into the relevant publisher and seller databases without error.

Consider the misery this would produce. Someone's got to spend a large amount of time making these cost models work, and communicating the relevant details to the production line and accountants. I won't even make jokes about English majors being bad at math. This would keep an economist busy.

The simpler (and probably more profitable) thing to do is fix the prices at something that seems ballpark right and produces enough money to keep the bookstores and publishers in the game. The savings in book-keeping and cost modeling probably makes up for the inaccuracies in price.

155:

Actually, what I am more surprised at (well, not really by now, but used to be) was how few books a typical author tends to sell. My family was and is rather booky; taking an estimate of our per-capita book ownership and applying it to the population of the US, there should be around 30 *billion* books privately owned by just that market. The UK alone should account for around 6 billion. I guess people just don't read that much.

156:
I think one reason I have a negative emotional reaction to the narrative going on right now is the constant denigration of fan-based or amateur writing as though if you're not a published writer, not making a living at what you're doing, not up to the standards of the professional markets, etc., then you're a "failure" and what you're doing is a complete waste of time. I really dislike that attitude.

I have no problem with the people who enjoy reading fanfic; I spent several years in the anime fanfic community in the mid-90s, made several friends, and still read the stories written by a few of them. And for the most part, I enjoyed my time there.

However, I do have a very vehement disagreement with those who suggest that the fanfic model is the future, and can or should replace professional publication. I left the community around 10 years ago because I got tired of wading through dozens of crappily-written stories to find the ones I enjoyed reading. Things weren't so bad in 1995, when the number of people online was relatively small; but over the years the volume of junk steadily increased - while the absolute number of stories worth reading actually decreased, if anything. My tolerance of bad prose, awkward characterization, poor plotting, and just plain bad writing also dropped precipitously - and to judge by my friends from those days, I'm far from the only one.

So when I speak of my own dislike for the typical level of quality in fanfics, it's from the standpoint of someone who's been there, done that, and doesn't want to go back. And it's why I have such a 'negative emotional reaction,' to use your term, to any suggestion that people in general can or should accept lower standards for professional writing, or that professional writing will be driven out by amateur writing. If some people enjoy reading hobbyist stories that aren't written up to professional standards, I'm fine with that; but my tolerance for poor writing has burned out over the years, and my own enjoyment depends on professional standards. I don't react well to the suggestion that publishers should make books available for cheaper without professional editing; I do not want the idea that editing is an 'optional extra' to gain traction, I don't want to give cost-cutting beancounters any excuse to view editing as an expense that can be cut back, and I want to make sure that the editing infrastructure stays strong and isn't weakened through lack of use/support.

157:

And it's why I have such a 'negative emotional reaction,' to use your term, to any suggestion that people in general can or should accept lower standards for professional writing, or that professional writing will be driven out by amateur writing.

"Can" is different from "should".

I'm not advocating anything per se when it comes to what standards exist or are possible to enforce in any given socioeconomic context. Nor do I think any advocacy on my or anyone's part would really make that much of a difference.

The fact remains that the publishing industry is in serious trouble, and that as cathartic as berating people who think books are too expensive for being philistines is, very few people have ever actually been berated or scolded into paying for things they don't seem to actually want.

I don't react well to the suggestion that publishers should make books available for cheaper without professional editing; I do not want the idea that editing is an 'optional extra' to gain traction, I don't want to give cost-cutting beancounters any excuse to view editing as an expense that can be cut back, and I want to make sure that the editing infrastructure stays strong and isn't weakened through lack of use/support.

And you're entitled to vote for your preferences through your spending. And other people are just as entitled to vote for theirs through their spending, or their lack thereof. And they seem to be doing so.

I mean, the reason there seems to be a "battle" over this at all seems to be that people really think that screaming at people who say "$10 is just too much to pay for a new book" with an itemized list of costs will get them to suddenly change their mind and say "Yes, of course I'll donate an extra $15 to support the industry!" instead of just shrugging and saying "Well, fine then, I don't want your stupid book anyway".

One thing I notice is that people keep conflating saying "This is what I think will happen" with "This is what I want to happen". The newspaper industry went through the same thing a while back, and we're starting to see the same pattern develop with publishing. In 2000 if you said that the Internet was going to kill newspapers you were just a starry-eyed fool; in 2005 if you said it you were an asshole who was "attacking" newspapers and hoping to profit from their demise; in 2010 you're just pointing out the sky is blue.

I really don't have much of a stake in *wanting* the publishing industry to be in trouble -- I just think it *is* in trouble, I don't think you can just make that trouble vanish short of trying some wide-ranging state solution like reinstating the NBA (which, frankly, is not going to happen in the UK, certainly will never be instituted in the USA, and will become an unenforceable nightmare as technology marches on), and I'd rather deal with a changed reality than yell at reality for changing.

Part of this is there being a distinction between saying "Hey, you know, even if the worst-case scenario of the arts collapsing into fanfiction.net actually happens, it wouldn't be all *that* bad if it did; it wouldn't actually be the end of art or creative expression" and saying "Ha ha! I dance with glee upon the grave of your career! Fanficcers, time to hold a feast of victory!"

And the issue here is that people are basically admitting flat-out that they rely on some books to subsidize other books and that they rely on a misleading form of marketing (touting hardbacks as a "superior" product to paperbacks even though they don't actually cost that much to make and mainly exist to enforce time-dependent price discrimination) to trick some customers into subsidizing others -- and then being surprised when the customers start saying "Well, we want to *stop* being the subsidizers".

You can't blame a dumbing down of the culture or people suddenly losing their taste for good literature for this -- it is absolutely and entirely a case of there being a market bottleneck where people have been paying more than they really want to pay for stuff they don't really want to buy, and this being to the advantage of certain cultural elites who make their living off that market bottleneck.

158:

Consider the misery this would produce. Someone's got to spend a large amount of time making these cost models work, and communicating the relevant details to the production line and accountants. I won't even make jokes about English majors being bad at math. This would keep an economist busy.

The simpler (and probably more profitable) thing to do is fix the prices at something that seems ballpark right and produces enough money to keep the bookstores and publishers in the game. The savings in book-keeping and cost modeling probably makes up for the inaccuracies in price.

It's... not that different a market, AFAICT, from anything else where quality is largely subjective and trends can be driven by quickly changing tastes. I.e. half the markets out there that are currently keeping people busy figuring out how to corner them (with all the perversities that come built-in with trying to anticipate the needs of a fickle and irrational public).

And I'm really not sure what you mean about the free market being "expensive" because you're trying to maintain an "accurate" price signal. For free-marketeers the whole POINT of a free-market solution is that you don't care about any single individual having an "accurate" price signal at any single point in time, and are in fact skeptical of the idea that an objectively "accurate" price exists or is possible to calculate (because you are skeptical of the idea that there is any such thing as an "accurate" objective analysis of the quality of something, as opposed to a mere aggregate of all the random whims of the masses of humanity at a given instant).

You can tell this is an American audience because even among a left-wing American political discussion the idea that you can just set a price to something that "seems right" is tantamount to proposing coprophagia. But even if you dismiss this as a kneejerk reaction, the fact remains that most economists, even liberal ones -- the ones you're invoking as people not smart enough despite their training to figure out how to set "correct" prices for published books -- would agree that *no one* is smart enough to set such prices and that therefore no one should be trying to do it. People should just be trying to sell books for what the market will bear and adjusting the prices based on how much people buy them, and letting the question of how much money a book "deserves" to make or "deserves" to cost come out in the wash.

(When it comes to the specific issue of a price-fixing cartel, there's all kinds of side effects of just setting a price that "seems right" that often go unexamined in such conversations -- the main hidden cost being that the existing cartel has a very strong incentive to set prices at a level that keeps the market for books exactly the size that it's at now, guaranteeing a steady profit for the people already in it and putting up a really strong barrier to anyone who wants to *try* a radically different method of production and distribution to get books to the large number of people who would like a book but right now think they're too expensive to get access to.

