June 19, 2012

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.