Calculating the Cost of an E-Book

CalculatorI’ve had a lot of positive feedback from my previous post entitled Weighing in on E-Books, so I wanted to talk about ways to calculate the cost of an e-book.

First, let’s pull some arbitrary numbers. (And by arbitrary, I mean that these are not precise figures.) Let’s say that we paid our author $3,000 for their novel that was 100,000 words in length, which is the equivalent of about 3 cents per word. Then, let’s say we paid an editor a flat rate of $1,250 to edit the novel and an artist $500 for cover art. Add in production costs of $250 to create an e-book, and that gives us a grand total of $5,000 as the sum of the costs for our imaginary publisher.

In order to make up the costs of producing the e-book, we would need to sell a certain amount of copies at a specific price. Say that we priced the e-book at $10.00. If we kept one hundred percent of the revenue, we would need to sell 500 copies of that e-book to make up our costs before we made any money off of the book.

We decided that a retailer, like Amazon, is the best way to offer our e-book for sale. Currently, Amazon takes 65 percent of the cost of the book for all Kindle editions. Recently, they announced that they will lower that rate to thirty percent, but the new rate won’t kick in until June 30, 2010. (Read Amazon ups author royalty for Kindle, matching Apple per CNet.)

Let’s calculate our cost based on the 65% rate, because I think it’s important for you to see how that affects a publisher’s bottom line.

Now, we’d only make $3.50 for every book sold at a price of $10.00. At that rate, we need to sell approximately 1,429 or almost three times the amount of e-books if we took 100% of the revenue to make up our costs. Some retailers take less than 65 percent, but they still take a percentage to offer the book through their store. If you sign up with a One BookShelf site like DriveThruHorror e-books for example, they’ll only take 30 percent. Our profit would now be $7.00 for every e-book sold. So, we need to sell approximately 715 e-books to make up our costs at the $10.00 price rather than 1,429.

Even though we’ve estimated a price based on our costs, we need to think about something else — demand. Is this title only available as an electronic book? Or do we have a hardcover or paperback edition? Will pricing the e-book on sale at $5.99 sell enough copies to warrant the discounted price? How popular is this particular author? The volume of e-books that we need to sell might be different, depending upon any number of additional factors. One issue might come down to the original agreement that a publisher has signed with the author. Unfortunately, there are contracts that pre-date the release of electronic formats so it’s not uncommon to see authors providing a publisher with print rights but not digital or audio rights.

For me, I’m factoring in demand based on the reader’s awareness of my work as an author. Chances are, my soon-to-be-released small press product is not going to sell 1,000 copies at a price of $9.99 within a reasonable amount of time. Because I’m projecting lower sales, I’m lowering the costs of developing my digital product. Instead of paying an editor a thousand dollars, the publisher is offering a direct royalty payment that pays per product sold. We also are reviewing ways to make the product more valuable and attractive to readers by researching different types of graphics and layouts. Still, I needed to come up with two pricing structures; a retail price and a sale price. For me, my e-book price is lower than $9.99 because my costs and the demand for my work are both lower than a mainstream author. Those two things combined also mean that it may take me longer to recoup my costs.

Personally, I have a lot of trouble with people offering e-books at heavily discounted prices or for free, because this devalues the books considerably. What would you think of a print book that’s “on sale” for only ninety-nine cents? It’s original price is only $1.99? To me, this pricing structure seems pretty arbitrary. If your costs were $1,000 and you offered the book through OneBookShelf, you’d still need to sell approximately 720 books to make up that cost. (If your costs were $5,000, you’d need to sell 3,598 copies!!!)

Regardless of whether you self-publish or not, I feel that it’s a smart idea to calculate price based on your costs and your projected sales. By doing that, it can help you set reasonable expectations for your e-book pricing structure and prevent you from losing money over the long haul. Keep in mind, that the biggest mistake I see publishers making, is offering their e-book through a digital retailer like Amazon.com or OneBookShelf, and then “forgetting” about that book. If you want to make up your costs, be sure to include marketing your books — wherever they are being sold — into your plan. Sometimes, you need to make readers aware that you now offer your books in a different format, in order for them to buy those products.