I mean, if you're invested in the "professional standards" of the cartel as being inherently and objectively correct, then sure, this isn't an issue for you, but you run into the bigger issue that cartels are inherently unstable, even when they have the state backing up the prices they're setting -- you have to have very strong social and cultural support for the idea of the cartel/guild/whatever-you-want-to-call-it to fight back against the simple fact that any one member of the group has a very tempting incentive to break the rules and end the Prisoner's Dilemma by doing something profitable -- discounting an obvious bestseller, for instance -- at any given point in time. And you can try to use the law as a bludgeon to prevent this but there's only so long you can convince the unwashed masses to keep voting for the idea that they need to be protected from their own tastes.)

159:

The fact remains that the publishing industry is in serious trouble

Really? What are your grounds for saying this? Is sales volume down? Is revenue down? Profits? Any big publishers going out of business recently?

people really think that screaming at people who say "$10 is just too much to pay for a new book" with an itemized list of costs will get them to suddenly change their mind

I think you've got the sense of entitlement backwards there. If the people who buy ebooks today were to hold their breaths until their faces turned blue, never buying any books more expensive than 10 dollars again - hell, never buying any books again - that would a tiny blip in the figures. It's 2/3% of the market, at best.
Of course they don't actually stop buying books. They just whine about the price. And when people explain why books cost what they do, they don't want to hear it.

they rely on some books to subsidize other books and that they rely on a misleading form of marketing to trick some customers into subsidizing others


It is not a secret that successful books subsidise unsuccessful books. But the publisher does not know in advance which is which Any more than film studios know which films are going to be successful when they greenlight, or TV studios know which pilots will make it, or record studios know which bands are going to be popular. So they make a bunch, throw them at the market, and hope that some of them will make money, enough to pay for the failures.

This is not a question of the lowbrow subsidising the highbrow either. A book with a celebrity name, an explosion-tastic movie, a pilot with an attached star, or an American Idol's first album - these all have a higher baseline audience, but they also have a higher upfront cost. Its very, very easy to lose an awful lot of money on 'sure things'. A lot of the time, it's the highbrow that subsidises the lowbrow - the movie with no SFX or stars, the first novel that gets an award nomination, and so on.

And customers tricked into buying hardbacks? Seriously? Hardbacks have higher production values and make nicer gifts, but the main advantage they have is that they come out first. That's not a trick. Quick experiment for you - go down to your nearest bookshop, find someone buying a hardback, grab them by the collar and shout, "Don't you understand? They don't cost three times as much to produce! Wait until next year and you can buy a cheaper paperbaaaaack!" There might be some looks of panic, but not from the representatives of Big Publishing realising that the jig is up.

160:

More on Purple Singing Dinosaurs to be found here .....

161: Book design, cover design, front and back flap copy, and cover artwork. The editor pulls together a description of the book and/or the original manuscript. These are used to brief the art director, who if necessary commissions an artist to produce a painting. (Cover paintings may not be necessary if the fashion is currently for abstract/design-driven covers in marketing.)Actual commissioned cover paintings apparently also aren't necessary if you're Tor, as like a sort of publishing version of the Nutramatic drink dispenser, they invariably commission some painting of a random spaceship that bears little or no resemblance to anything mentioned within the book itself and put that on the cover. I'm guessing they keep some guy employed painting spaceships full-time, and just grab whichever one is at the top of the stack whenever a new book comes out.

(At least this seems to be the case with Scalzi's novels, as well as A Fire Upon the Deep.)

It's really annoying. When I get a book, I want to see a scene from the novel, not some generic space ship. Grrr.

162:

Charlie, thank you for remembering the blue pen brigade in point nine.

I can't count the number of authors who claim that copy editors never improve their work and only complicate things, but I've seen their work and seen it published and it makes me want to stab authors. Simple errors like the the principle/principal divide make me want to through a book across the room, let alone harder ones.

You do mention the reality of copy editors as being freelancers, it seems to me we are mostly attached to various publishing houses, etc. It looks like something that can be sectioned out, but really requires too much time IMHO to be anything but a corporate venture. At least without us needing our our marketeers, etc.

Could there be a real alternative production system, given the obstacles? I've done stuff for community organisations, at it's been cool, but I've always felt it lacked the pressure of a commercial job and was always paid less well. It didn't bother me, but I can't see it being a commercial alternative.

Peter

163:

By which I meant point six, thus discounting everything else I said.

164:

There are actually two entirely distinct reprint markets: The one in which you find Wordsworth classics and similar companies selling out-of-copyright books at marginally more than the cost of their physical components, and the one that contains the Folio Society (and various small presses with similar ideas) and into which mainstream publishers happily release coffee-table-book-sized glossy editions of things like "The Hobbit".

The former are indeed cheaper than newly-released books, and also give the obvious lie to those who claim that paper represents a large part of the cost of a book. If paper accounts (as some here have claimed) for half the total cost of the book, how can Wordsworth sell 600-page classic novels for less than a fifth of standard paperback price and make money?

The latter, however, are much more expensive both to buy and to make, even if (as with some Folio editions) they're out-of-copyright works. People only make them when they're sure that they'll sell.

165:

I think that this comment may have a "well duh" response but I'll try to make it anyway. It is interesting that the tech that has created the concept of eBooks and its attributes of portability, a new channel for distribution, and the plain old gadget fetish/business tool feel of reading differentiation, is all very sexy and shiny. However the market rationalists for eBooks may be driving the content of future eBooks into the dark ages. Yes I am referring to quality. Amazon counted on a tech based form of populism to make their case.

It is all fine that information should be free and devoid of snobbery but not at the cost of dismantling a system that is rather efficient at producing value and quality, because, it is a collaborative endeavor. Throw DRM into the mix of the discussion and my unalterable artifacts (books) that I can own for as long as I need to for a onetime purchase price, make dead trees very powerful indeed.

The true costs of a book type thing begin with all that education we get for "free" for twelve or so years. Talk about marketing expenditures.

166:

The move to ebooks may simplify some of this process; it does away with physical copies and all the angst about how many copies to produce in advance and what to do with returns.

However, it won't do a thing to help the slushpile editor, the copyeditor, and all those other pairs of eyeballs that Charlie made clear are essential to making an author's work good for us to read.

It certainly makes it clear why ebooks are not going to be sold for "just the amount that used to go to the author". That would be insane. I see that now. Fascinating.

Perhaps in the future some sort of crowd-sourced editing process can be devised that meets the standard of today's process, but it'll be a tough ask. Much tougher than Wikipedia's system.

167:

What's getting lost in the numbers here is that publishing is a culture industry, and therefore there are intangible costs to doing business as well, social and ethical issues to be considered, and so on. However, the discussion always revolves around numbers (I'm not critiquing the discussion here so much as the general tone of discussion in the industry) and rarely does anybody stop to think about the cultural costs of investing in one model over the other. I will be curious to see how financial and artistic issues dovetail in the forthcoming post on how authors make money according to Charles's experience.

168:

@159

"Really? What are your grounds for saying this? Is sales volume down? Is revenue down? Profits? Any big publishers going out of business recently?"

I think the most vulnerable part of the chain are bookstores. At this point, they have very little reason for existing and the smaller ones are going under in droves.

http://articles.latimes.com/2008/may/13/opinion/ed-martinez13

Very little of this is due to ebooks of course, as you pointed out they are a small part of the puzzle at the moment, however I think you are holding a minority view if you don't think the whole value chain is "in trouble".

169:

here is an interesting article on Barnes and Nobles

http://www.reuters.com/article/idCNN2324463420100223?rpc=44

170:

Alex @150

"Businesses produce until, at the margin, the cost of production equals price. This is normal practice."

You've missed the important fine print on this. First, this only applies to a perfectly competitive market. Under that assumption, you can sell as many as you can make at the market price, and there are enough other producers that going to maximum production doesn't drive down the market price. Second, it is only true if price exceeds minimum *average* cost. If the business can't make back average cost, it won't produce at all. This is also normal practice.

What you actually have in the new book market is a monopoly product with close but imperfect substitute products available.

