Further proof that e-books, in fact, do cost money to produce

Just in case you’re left still believing the Bezos-inspired hype that e-books cost virtually no money to produce and therefore should sell at steeply discounted prices, Phillip Elmer-Dewitt, writing in Fortune, spotlights a New Yorker essay that neatly and summarily dismisses the hype. Elmer-Dewitt says that in his many years of writing about publishing and technology, he’s never seen an accurate account of what it truly costs to produce an e-book. While that in itself may be hard to believe, the gist of the New Yorker essay is not:

“E-books are cheaper to produce, by about twenty per cent per book, because they do away with the cost of paper, printing, shipping, and warehousing. They also eliminate returns of unsold books—a significant expense, since thirty to fifty per cent of books are returned. But they create additional costs: maintaining computer servers, monitoring piracy, digitizing old books. And publishers have to pay authors and editors, as well as rent and administrative overhead, not to mention the costs of printing, distributing, and warehousing bound books, which continue to account for the large majority of their sales.”

MobyLives is one of many outlets to report on this controversy (see previous reports here, here, and here), but still it seems consumers are persuaded by Bezos’ message, which in turn justifies Amazon’s sharp price discounts.

From a consumer standpoint, a cheaper e-book is a cheaper e-book, and it is difficult to argue the simple fact that readers want more for less. And while for the time being Amazon might be able to get away with marking down already published material, the picture grows rather foggy when imagining a future during which writers producing serious work are not paid accordingly because publishers cannot afford to and Amazon does not value serious writing. It’s no wonder people who care about publishing quality literature, along with the notion that e-books are basically free to produce, find this proposal unacceptable and maddening.

For a further broken down detail on the cost of producing e-books, have a look at the graph below, researched by the NY Times.

This illustrates that e-books do in fact cost money to produce, and that publishers are not swindling authors and readers while Jeff Bezos plays Robin Hood to the content-hungry public. What’s more, the New Yorker essay goes on to highlight the merits of traditional publishing, rather than self-publishing through Amazon.

The traditional model has advantages for authors, though, particularly in publishers’ function as venture-capital firms. When an author sells a book proposal to a publisher, he receives an advance against royalties, which helps underwrite research and writing. Most of these advances are never earned back. But books that sell well support the ones that don’t. In a good year, this earns the publishers a modest profit, and it allows more authors to take risks in starting new projects—which is to say, it supports a class of professional writers. In a more efficient world, publishers would pay authors who write best-selling books and rarely pay those who don’t, an alarming prospect for most serious readers and writers. According to a recent survey by the Web site Taleist, half of all self-published authors make less than five hundred dollars a year from their writing. If publishers don’t have the money to pay advances, Young says, “we’re going to have fewer books of quality. The impact on authors could be huge.”

Given what we now know about the exorbitant rates Amazon is charging authors for delivery of their e-books to readers, and how significantly those rates cut into author royalties, coupled with our new understanding surrounding the price of producing an e-book, it’s difficult to see Amazon as much more than a digitized Wal-mart — a vendor supplying devalued products for a reading public whose tastes, due to the Bezos hype, crave quantity over quality.

Sure, Amazon has put more books in the hands of more people, but by this point one can’t help wondering at what cost.

Kevin Murphy is the digital media marketing manager of Melville House.