If you’re curious about Amazon’s rates, be sure to visit Amazon.com’s Terms and Conditions or the Terms and Conditions for DriveThruRPG through OneBookShelf. (The Terms and Conditions for the DriveThruRPG site are very similar to the fiction and the comic book sites.)

New Guest Post on Apex: Discussing Rape, Incest and Abuse in Horror

This week, I offered the folks over at Apex Book Company a blog post entitled, Why Do Some Horror Authors Write about Rape, Incest and Abuse? This was a sensitive topic to write about, and I found out after the article was published that I made a slight oversight in the post.

My goal for this article, was not to provide a definitive “answer” on this subject, but to facilitate discussion and to get people really thinking about writing for “shock” value or how they might address serious issues like rape, incest and abuse.

Let’s take a look at a quote:

Good horror stories can cause a reader to react in a number of different ways. They can jump out of their chair, groan in disgust or feel their skin crawl. Fear, however, isn’t the only emotion a reader can feel. They can also feel empathy for a character, anger because the villain got away, or sadness because a victim died. These reactions occur as a result of the story’s pacing or description; an author’s goal is to help guide the reader through a broad range of reactions so that the reader won’t put their book down.–SOURCE: Why Do Some Horror Authors Write about Rape, Incest and Abuse?

If this topic interests you, there’s a lot of comments and interesting discussion on the post that you might want to check out. As I mentioned earlier, I firmly believe that there aren’t definitive answers to my question. I just feel it’s a question worth exploring.

Do You Need to be Heard, Or Do You Need an Answer?

One of the things I’m beginning to find pretty frustrating, is the need for people to publicly rant about something that they haven’t tried to resolve on their own. From misprints to crappy downloads, it seems like ranting about bad business experiences, politics and other frustrations is the “thing” to do. The trouble is, there’s this little link on most websites that offers you the ability to “contact us.”

I often have to quash the internet myth that once you post something online — everyone will read it. Yes, everyone can read it but that doesn’t mean that everyone will.

Online reputation management can be very time-consuming for businesses, especially since they already have protocols in place to handle customer complaints and troubleshoot issues. Using Google Alerts is one way anyone can monitor what people are saying, but even that has its limitations depending upon how someone uses them and when they get around to reading the emails. Even then, there is no hard and fast rule for businesses to deal with public rants about customer service. Often, contacting customers directly opens the door to several, different types of reactions: some customers get even more upset, others expect the attention or appreciate it and many freak out about “big brother” watching them.

I understand that it’s easy to complain about things that happen in your daily life. Believe me, I really do. However, if you want an answer to your woes, if you want someone to address your concerns and listen to what you have to say, try to contact that person or business directly. If you’re unhappy with politics, write your local congressman or woman! If your coffee maker failed, then try to contact the manufacturer and get your issue resolved. Or, if you’re frustrated with publishers for not releasing digital files on time, take it up with the publisher rather than stage a “protest.” (See this article.)

Companies, from the small mom-and-pop shops to larger corporations, have systems in place to help customers. Use those channels, and you’d might be surprised not only how quickly your voice is heard, but also how much they care about you as a customer. While not every issue can be resolved, you have a better chance of getting the answer you want if you deal with the company directly.

Just something to think about.

🙂

Weighing in on E-Books

It’s been really interesting for me to watch the complex discussions about e-books online, because I work for a digital publisher. My company provides digital sheet music files to our customers and there are a lot of similarities between our industry and the publishing industry. However, books have a broader market than sheet music does, in part because more people know how to read text than music.