171:

I heard stranger and stranger Tales of Darkest Book Publishing from my father as he rose from Editor to Editor-in-Chief to executive in publishing company to executive in conglomerate which owns media companies. Mr. Stross has hit every nail on the head. My father's only published novel AS AN AUTHOR ("The Editor") was mixed metaphorically blurbed: "Rips the cover off the steaming jungle of the publishing world."

Note that publishers, like insurance companies, are trying and failing at optimally combining sunk costs, expected revenue, estimated risk, supply chain management, technology change, regulation, taxation, and customer good will. I doubt that the Obama Administration will bail out book publishers in the USA the way that they are overhauling its $150 billion bailout of AIG. Yet the pr0n industry submitted a formal request for bailout! Surely Science Fiction sucks less.

172:

A copy editor would have caught that for you, and a few other things, too. :)

173:

As a counter-point to this entry, I wrote up my process for self-publishing. The process isn't very difficult, and I think I would go crazy if it took 12 months to go to press.

174:

@162
"Simple errors like the the principle/principal divide make me want to THROUGH a book across the room, let alone harder ones."

You are a copy editor? ;)

175:

Really? What are your grounds for saying this? Is sales volume down? Is revenue down? Profits? Any big publishers going out of business recently?

Um.

http://nymag.com/news/media/50279/

I mean, this particular article has something of an alarmist tone to grab readers, sure, but it's hardly a big secret that, yes, profits are down and the past few years have seen a wave of mergers, cutbacks and downsizing.

There's a very specific and interesting double-faced tone people get where they're simultaneously crowing that the industry is so vital to our culture, so well-run, so intrinsically the most sensible way to do things that it will NEVER DIE, and at the same time facing down the Internet mobs with terror and rage because we're threatening to kill it.

Which one is it? Does Gandalf Stormcrow speak truth or lies? If truth, why shoot the messenger? Me saying "publishing is in trouble" is hardly *causing* publishing to be in trouble or even a vote in favor it.

If lies, why spend so much time yelling at him for being wrong, if his opinions are so laughably wrong and easily dismissed?

"Publishing is in trouble" doesn't even seem to be controversial with our gracious host, who has, for instance, posted a trepidatious speculative essay about the future of compensation for content creation as Google conquers everything.

I think you've got the sense of entitlement backwards there. If the people who buy ebooks today were to hold their breaths until their faces turned blue, never buying any books more expensive than 10 dollars again - hell, never buying any books again - that would a tiny blip in the figures. It's 2/3% of the market, at best.
Of course they don't actually stop buying books. They just whine about the price. And when people explain why books cost what they do, they don't want to hear it.

The issue is not people buying ebooks instead of paper books. The issue is, in fact, people who just don't buy books. People who buy ebooks and/or don't buy paper books are a tiny subset of this conversation, relevant only as a symptom, not a cause.

176:

Piaw Na@173

Your very short book aimed at a very limited market:

'An Engineer's Guide to Silicon Valley Startups'

is an excellent example of how self publishing can be the right thing to do for a particular book.

Your route is, however, an absolutely dreadful way of selling long novels to a huge market...

177:

@170

""Businesses produce until, at the margin, the cost of production equals price. This is normal practice."

"First, this only applies to a perfectly competitive market."

No it doesn't. It applies to any producer making mass produced products. Competition between producers helps set the price, not the propensity to produce to the level of zero profitability at the margin. Any product had a supply demand curve, whether single producer or commodity. And don't forget almost all products have substitutes.

Second, it is only true if price exceeds minimum *average* cost. If the business can't make back average cost, it won't produce at all. This is also normal practice."

You must have missed the whole tech business then. Producers sold at below cost with the aim of driving up volume that lowered costs through experience curve pricing. Of course the aim was to have a large market that was profitable at the end, but that could be many years ahead.

"What you actually have in the new book market is a monopoly product with close but imperfect substitute products available."

Hardly a monopoly if substitutes are close, is it?

More importantly, we have little idea what role price plays in substitutability as cover prices are so similar. The effect of price on popularity has been almost completely removed with books, although we are starting to see how price is affecting popularity with web offerings.

178:

Note that publishers, like insurance companies, are trying and failing at optimally combining sunk costs, expected revenue, estimated risk, supply chain management, technology change, regulation, taxation, and customer good will. I doubt that the Obama Administration will bail out book publishers in the USA the way that they are overhauling its $150 billion bailout of AIG. Yet the pr0n industry submitted a formal request for bailout! Surely Science Fiction sucks less.

Call me a right-wing tool by European standards if you want, but I think this wave of bailouts, nationalization, enforced price supports, etc. is unsustainable.

Most of the ways to "save" publishing that I hear that don't involve handwavy technological magic or a sudden explosive wave of education transforming the public into promiscuous a-different-genre-and-author-every-week book-buyers involve following France and agreeing to price-fixing, i.e. putting back the Net Book Agreement in the UK and instating it in the USA and whatnot.

I detailed above why for a lot of reasons this strikes me as a horrible thing, but the real reason this is a non-starter is that it's just not going to happen -- it is, in its own way, as fabulous as the hypothetical of doing a massive campaign of televised PSAs telling people to read more. We did "bailouts" for the big banking and insurance firms because they're holding huge amounts of money and jobs hostage. It may not have been the right thing to do (I suspect that it wasn't) but it felt necessary, and not doing it would've been extremely politically difficult.

None of this applies to the proposal of book-price-fixing in the USA, where the people whose profits would be badly hurt by such a proposal are the big dogs who are holding all the money and jobs hostage -- big distributors like Amazon -- and the people you're trying to protect (midlist authors, the traditional publication structure, the "cultural commons" of a professional elite literary class) are the underdogs.

France could phrase their reinstatement of price-fixing as an attempt to push big corporate money out of their borders -- the USA is where said big corporate money lives. It's not going to happen. Even if I thought it *should* happen, which I don't, it won't. You can sell massive government intervention in a market when the scary result at hand is thousands or millions of lower-class uneducated people being rendered penniless and unable to find work; as obnoxious as our host finds the "Get a real job" crowd to be, you simply won't and, I'd argue, shouldn't get the same degree of public sympathy for "Good books will be harder to buy because it'll be harder for an author to reach the level of success that will let her quit her day job! Editors and graphic designers will have to take jobs doing advertising instead because of cutbacks at Houghton-Mifflin!"

179:

You seem to have a penchant for quoting old media reports; I think we can be reasonably confident that it was not 'The End' of publishing, since the article was published on Sep 14, 2008...

180:

More importantly, we have little idea what role price plays in substitutability as cover prices are so similar. The effect of price on popularity has been almost completely removed with books, although we are starting to see how price is affecting popularity with web offerings.

And this is something that I think we'll start to see happen more and more over time. The reason so many (in the context of this conversation) conservatives are so pissed at what the loss of the NBA has done to UK booksellers is that it's permitted a very crude form of adjusting price to popularity -- the so-obvious-a-child-could-think-of-it strategy of taking existing bestsellers, slapping a deep discount on them and churning them out like hotcakes.

A lot of angry bookbuyers and booksellers ask why someone would violate the gentleman's agreement of selling all books at an agreed-upon price and "letting the reader decide" whether this book or the other is the one she wants to pay $26 for. And the answer is kind of obvious -- because doing this reaps immense and easy profits at a very rapid pace, because most ordinary bookbuyers respond very amenably to it.

The ability to closely track how popular a book actually is when you're actually selling it and quickly adjust the price you ask for it based on that is the real kicker, here -- it's centralized distribution, computerized sales monitoring and cheap, rapid cross-country shipping that have really driven the so-called "collapse of the midlist", not Amazon.com or ebooks or any of that johnny-come-lately sideshow stuff. At present the resources only exist to do this crudely and hamfistedly, but even the simple mechanism of being able to quickly identify bestsellers, up your orders of them (and cut your orders of everything else) and slap a discount on them has vastly changed the industry.

Attempts to do this with greater sophistication are growing all the time -- not just in this industry but in any industry that pays for market research -- because the profits are too obvious to pass up. There is no way we can go back to a gentleman's agreement of "Everything costs the same, just pick the ones you personally think you'll like" except by top-down force.