7 Comments

James Palmer at 1:29 pm on June 19, 2012
Every time I read one of these anti-ebook articles, I do two things. First, I laugh. Hard. The second thing I do is wonder where all this fearmongering comes from. Is it Stockholm Syndrome? Is it fear of change?
Joe Konrath could tear this thing apart far more deftly than I can, but let me just point out that no one is saying ebooks cost nothing to produce. Of course they do. They simply cost less to produce in the beginning, and distribute in the long run. Plus, they are available forever! No more treating books like periodicals the way traditional publishers do. They have years to find an audience and build sales, and since independent authors don’t have rent on a Manhattan skyscraper to pay for, we’re patient enough to wait.
As far as ebook pricing goes, the only true reason publishers want their ebooks to cost $14.99 or higher is to preserve their stranglehold on print distribution. Any other reason they give is complete B.S. That’s why we see paperbacks cheaper than their ebook counterparts. The publishers are still hoping this crazy, newfangled ebook craze will just go away so they can go back to partying like it’s 1899.
And Amazon’s distribution fees? C’mon. We’re talking pennies here. Exorbitant? Hardly. Sure, maybe for that travel book writer, but his book was a very large file size, and I’m sure is the exception, not the rule. And Amazon doesn’t even charge you up to a certain point.
So let’s just keep blaming Amazon for all of publishing’s woes, shall we? Let’s keep blaming them for giving customers what they want, offering better royalties and sales tracking for writers. Maybe if we believe in fairies and unicorns long and hard and loud enough, Jeff “the Boogeyman” Bezos will just dry up and blow away.
justjason at 2:56 pm on June 19, 2012
Maybe this could be explained because I’m not entirely sure how the publisher and retailer relationship works. Do publishers set the price of physical books in stores or does the retailer set the price? Target for instance sells all their books at a 20% discount. I assume this is their decision and not the publishers. Why shouldn’t Amazon be able to do the same?
Thomas Lawson at 11:13 am on June 20, 2012
“…a vendor supplying devalued products for a reading public whose tastes, due to the Bezos hype, crave quantity over quality.”
The ‘traditional model’ has already given us two books from Snooki. Oh, wait, let me check…sorry, THREE books.
This is not a knock at traditional publishing, this is a warning. If they continue to concentrate on the big opening weekend receipts then our literary culture is sunk. Publishers shouldn’t see Amazon as the enemy, they should see Amazon as doing all the leg work for them to swoop in and find the real talent–the writers that get tons of good reviews and produce what their readers want. A talented writer that is terrible at finding an agent is a thing of the past now. Amazon is the agent’s tool. Agents can either choose to pick from Kindle writers that have constant commercial success and great reviews or find writers that have potential and that agents can nurture and get ready for primetime. With the ‘Look Inside’ feature on Amazon, this is so easy. That feature is the new book proposal, the new query letter. Agents that choose to passively wait for talent to contact them and are not actively searching for talent on Amazon are idiots. There is no rule that says you can’t do both.
For every single self-published author on Amazon that says they’re fine getting their 70% royalty and having total control, there are a hundred (maybe a thousand) that want a real publishing house to notice them; because writers want to be writers, not publishers.
After all, where do music producers go to find talent? YouTube or the mailbox for demo CDs?
cynner at 3:43 pm on June 21, 2012
And for $9.99 (on the Kindle) you are only getting a license to read an eBook. It doesn’t become your property. I use the eReader for convenience when travelling, otherwise it becomes an expense to maintain.
James Palmer at 4:27 pm on June 21, 2012
Ebooks are not software. You don’t “own” the books you buy in print either. You buy a copy of a book. Just like you own a copy of an ebook file. You’re still gaining access to the work. This idea of ownership of a book is insane.
MikeLindgren at 12:13 pm on June 23, 2012
It is not insane. When I hold a copy of a book by George Orwell in my hand, I can be sure that some company is not going to electronically repo it because they screwed up the copyright requirements, as Amazon has done.
I also note that if you could ask Amazon authors if they could magically have their book published by Knopf or FSG in hardcover instead, I’m sure they would all jump at the chance, and there is a reason for that.
James at 12:35 pm on June 23, 2012
How has Amazon screwed up the copyright? You can always sideload a copy of it from your Kindle to your computer if you’re afraid of losing it. And if it doesn’t let you, thank the publisher’s draconian and byzantine DRM requirements instead of blaming Amazon. Part of the reason for Amazon’s dominance in the first place is the big publishers’ insistence on DRM that treats everyone like a criminal.
And I’m sure if you could ask most self-published authors, they would tell you they would go where they are getting the best deal. If you can make more money over a longer period of time doing it yourself than you can get from a one-time advance and a measely cut of sales from a big publisher, you should do it yourself. Self publishing is no longer the realm of people who couldn’t get a big publisher.