One of the biggest challenges that I see is two-fold: one, inconsistent pricing models and two, proprietary platforms and formats. E-book pricing is based of a number of different factors that go beyond what a writer, editor and/or publisher earns. First, you have the cost that the e-book retailer charges for every book sold. That charge varies from site to site, but it can comprise as much as forty percent of the book’s value. Second, you have the cost of laying out and creating that digital file in the appropriate formats. Third, you have to pay an artist for cover art and fourth, you have to pay the additional cost of online marketing to get people to buy the book. I believe that publishers have a challenging time coming up with a set price for e-books that people will respond to, because the costs of doing business may be different depending upon the product. Graphics, tables, high page counts and other file format issues can easily tack on more time to the e-book production process.

Unfortunately, these “invisible” costs are not apparent to the reader. Many readers believe that e-books should be less expensive than their paperback or hard cover counterparts, because they assess a different value to the production of a printed book differently than an electronic file. (This is also why I believe piracy is such a huge threat to digital publishers, too.) Part of that assessment is their experience with the internet where information has been “free.”

I’m not sure what the answer is, but I feel that it’s going to be pretty challenging to educate readers on what the production value of an e-book. I don’t feel that being transparent about the cost of doing business for a publisher is the answer, but I also feel that the e-book “evolution” is still in its infancy stages.

As I mentioned earlier, I believe that one of the biggest challenges e-book publishers face is proprietary e-readers and formats. Why? Without having a standardized format that all e-book readers can use for the books they want to read, you’re immediately limiting the market to a select few. I’ve heard many comparisons between e-books and the digital music industry, and while there are similarities, they are still very different. Imaging the cost of archiving these e-books at a library, for example. Now, instead of needing physical space, you need electronic space. Instead of a standardized format that works on all e-readers, you need several different types of readers and several different formats (e.g. duplicates) of the same book.

For the reader, you’ve now increased the cost of being able to read their favorite books. The accessibility of where you can buy a proprietary e-reader, the cost of upgrading them and the cost of maintaining them or replacing files adds in a layer of “cost” to the e-books that wasn’t there before. Now, instead of just buying the books like you would in a physical store, you have to buy the platform and then buy the books, which inflates the cost of whatever e-books you buy. This is also why I believe readers expect that e-books should be cheaper. They aren’t looking at where their money goes, they see it as “I spend $350 on an e-reader and now I have to spend $7.99 on a single book. Why are they so expensive?” As a result, reading a book is no longer available to those who can’t afford the platform to read it on.

In my opinion, copyright restrictions and the threat of digital piracy aren’t the only reasons why the music industry has evolved the way that it did. In part, it’s also because of the volume and the demand. For this reasons and many more, I feel that the e-book “evolution” will not happen overnight. This will be a long process that publishers, retailers, readers, libraries, authors and editors will need to go through. My only hope is that there will be more long-term discussions on how to move toward accessibility to more readers and some standardization.

Marathon Wrap-Up and a Quick Look Ahead

First of all, marathoners — I owe you an apology. I had a summary post written (I really, really did) but somewhere in between plowing full steam ahead to 2010 and my WordPress updates I lost it. I’d like to share with you some closing thoughts on the Marathon.

For me, December was a kick start to re-focus my efforts on my fiction. While I didn’t accomplish as much as I would have liked, I did get a lot of filing done (phew!) and I was able to take enough of a breather to simplify the story. While every writer that I talked to got something different out of the marathon, for me the reminders were two-fold: one, it was a way to re-establish my routine and keep going and two, writers are not machines. No matter how strict of a schedule I might create, my personal life has to happen somewhere in between waking up and going to bed.

I hope that the December Writing Marathon inspired you to write. Regardless of what you learned, I feel very strongly about finding inspiration wherever you can find it, so if you have links to share with your fellow writers — post ’em in the comments.

A Look Ahead

Fourth quarter really sucked. I mean, really sucked. I had several fiction opportunities and a major licensed property fall through (or be greatly post-poned) all within three months. Add other drama to the mix and it was a recipe for a very busy and very stressful couple of months. While I’m pretty realistic about rejections and the like, the sheer volume of “No, no, no’s” took its toll.

I don’t have any New Year’s Resolutions other than a simple motto: NO FEAR. What does that mean? Stay tuned and find out…

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