181:

Holy crap.

Of course it wasn't "the end" of publishing, in that no, the big six publishing houses did not all simultaneously close their doors right then in 2008. And the New York Times is still coming out on paper. So clearly, nothing fundamental has changed, no disturbing trends exist, the world will still be the same in 20 years as it is now, and everyone who says otherwise is a crazy doomsayer.

Unless you're saying there was a sudden massive resurgence of cash flow since 2008, the high-profile editors who were laid off in the wave of downsizing got their jobs back, the midlist has un-collapsed and everything is hunky-dory.

182:

Alex @ 177:

"You must have missed the whole tech business then. Producers sold at below cost with the aim of driving up volume that lowered costs through experience curve pricing. Of course the aim was to have a large market that was profitable at the end, but that could be many years ahead."

But that supports my point. That model requires selling the last product sold at well above marginal cost or the product is unprofitable.

For example, imagine an electronic product that costs $30,000 to produce and distribute the first copy and ten cents a copy for each additional copy. If you can sell 10,000 copies at $3.20 each, you make a modest profit. Between one and 10,000 copies the minimum average cost is $3.10, at 10,000 copies.

183:

Art, if you can properly judge the value of a book to you (as opposed to a production price) from its cover, then...well, I guess you're buying books for their covers and not their contents.

The fundamental problem with your economic argument is that, as with movies or any other experiential art piece, it's difficult to accurately estimate the value of a book before you read it.

How much should you pay for a particular book? Well, you have to use substitutes to estimate that value: cover art, the author's reputation, which bookstore it's in, whether it's in the library, the publisher's reputation for quality, reviews, and so on. None of these are perfect estimates of personal value.

Books aren't bread, and they don't substitute well. For example, I read Charles Stross and not Nora Roberts. While they are both good authors, they don't substitute for me.

So what's the proper price of a book? If they vary in production costs and the value can't be judged without purchasing and reading the thing, then...? Probably the simplest thing is to set the same price for a bunch of books and make your money on volume, rather than price per unit.


184:

Alex, novels are not interchangable mass produced components.

If you think they are, I challenge you to go into your nearest big chain bookstore and grab five novels off the shelves at random, pay for them, then read them.

If you find them as satisfying as five selected by you from your preferred authors, then there's something very odd in your head. And by the way, can I clone you?

185:

You might bear in mind that trotting out old media articles is a really, really bad way of disputing Charlie's observations; you could try advancing some arguments based on specific information relevant to the points he makes instead...

186:

heteromeles@183, charlie @184

You are both making the mistake of arguing substitutability for the individual, rather than across the population.

My substitution matrix is going to be very individual, so that a Stross will be substituted quite well by say a Vinge, but not a Maeve Binchy for a stimulating read. Thus the price differential between a Stross and Vinge could be quite small, whilst it will be very large between a Stross and a Binchy (actually you probably couldn't even pay me to read Binchy). Across the population, the matrices with average out and we should see the global substitutability matrix emerge. [Obviously we are ignoring sub-population matrix clusters here].

Contrary to the heteromeles assertion that you cannot value a book without reading it first, you can get information signals about it. There is a lot of information to be gleaned from prior works by the author, reviews by trusted reviewers (including word of mouth recommendations), sales rank, etc, etc.

As for charlie's experiment about randomly picking books off shelves, if we substitute "novels off the shelves at random" with "selected by sales popularity/best critical review", then I would say that the selection criterion will be better than random, but probably, but not certainly, still poorer than my own preference biases.

But let's examine this in detail. I have so much money to spend on books per year (actually the constraint is reading time). If charlie only publishes "The Fuller Memorandum" this year, my purchasing will result in only one Stross and I will allocate more reading time to other authors. I would argue that shows quite a lot of substitution possibilities in my preferences matrix. Suppose that charlie gets permanently removed from a major distributor, like Amazon. How much extra cost would I endure to acquire a Stross rather than a substitute? What if Stross books were 2x as expensive?
Without free market, floating prices, we don't know the answer to that, although as I have argued earlier, used book prices may give us some better indication of that.

187:

So what's the proper price of a book? If they vary in production costs and the value can't be judged without purchasing and reading the thing, then...?

I don't know what you think you're arguing with me about. My whole point is that there is no "proper" price of a book, nor "proper" price of anything.

The "proper" price of a book is however much sellers can sell it for at whatever price buyers are willing to buy it for.

I don't see why the conversation keeps circling around and around this "How do you determine what a book is *really* worth?" thing. Nothing is really worth anything except what any given individual is willing to pay for it at any given point in time.

Does this mean that books get judged by covers, that people decide not to put up the cash for something that they might think was worth five times the price if they give it a chance, that people will pay in droves for something based on marketing, faddishness, it being already on the bestseller list?

Sure. That's human nature. I fail to see what's wrong with this. It may be distasteful to you or me when we personally feel that we're above the herd behavior in question, but that's not the same as its being wrong.

In the specific circumstance we're talking about, we're talking about yes, the fact that distributors will put massive discounts on existing bestsellers and order massive quantities of bestsellers rather than giving a "fair" shot to the entire list. This has nothing to do with any "objective" or "proper" or "correct" value that a bestseller has relative to a midlist author. This has to do with the simple *tautological* fact that more people want books that are currently bestsellers than they do books that are not bestsellers, and so they *make more money* pushing out huge crates full of bestsellers at the expense of everything else.

This has nothing to do with finding the "proper" price of a book. Businesses are not in business to try to find the "proper" price of things, they're in business to try to find the price that will make them the highest profit.

188:

Is it weird that reading this post makes me want to sit down and write a novel?

189:

You are both making the mistake of arguing substitutability for the individual, rather than across the population.

A lot of people are using basic econ terms willy-nilly in wildly incorrect ways in this thread.

I would argue that it's pretty clearly *not* the case that books are a good with *zero* substitutability. It's actually kind of hard to imagine an individual consumer for whom this could be true -- indeed, contrary to heteromeles says, the only situation in which this could be the case is if someone has *already* read the book in question (or gained perfect knowledge of it through precognitive powers) and loves it so much they will absolutely not be satisfied with anything but a word-for-word copy of that book.

Otherwise it's just not true. Books are substitutable goods. Not perfectly so, but they are, because if I go browsing in the bookstore and I don't see the *one specific book* I want I can nonetheless browse for similar books, books by the same author, books that received similar reviews, etc.

Indeed, arguably the more someone loves books *and* the less someone loves books the more substitutable books are for them -- a true bibliophile probably has a wide range of specific but eclectic tastes, such that if any single individual author died or swore off writing forever he could still spend a happy hour poring through the stacks looking for something he will like. Similarly, someone who only likes books casually -- Tom Clancy paperbacks, big celebrity ghostwritten autobiographies, trendy nonfiction hardcovers about Important Political Matters, etc. -- is likely to grab whatever is being pushed in her face and not notice that much if one trendy nonfiction author has been replaced by another.

The only people for whom books are absolutely not substitutable are the crazy hardcore fans of one particular thing -- the seventh Harry Potter book would not be substitutable for any other book for a Harry Potter fan, in that if it wasn't made available they simply wouldn't buy anything at all rather than settling for something else.

Even then, we're talking about substitution on the *consumption* side, not the *production* side. That's the other part of it -- if books were not substitutable at all then if any single factor of the writing or editing of a Charles Stross novel were not up to snuff, I would simply turn up my nose at it and not buy it at all. If he made authorial choices that did not match my specific criteria of expectations, I would simply turn up my nose at it and not buy it at all.

Clearly this, too, is not the case, and people are to a certain degree willing to settle for something less than their perfect ideal when they buy books. (Indeed, if you are a "fan" of a certain author who is willing to say "He's disappointed me sometimes but I still like him enough overall I read everything he puts out", you are advertising that you view his books as substitutable for each other!)

