Sunday, June 24, 2007

Big Claims for E-Books, and the Economics of Print Publishing

I just read some interesting claims by the author of an E-book on search-engine optimization. This SEO maven claims to be selling around 4,000 copies per year—at $79 a pop. In addition, the author informs us that publishers have been offering deals to publish the book, it’s such a winner.

Skeptic that I am, I have my doubts about the sales claim. I don’t think the E-book business is mature enough to spin off that kind of money from a book on a worn-out topic by an unestablished writer. But I suppose it could be true. After all, everyone knows that the Internet is the absolute the place to go if you want to make forty-seven million dollars in three days while sitting in your hot tub after you lost your job, went deep into debt, and watched your family slowly starve. And this author might one of those select few who have the secret to Internet wealth, and has broken the Money for Nothing Code of Silence. Lots of people would be willing to blow $79 on the chance that the E-book will deliver on its promises. You spend more than that on a chance to win a $30,000 car in a charity raffle. All that has to happen is for enough of the right kind of people to stumble across the Web site, and the author might be making several hundred grand per year. (Of course, there are tens of thousands of other Web sites trying to sell those millionaire raffle tickets, so getting 4,000 customers a year might prove difficult.)

Regardless of how likely that is to happen, I have more serious doubts over the claim about print publishers tripping over themselves to buy the book.

Even if the author provided absolute, unequivocal proof of selling 4,000 copies per year at $79 and grossing $300,000, I don’t believe a print publisher would spring for it. There are too many SEO books out there already. And there’s just not enough money to make a publisher interested.

How can I say that? Because the book is very unlikely to sell 4,000 copies, and it definitely wouldn’t sell for $79.

Hard to believe? I’ll explain the second statement first. Except where textbooks and professional references are involved (and I mean real professions, like medicine and law), readers are accustomed to certain price caps. A bookstore browser would expect the big trade paperback that such an SEO book would be to cost $30 or less. If she picked it up and saw a $79 price tag, she’d probably think, “This is a book. I know what books cost. Big paperback books like this go for less than thirty bucks!” and go on to something else.

Some optimists would look past the price and flip through the book, hopes still high. And they would be dissuaded from buying it because it doesn’t look like something they can use to make ten bucks, let alone millions. Not something they’d bet $79 on, anyway. (That kind of price works on the Internet because you don’t get to see what you’re really buying, and you can sustain your million-dollar fantasy long enough to buy. And few print books make the kind of outrageous promises that Web sites make to convince someone to buy into a fantasy.)

So, maybe the book would sell for $25.

Now, let’s set up a scenario where the book sells 4,000 copies. Wouldn’t that be enough money to interest a publisher? Probably not. Maybe they do a 5,000-copy print run of a trade paperback, typical run for an unproven book by an unproven author. Publishers know they can always print more if the need arises. At a cost of three bucks per copy the total expense is $15K. Add another $10K author advance. That $10K maximum because the author in this instance would be regarded as a midlist author, if not a new writer altogether. There’s a little overhead in there (editorial and promotion and warehousing), so say the publisher has $30K invested to produce the book and print 5,000 copies.

So 4,000 copies sell—and that’s a generous sell-through, equal to the number of customers the aforementioned E-book author claims to have found already. The publisher’s net is going to be around $50,000. Subtract the author advance and production costs, and the publisher makes $20,000. (And the author has failed to earn out his advance.)

But there’s no guarantee that the book will sell that many copies. Like a lot of other books, this one will hit the market with the expectation that it will sell about half the print run and break even. There would probably be very little promotion or advertising; when publishers advertise, they tend to put money into proven authors and books. A new author’s work has to prove itself. Once an author and book start bringing in big orders with a high sell-through rate, then the publisher will get behind the book.

And it’s unlikely to sell another 4,000 copies, since the market has already been tapped, the topic is old, and the book will soon be outdated. Any publisher will choose invest in a book that has a better chance of earning more than $20,000 for the same investment.
Copyright © 2007, Michael A. Banks

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