This is the thing -- people tend to mentally insert a "perfect" into terms such that if a market isn't in "perfect competition" then no insights about economic competition apply to it at all. If goods aren't perfectly fungible or substitutable then no arbitrage or substitution must be occurring, ever, at all -- and that's clearly *not* the case. It's clearly not the case that you can simply dump a randomly selected pile of books into a crate and sell them to customers by the kilo, but it's *also* clearly not the case that every customer walks into the bookshop with a single highly specific book in mind and cannot be swayed from that object by any other factors, like availability or price.

The somewhat oxymoronic term "monopolistic competition" is used for situations like these, and it's a sticky topic, but it boils down to this -- Charles Stross cannot expect that his novels will be treated identically by the book-buying public to Dan Brown novels and therefore it is not a simple matter of course that Dan Brown novels and his novels must be sold at the exact same price because any difference in price will just drive people to buy the other one.

It is *also* not the case that Charles Stross really has a "monopoly on Charles Stross novels", per se, in that NO ONE who buys Charles Stross books would EVER spend the money they spend on his books on ANY OTHER books, and therefore the price he can set is limited only by the pocketbooks of his customers and he is utterly unaffected by what anyone else sells. If Charles Stross novels suddenly cost $300 a copy and Peter Watts novels cost five cents, a nontrivial number of people -- mostly poor people for whom economic decisions really are primarily about what they can afford rather than what kind of "signal" they wish to send -- will stop buying Charles Stross novels in favor of Peter Watts novels (or Dan Brown novels, or Stephenie Meyer novels, or Karen Traviss novels).

Being that this is the case, it behooves anyone who is contractually and legally obligated to provide the maximal possible profit to their shareholders to analyze how monopolistic the competition is and to see *how much* product differentiation -- how much cross-price elasticity of demand, to use wonkish jargon -- exists, rather than assuming that this information is somehow completely unavailable and/or random and therefore we might as well pick a price that "seems right".

The very existence of bestseller lists indicates that this information is, at the very least, generally available after a book has been out for a relatively short time, Cinderella stories like Harry Potter notwithstanding. The very fact that there's such a thing as a "proven" author who is much more likely to sell a manuscript than a no-name wannabe -- and yet "proven" authors are not all little kings who can demand any price they want for their work because their loyal fans will *absolutely* buy their books and no one else's no matter what -- is more evidence of this. Indeed, for people saying that price-fixing makes sense because no one can possibly determine the value of a book before or even after it's actually sold -- isn't that *exactly* what an acquisitions editor does? Determines the potential revenue of a manuscript relative to the cost of publishing it and make a guess as to whether it'll be enough to justify buying it? Why is it okay to speculatively divide books into the simple two categories "worth publishing" and "not worth publishing" but not make any considerations about how much you think people will be willing to pay for it besides that? (And, of course, publishers *do* -- when you take away a publisher's ability to decide how much to bet on a book's success based on setting the final price point, they just pass that on to harder-to-see stuff like how much of an advance to offer the author, how much to spend on the book's marketing budget, how much of a print run to order, etc. The argument that no one can possibly make judgments about the "worth" of a book before the reader reads it all the way through is silly, and we seem to be only having it because of issues people have about the specific concern of consumer pricing.)

190:

You might bear in mind that trotting out old media articles is a really, really bad way of disputing Charlie's observations; you could try advancing some arguments based on specific information relevant to the points he makes instead...

You keep saying "old media article" instead of actually referring to any information in the article or anything I'm actually talking about. (And, srsly, 2008 is not "old". C'mon, I know we're on the Internet here, but seriously?)

I don't even think I am "disputing Charlie's observations" -- indeed, I think I started this specific foray into commentdom saying that I wasn't. I do not dispute it costs what Charlie says it costs to pay all the people to send a manuscript through the traditional publication process and end up with a finished product that meets what we currently consider professional standards of quality.

I *do* dispute that this system is tenable over the long term, and I dispute this based on the economic facts of what is actually happening to the publishing industry right now. This dispute has *nothing to do* with any abstract, objective argument about how much books "should" cost or whether we "should" support professional standards. I'm talking about what I see as actually happening, not what I think should happen -- and I'm talking about why I think the general angry fusillade of "You whiners don't understand what it costs to make a book!" is not going to make any difference.

Newspapers weren't a very high-margin industry either and they, too, were largely staffed by people who did valuable skilled work that they made a decent but not great living at whose contribution to our society will be difficult to replicate with that structure.

Yelling at people about this -- shaking them by the lapels and telling them their refusal to keep paying into the system is undermining Western civilization or whatnot, as an increasingly large number of angry people are doing -- is not going to make them all start buying back the paper subscriptions they let lapse, paying to advertise in the classifieds rather than doing it on Craigslist, going around buying newsstand copies of magazines at newsstand prices rather than surfing the blogosphere, etc.

It's similarly not going to make people who buy paperbacks once in a while at Wal-Mart start forking over hundreds of dollars for shiny hardcovers from their local independent bookseller, or any of the other things that would have to happen to reverse the trends that are eating into publishers' ability to survive.

I don't care to argue with anyone over what the price of books "should" be. There are no "shoulds" in business. I think it's pretty clear that publishers are increasingly having trouble getting people to pay what they want to charge for books -- and I think this has *very little* to do with Kindle or Amazon or ebooks, it's an issue that first flared up with the end of the NBA in the UK in 1995 and the rapid breakdown of the old paperback distribution system in the late '90s -- and that if our host is correct about how most of these costs go into the actual work of publishing a book up to professional standards and putting it out through marketing and distribution channels, then it's going to rapidly get a lot harder to publish a book up to professional standards and put it out through marketing and distribution channels.

I'm not a utopian who thinks that the Internet and the cloud and the wisdom of crowds will instantly pick up the slack if we just burn down the existing system. I think that a lot of the transition as the existing system starts to creak and totter is going to be painful. But I also think that trying to save it by propping it up with legislation is a doomed effort.

191:

It would also help if you grasped that the 'big picture' bullshit is immediately recognisable to anyone who has spent more than a couple of hours reading comments on blogs; there's a huge supply of it on the web and bugger all demand...

192:

Okay, you're clearly just trying to antagonize me at this point, so I have to ask: What's *your* point? What is it that you think is "bullshit" about what I'm saying?

Again, note that I'm not disputing any of our host's points about the costs of publishing or whatever -- I'm putting forward the "big picture bullshit" that, regardless of whether you think these costs are necessary to having a decent-quality book, they're costs that *are being cut right now* because the money to fund them is increasingly difficult to find. And that this isn't a problem that's solvable by yelling at the customers that they should pay more.

Do you have any specific arguments to offer against this point of view? Because I wouldn't be wasting all this time posting this "big picture bullshit" if I didn't want to hear a response. I just don't see the point if you're just going to try to bait me with "Your article is old!" and "Nothing you say is original!" (Well, no shit -- I'm reporting what I see based on what I read and what I hear, I don't have a university position from which I can make doing original research on the matter a full-time job.)

193:

"The argument that no one can possibly make judgments about the "worth" of a book before the reader reads it all the way through is silly, and we seem to be only having it because of issues people have about the specific concern of consumer pricing."

The argument is based on the observation that 90 percent of books do not earn their advance back. So, at best, your acquisitions editor correctly predicts the books' ROI 10 percent of the time, and they're not likely to get much better Moreover, they're about as good at spotting break-out books as the film acquisitions business is at spotting blockbusters, so I think this is a problem that's endemic in the arts, not a product of editors being stupid. Go read The Black Swan if this doesn't make sense.

Additionally, there's the real problem that it takes hundreds to thousands of person-hours to create a book. This is why many authors live in places like rural Ohio, where US$30k per year is close to a living wage. Where I live, that's poverty wages.

So, we have a disconnect between the basic idea that authors would like to make a living wage off their art (want to argue that?), and consumers should be able to purchase their works for less than their current cover price, because we all know that it doesn't accurately reflect the "real" price.

So what to do? Letting your economics textbook do your talking and thinking for you is not an option, because we're currently in a recession that demonstrates that markets are massively more subjective than conventional economists think.

Charlie's doing something really good, by educating his readers about the real costs and hurdles of the publishing industry. That will probably do as much to help save the SF publishing industry as any of the economic theorizing I've seen here, simply because it helps readers better understand what it is they are paying for when they buy a book.

194:

Regarding the random spaceship picture for front covers - I am reading Saturn's Children at the moment and the spaceship on the front of this Orbit paperback is just the kind of floating baroque pleasure palace that you would imagine for the opening scene. Generally they are just random battling spaceships. You would think bright green gorgeous mixed-sex space warriors in hand-to-hand combat with weird aliens would grace a Scalzi cover. Though imagination has better pictures, so often.

I have always found an extra pleasure if the book I am reading has a bright yellow plain cover. I looked that up to make sure I wasn't going to make a fool of myself and see that Gollancz are now part of Orion - mmmm.

A bugbear I recently discovered that I share with my mother is the inaccuracy of many cover depictions. Particularly where a (99.9% of the time female) character is described as dark-haired and the cover shows a blonde. We are both ravishingly raven-haired.

Charlie, I was wondering if you deliberately write in American for some books and English in others. Did you choose aluminium in some but aluminum in, for example, the Merchant Families where the protagonist was educated in the US? Do your proofreaders translate as they go for the transatlantic editions?

I spotted a little mistake in Saturn's Children where "he" was substituted for "be", in a phrase in italics. The other mistakes may be less forgiveable (I'm an evil bastard but I don't let the errors spoil the fun) but that was understandable and perhaps the font should be made less curly. Charlie, if you recommend me as a possible proofreader to your publishers (you do need a polymathic perfectionist who can follow your plots) I will tell you where it was on page 265 :O)

195:

Although I'm not Charles, I can answer the question you asked him -- each publisher has a "house style" and alters spelling, punctuation, etc. to conform to that style. So if Charles writes "colour" then his American publisher will change it to "color" if that is in keeping with house style.

196:

I think it is also important to remember that if you piss off the consumer badly enough with price fixing they will just pirate the damn things

197:

OK. I'm officially irritated now.

Please, for the sake of my aching head, refrain from further distortions of economic principles relating to Our Gracious Host's posting until you can satisfactorily — and by "satisfactorily," I mean "earn a passing grade on an examination at LSE, Stanford, and/or Washington U" — integrate the following economic concepts into your posting:

1 the distinction between oligopoly and monopoly
2 the distinction between monopsony and monopoly
3 the distinction between an economic monopoly and a statutory monopoly
4 imperfect rivalrousness
5 transactional and translational friction
6 temporal elasticity of demand
7 the distinction between risk and variability of expected return

Humph! (and the little kangaroo in my refrigerator said "Humph!" too).

I'm actually making a serious point here. As anyone reading Mr Stross's two essays on publishing misconceptions — actually reading them, not just reacting to trigger words — would understand, it's all about context. It's not about ideology, or economic models, or preferential business structures, or the relationship between capital and labor (particularly when that hybrid "intellectual property" gets thrown in there); those are all irrelevant without understanding something about the context. I respectfully submit that the economic context will always, in any transaction or transactional system involving an exchange of intellectual property, always, always require an explicit understanding of the seven items I listed above.

198:

And after the bookstore employees go through the stripped books, they send them to a landfill, where the employees will go through the remainder.
Some of them aren't bad, but some are losses in terms of actual book stuff like plotting and characterization.

199:

Oh yes, physical bookstores are in trouble, I won't dispute that. But let's be clear about the reason they're in trouble - it's not that people have stopped buying books. They're in trouble because people are buying books online, and buying books at the supermarket and they're losing market share.

200:

Yes, that article is a trifle alarmist.

Look, the whole problem here is that your argument is
1. Books are not selling at the current prices
therefore
2. It doesn't matter what the costs involved in producing books are
because
3. the publishing industry is doomed unless prices come down

And then you add some rants about price fixing and elites and hardback prices and whatnot.

But you have no evidence for point 1. In fact, the first figures I find in a quick google say that sales are UP.
http://www.publishers.org/
And if it isn't true that people won't buy books at current prices, then your other points are... beside the point.

201:

The argument is based on the observation that 90 percent of books do not earn their advance back. So, at best, your acquisitions editor correctly predicts the books' ROI 10 percent of the time,

This is bullshit. I don't know where it's coming from, but it's just plain misleading.

Here's the point: the acquisitions editor makes a stab at guessing the likely sell-through of a manuscript before they issue the contract for it. On the basis of the sell-through and the percentage cut laid out in their standard contract they work out roughly how much they are likely to pay the author in royalties. They then arm-westle with the author or their agent over the size of an advance which will usually come within close spitting distance of equalling those anticipated royalties. Some few books will sell much better than anticipated, and "earn out", so that additional royalties must be paid. Mostly they sell slightly worse, or slightly better, than anticipated, leaving the publisher a few hundred bucks in the red or forcing them to cut a cheque for the small change. Overall, they average out. But the book does not need to earn out the advance in order for the publisher to hit break even. Publishers aren't stupid; they know about this stuff before they go into the contract negotiations, and they highball their estimates of production costs and lowball their estimates of sales.

I surmise that the advance-driven system for doling out royalties may persist because of favourable tax implications for the publishers -- I don't know for sure that there are such tax implications (I'm not a publisher's accountant), but I'd expect publishers to write off the up-front book advance as a capital outlay: if they didn't issue an advance but paid royalties they'd get clobbered with tax on their profits. Or something like that. (This is a wild-assed guess. Any tax accountants prepared to correct me?)

I think the next "Common Misconceptions about Publishing" post is going to be about Contracts and Rights, i.e. What The Author Sells. (As I'm not a lawyer, this is inevitably going to be slightly vaguer and contain more inaccuracies than the first two posts ... but given the misconceptions kicking around, it's time somebody did it.)

202:

Actually, a savings of $2-3 per unit in production costs is far from insignificant; that could reduce retail cost by as much as twice that. So, in an electronic-printing-only world, there's no reason that $25 hardcovers shouldn't come down to as low as $19, and mass market paperbacks also drop in price by a dollar or so.

But there's an even larger savings there, because fully electronic distribution also eliminates returns and losses from having to write off unsold books. It's hard to say how much this is worth, since it's a very complex and publisher-dependent calculation, but given the number of books (in commercial fiction, anyway) that fail to earn out their advances it's probably not insubstantial.

That said, we're certainly not yet anywhere near a world where one could do an electronic "printing" only.

Much more interesting, and not dependent on the demise of paper editions of books, is that taking out steps 13-16 makes a dramatic reduction in the marginal cost of a single unit of the electronic edition. That makes it perfectly reasonable to cut the price to a small fraction of the current cost if that enables you to sell enough additional copies to maintain or increase your overall profit.

That it's not a totally unreasonable business plan to sell e-books at $2-3 each, at least at some point in the lifetime of the book, is not only the belief of crackpot blog-comment-posters, but also of some publishers. Baen for example, with authors such as Robert Heinlein and Anne McCaffrey.

203:

William Goldman's rule about the film industry could be modified to fit the current debate: "In publishing, nobody knows anything."

your acquisitions editor correctly predicts the books' ROI 10 percent of the time

Anybody who knows anything about publishing will roll in the aisles with laughter at this point.

204:

(just a PS to say that I am making fun of the concept that an editor is capable of accurately predicating anything, not of the original post)

205:

(i meant predicting, of course)

206:

I'd be surprised if the advance system was heavily driven by tax considerations. By advancing against against royalties you might get the write-off sooner, but you also have to lay out the cash sooner, and the cash outlay is bigger than the tax savings from the write off.

The most obvious advantage is that the author that lives on his royalties gets his living expenses covered while he writes the book, instead of having to borrow. And the incentive for completing the book on time is stronger.

As a matter of curiosity, how long does the typical novel take to earn back the advance, and when does the halfway point come?

207:

There is no such thing as a "typical" novel. Each is a unique situation. Many never earn back their advances.

208:

Also, insofar as money is an incentive to write (it isn't much of one, since most writers don't make a living off their royalties or advances or anything associated with book sales -- it sounds like Charles plans to blow the lid off of this misperception, so I won't say more), there is more incentive to complete a book for which you've received an advance, because the advance comes with deadlines (even if they are soft deadlines). Also, authors don't "borrow" their advance. They are "advanced" that money. In other words, they are "guaranteed" a certain revenue from royalties, paid in advance. An advance that does not earn out is not repaid and the author is not indebted to the publisher.

209:

Will, that's absolutely correct for a startup. However, follow Daryl Dollar here:

Daryl begins his unfulfilling existence as part of Bill's author advance. At that moment, Clarisse in Accounting marks Daryl down in the corporation's ledger as an "actually paid" expense, which is nontaxable (and, in fact, is set off against actual and/or recognized income at tax time). About eight months later, Daryl — after sitting in Bill's wallet — gets plunked down on the counter at Waterstones/Borders/Barnes and Noble, consolidated, and through the magic of accounting, ends up in the publisher's hands. In the ordinary course of things, that would mean that Daryl has to be declared as gross income for that tax period. Fortunately for the publisher, Clarisse is ready to send out Annie's advance, so Daryl gets marked again as an "actually paid" expense, putting any recognition of his Mr Hyde nature as taxable gross income off into the next accounting period.

This is the magic of a period-based, rather than transaction-based, tax system... and a necessary consequence of equity-based corporate ownership, which can't exist under a transaction-based tax system, but that's a much tougher demonstration involving real math and imaginary numbers (no, not the kind of imaginary numbers that we put on our tax returns).

* * *

And as an aside, in my litigation and prelitigation experience the ordinary breakeven point for the publisher for a nonspecialty trade book (n = 144) ranges between 72% and 78% of advances negotiated at arm's length. That is, using even the accounting systems most common in publishing, the publisher is profitable for a particular book while the book is ramping up from 78% to 100% of advance, and the author is not getting paid any more. For that same sample, the median return absent a nonfinancial decision to revert was 84%... so the whingeing that the publishers aren't on average profiting from the "average" trade book is a bit off. The problem is that, in this world of judging financial returns under the same standards as the children at Lake Woebegone (they're all "above average"), that's not a good enough probability or magnitude of return... as Moneyball hasn't made its way into publishing yet (all snark and ironies fully intended).

Of course, any bank to whom you went for a mortgage based on even the documents produced in litigation would laugh you out of the building, given the creative accounting behind everything...

210:

It sounds like the accountants in publishing are more creative than half the writers.

211:

@201: Sorry Charlie, I'll try to find the source of that 90 percent. I'd respectfully suggest that if the publishers were that good at estimating their sales, there wouldn't be the problems that we're seeing. It also suggests that, if the publishers are highballing their publishing costs, they can, in fact, make their books more cheaply than they do without loss of quality.

If a lot of books don't earn back their advances, in the long run the company is going out of business, and in the short run, all profits depend on blockbusters. Is that accurate?

212:

Note that my next brain dump is written and waiting only for feedback from a friend before it goes on the front page of the blog. It tackles royalty/contractual issues in a little bit more detail.

EDIT: It's live now.

213:

Heteromeles: It also suggests that, if the publishers are highballing their publishing costs, they can, in fact, make their books more cheaply than they do without loss of quality.

Yes, but not by much. (CEPetit's observation that the break-even point is sales of 72-78% of the book advance break-even point is germane here; if you think in terms of publishers earning roughly as much in profit as the author, then this tells us that they make most of their profits on the 22-28% sales spread between hitting break-even and having to disburse more royalties. Even if half the gross value of the sales in that area is pure profit, then they're making 11-14% on top ...)

If a lot of books don't earn back their advances, in the long run the company is going out of business, and in the short run, all profits depend on blockbusters. Is that accurate?

Yes, more or less, with the proviso that, pace William Goldman, "nobody knows anything about nothing in this business". The first Harry Potter print run was something like 1200 hardcovers. Nobody knows where the next blockbuster is coming from; we can guess that the next J. K. Rowling book will sell by the container shipload, but we don't know for sure that some book by hitherto-unknown J. Random Aspirant isn't going to go gold and eat JKR's lunch the very same month.

214:

Now I bet everyone has gone over to look at the next installment, so I'm probably missing the boat by posting in this thread, but... IF it were true that books (e or otherwise) cost X to produce but people won't pay it, so the publishing industry as we know it is unsustainable, leading it to be replaced by poorly or unedited and unscreened material (a little wheat, mostly chaff) - that sounds to me like a market failure, and a good justification for Government intervention.

215:

Why would that be a market failure, and what should the intervention do to make the market work better?

It sounds to me as if you've described a classic case of market success: something costs more than people care to pay, so it doesn't get manufactured. I.e., the market has caused sellers to sell people what they do want, rather that what they don't.

216:

I'll go onto the next thread. One note: Mssr. Petit's informative post was written while I was writing mine. Life happens, and it's good to have some real numbers.

217:

There's one area where the "publisher" has been, at times, eliminated, and that's Comic Books.

There's less of it now than in the 80's and 90's: Some of the biggest have been bought by Marvel (Disney) and DC (Warner): Wildstorm got swallowed up by DC, and a couple other bits of what was originally Image are now part of Marvel. I'm sure there's other exmaples too, but I can think of a few indies that make good examples:

Aardvark-Vanaheim self-published much of "Cerebus the Aardvark's" run. I believe Dave Sim made a decent living off of it.

Phil Foglio's wonderful "Girl Genius" was originally dead-tree self-published, then went "free" (advertising-supported) on the web... and his once-yearly collections of the free strips started selling better. He's an obvious exception to the rule, though, as he had an established fan base before the book began, and had significant momentum when he moved to the web.

With comics, there's a difference: certain errors (spelling, continuity) are more easily forgiven, perhaps because it's considered a lower-class art form than the novel. So editors are bypassed for some. "Design" is kind of built-in to the process, something a prose author has less involvement in.

But the Girl Genius example also reminds me of a couple of *not* self-published, but SF publishing free on the web: Cory Doctorow's "Makers" on Tor.com, and Subterranean.com's publishing of a number of pieces of short fiction. It may be possible to take the production of paper out of the process, and still feed the authors and publishers. I'm guessing both of those were seen as "loss leaders" -- not direct revenue generators, but would drive sales of other works. Not as useful for a first-time author who doesn't have a backfile to sell.

218:

Ah, a free market fundamentalist.

(Here's a hint: I'm one of those European mixed-economy social democrat pragmatist types. Markets are, like fire, a valuable tool but a very dangerous master ... as witness the current two-year-long banking hangover.)

If the market has failed to provide a social good that must be provided for the general commonweal, then a mechanism other the market must be employed to provide it. C'mon, if even Hayek can come out in favour of state-funded healthcare, surely you can buy into some element of interventionism too?

219:

Joel, an important point to note is that even "Girl Genius" is the product of teamwork.

It's not just Phil; Katja does a lot of work too, and Cheyenne Wright colours the strip. Cheyenne's recent illness shows just how important that particular contribution is! It's a regular cottage industry.

I'm going to leave Cory's "Makers" alone for now, but I'd like to comment on Subterranean Press. Subpress is a "small press" insofar as it's not part of one of the big conglomerates -- but "small" is relative; drop them into the UK market and they'd be a medium-to-large genre publisher, and they ship more bound chunks of dead tree than many majors. They rely on the various distribution channels to a different extent from a major, and they don't do the big "blockbuster" stuff -- but they're low on overheads and able to produce work by midlist and cult-following writers on a profitable basis. From their PoV, online free fiction is indeed a promotional loss-leader. But they don't have to deal with media executives in a remote boardroom handing down policy that is inappropriate to their business needs.

220:

Probably because providing medical care to people with serious health conditions is something easier to sell as "a social goal that must be provided for the common weal" than making sure a certain model for publishing artistic work is preserved?

221:

Aardvark-Vanaheim self-published much of "Cerebus the Aardvark's" run. I believe Dave Sim made a decent living off of it.

Sim is actually a very interesting case because he has staked out a more extreme position than I've seen anyone else stake out -- not just saying that authors *can* self-publish but that they *should* self-publish, not just in terms of cost savings but in terms of taking artistic responsibility for every aspect of their work, and that selling off this responsibility to a profiteering corporation is bad not because it's economically inefficient but because it's an abdication of a moral bond of trust with the reader that everything the reader sees is something the author is responsible for.

Then again, Sim is a man who sold all the furniture in his house, sleeps on the floor, prays five times a day, regularly fasts, and remains celibate so as to avoid polluting his soul with the presence of the "Draining Emotional Female Void", so... yeah.

222:

In this 'ere country, Opera gets a stonking great subsidy from the public purse; football (soccer) doesn't. They have roughly equal audiences. There's no obvious rhyme nor reason to it (other than the nob's pursuits getting the money and the proles being out in the cold).

223:

That's obviously a large part of it, but there's also the fact that opera (and symphony orchestras, and theatres putting on things that aren't Shakespeare or Lloyd Webber) are expensive, and would cease to exist without subsidy. And football does get funding afaik, from the DCMS.

Writers are indirectly subsidised through the Public Lending Right (a terrible idea, btw, better to spend the money on acquisitions), in Ireland tax breaks, and possibly also subsidies for publishers? If the publishing industry really were in trouble, you might see them getting subsidies along the same lines as theatre companies...

224:

Art, your comments make a lot of sense. While a great book is generally a team effort, there art those who take on the entire challenge themselves. There's some bravery there!

Greg Gutierrez
Zen and the Art of Surfing

225:

The reason why I think ebooks won't replace the c-formatt (not necassarily MM) paper book is because it's just a good format. It fits in a pocket. It is still readable. I won't be electrocuted if I drop it in my bath tub. It's comfortable to read. I'm not saying there is no market for ebooks, or even that there isn't overlap between the 2. But I will still be buying c-format books because I LIKE them that way.

226:

Very interesting. I reply to a single hypothetical situation (note that it's clearly not a description of the real life situation, screams and cries from a changing industry notwithstanding) with a particular response, and I get labeled a "market fundamentalist."

How do you reconcile that with, say, my support for state funding of the arts?

And in fact I do support state-funded healthcare systems that most would call "socialized medicine" or some such thing.* That's perfectly compatible with pointing out that a lot of the problems with the U.S. health care system are due to market distortions that don't exist in the UK's (to my mind better, overall) health care system.

You can certainly say that I like well-configured markets, because I think they make everybody happy. I don't think that brings me anywhere near being a "market fundamentalist" in the sense you're using the word.

Let me also point out that accusations of a similar spirit could be leveled at you: you do things that hurt some of your fans who want to read e-books because it makes you more money. It's the person who views the world in terms of markets that's going to say, "That's an unfortunate reaction a badly designed system," rather than "Charlie Stross is a bad man."

* Not that many don't, in one way or another. In Bush's last term, the Republicans grew the US's existing state funded healthcare system by an enormous amount.

227:

Art, your comments make a lot of sense. While a great book is generally a team effort, there art those who take on the entire challenge themselves. There's some bravery there!

Are you actually responding to me or to me talking about Dave Sim? Because I should note that I really don't agree with Sim about many things. I like that in some ways Sim has a "freetard" ethos (he has pledged not to pursue legal action against anyone who uses his Cerebus characters in derivative works just as he used other people's characters in Cerebus) but philosophically I think my own ideological idea of the meaning of art is diametrically opposed to his. (I don't believe in what Ayn Rand would call "fountainheads" or what Sim calls "Individual Male Lights".)

228:

The reason why I think ebooks won't replace the c-formatt (not necassarily MM) paper book is because it's just a good format. It fits in a pocket. It is still readable. I won't be electrocuted if I drop it in my bath tub. It's comfortable to read. I'm not saying there is no market for ebooks, or even that there isn't overlap between the 2. But I will still be buying c-format books because I LIKE them that way.

You are certainly allowed to like whatever you like, but the portability, readability and non-electrocutionary properties of e-books are growing by leaps and bounds. (Already many Kindle advocates would argue that none of your complaints apply to the Kindle and all of them, in fact, seem to apply to reading on a laptop, which no one seriously thought was going to be the wave of the future of publishing.)

The chief thing that I think will eventually make e-books replace paper books -- not "replace" entirely, to be sure, but topple them from their place as the default choice in the market -- is the oft-overlooked fact that, sure, a single paperback is no bigger and often smaller than an e-reader, but a *shelf full of books* is not. The fact that an entire library of e-books can be stored in a space you can hold in the palm of your hand is a pretty big damn deal; when it comes to music there are a lot of music buffs who talked about how cathartic it was to replace an entire wall or room of storage space with a single iPod, and books are if anything bulkier, heavier and more prone to attracting dust than vinyl and CDs. Anyone who's ever struggled with multiple boxes that feel like they're filled with lead bricks when moving house will instantly see one really huge advantage of e-books that will only increase in importance as the disadvantages of e-books fade.

(There's the other, more controversial factor that e-books share with MP3s, which is that they're much easier to share and download illegally -- something that only a fool would try to deny was a huge part of massive adoption of the iPod and something that no amount of intrusive DRM clauses can, I'd argue, indefinitely prevent from becoming an issue with e-books.)

229:

Jackie, I'd be careful about making predictions about e-readers replacing (or not) paper books, even just for yourself.

I'm an e-reader fan for various reasons myself (mostly related to portability), but I didn't think that when that wasn't a factor (say, reading at home) I'd see any difference.

But recently I was forced to the paper edition of a novel* for the first time in a while, and to my surprise I found another good thing about e-readers: when you read one-handed, your hand doesn't start to cramp from holding the darn C-format paperback open.

* Saturn's Children, actually. And the reason I was forced to paper was pretty typical: no e-book available for Linux users. Heck, living in Japan, I don't even know who's legally allowed to sell the thing to me.

230:

Curt: Sorry, I get a lot of drive-by libertarians passing through here. It tends to ... sensitize me ... to certain uses of language.

231:

Regarding Makers:

The "free on the web" version hasn't gotten the proofreading attention that (I hope) the printed version will, so that just rolls back into the multistage model Our Gracious Host provided.

More importantly, though, keep in mind that Cory Doctorow isn't selling copies of his work to the same extent that he is consciously building brand identity for himself. In his view, those free electronic copies act as advertising for himself and for his works. And that's a perfectly valid view... from an individual, informed author engaging in strategic planning. It's not a valid view for:

  • an overenthusiastic fan, still living in his parents basement, who scans out-of-print books and puts them out there because he thinks it's good publicity, or his right, or his duty to culture, or whatever
  • a publisher that does not have an explicit license for electronic rights
  • anyone who thinks that he/she should be able to obtain compensation ("profit" or otherwise) from an electronic edition without sharing that compensation with the author
  • an author who is just going with the flow of what seems kewl without determining whether that kewl matches his/her own works, interests, or anything else
That giving his works away in electronic form seems to work* for Cory makes it a valid decision for Cory. Not for anyone else. Not for any other work.

* The sad thing is that this is purely anecdotal, because there is no actual comparative analysis available. Any proper analysis would require a comparison of the contemporaneous Cory Doctorow Canon in both "there exists a free electronic version" and "there does not exist a free electronic version" test-tubes... and then, since we're not dealing with something as nondistinctive as a glob of coal-tar extract, we'd need to repeat it for a wide variety of other authors, only to discover that they're not fungible. Which is, in fact, the point of publishing and copyright, but that's for another time.

232:

I think I can say here that, having discussed this with Cory in more detail than I care to go into in, public, Cory earns more from his writing than I do.

Obviously this is a unidimensional data point -- as noted, we can't compare with a "control" Cory -- but it's fair to say that of the two high profile SF authors who emerged around the same time, the one who is giving stuff away for free is earning more than the one who isn't.

233:

I'm completely confuddled by that, since I don't think of Cory as a fiction writer. Heck, most of the time, I'd be hard-pressed to say what he actually does.

I think this means I'm pretty out of touch with things, more than anything else.

Specials

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This page contains a single entry by Charlie Stross published on February 25, 2010 12:58 PM.

Common Misconceptions About Publishing: #1 was the previous entry in this blog.

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