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The Publisher’s Role in the Emerging eBook Market

By guest blogger Abigail Rhodes


Abigail RhodesIn the second and final part of her article focused on the changes occurring in the publishing business with the expansion of eBooks, our friend Abi Rhodes takes a closer look at the questions and challenges related to publishing eBooks from the financial point of view, as she considers the pros and cons from the perspective of the author as well as the small publisher. In case you have missed the first part which dealt with the profile of eBook readers, eBooks market penetration and the potential of eBooks on the book market in general, you can find it HERE.

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The idea of an eBook isn’t new to the book trade and, as noted, they presently only represent a small percentage of the market. According to market research and general opinion there is no fear that paperback/hardback books are about to disappear overnight, but it seems that the new generation of consumers are enjoying digital editions of books and feel that they complement traditional formats.

However, the digital environment is different to the paper and ink environment for many reasons, not least the new source of revenue/income it can generate. For example, an eBook is a digital file that requires no physical storage and it can be reused infinitely to supply as many customers as possible. For specialist publishers there is the added advantage of being able to supply individual chapters of a title for a low price. This would generate income and provide the consumer with the exact section they want, which is particularly attractive to students.

ereaders overviewBut where to start! It is worth thinking about how/where you will make your eBooks. For example, will you outsource it and ask an established printer with eBook making facilities to make your electronic books for you or are you willing to spend time and resources making them yourself? Do your authors want their books making into eBooks? What changes would need to be made to contracts with authors? And, if you do decide to make them how are you going to price/distribute them? And, will these new editions need new ISBNs?

I shall try to answer these questions one by one. The process of making an eBook is quite a complex one that requires a working knowledge of HTML. It is a technical process – which can be learnt, but perhaps for some this is not desirable. There is the option of outsourcing your eBook creation to a printer who already has this working knowledge and simply pay for their time. On average, for a simple 200page text only book with minimal footnotes it would take an experienced person 8 hours to create a validated eBook. So, depending on the hourly rate it might be ideal for some publishers to outsource this, but of course this eats into any profit that might be made. However, the beauty of an eBook is that this charge would be a one off – you need only create one file and that file can be distributed infinitely with no reprinting costs, which means the profit in the long run would be all yours, or the authors’.

If you publish many different authors’ titles it would be a good idea to find out their opinion on eBooks and whether they would like to see their work digitized. By communicating with your authors in this way you can begin to find out if you should be making steps towards a digital front list and start to put in to place any new sections that might need to be added to contracts.

Now, I am not a legal person, and I am certainly not the authority on contracts, plus this is a very new field but I will try to explain the information I have come across. To enable eBooks to be distributed, further negotiations are required with regard to the right to distribute an author’s work. In many cases publishers only have the rights for printed and audio content and so, according to PwC most of the big publishing houses are deciding to digitize most of their front list, including current bestsellers and, to the extent that they own the rights, are also opening up parts of their backlist for electronic sales. It might be advisable to ensure that any future contract with an author contains a clause about electronic rights.

It is possible that authors may decide to go it alone with their e-content and, for those of you amongst us, here are a couple of pros and cons of this. Firstly, the main reason to publish your own eBooks is that it is possible you would receive more money in the long run if you make, market and distribute your own content. The cons are that you would be unable to access publishers’ editing, marketing and distribution services, plus all fees would need to be stumped up personally and not by your publishing house! And, finally distributing content yourself is a lot easier if you are someone like Stephen King!

What kind of return can be expected from your eBooks? Well, since the advent of the iPad the industry seems to be following the Agency Pricing Model, which means if you decide to sell with an online retailer such as the iBookstore or Amazon (I will later tell you how to get on to these major retailers) then you, as the publisher fix the price and will receive up to 70% of the net revenue. But what does this actually mean? How much is an eBook retailing for?

At present there is no set price for an eBook but it seems the industry is generally choosing a price of 20-30% less than that of the paperback edition. Both consumers and publishers agree that an eBook should be priced lower than its physical counterpart, because it is a virtual product and consumers believe the costs involved in producing one is/should be small. As I have mentioned already, the cost of creating an eBook is a one off cost as there are no reprint, shipping and storage costs, but I have not yet reached the moment when I tell you there is an added cost to your eBooks and it is a Value Added cost! Yes, you have to pay VAT on all eBook sales! The reason for the different taxation is that tax law treats the digital book at the point at which it is downloaded or read online as a service that is rendered electronically and not as a cultural asset. So, it would seem tax law is based on the type of distribution (downloaded/online) and not on the product to be taxed. As the eBook industry becomes more prolific it might be possible, with some petitions, that tax law could be changed! Another cost is that of supplying ISBNs. It is required that each eBook has its own ISBN, which means you would need to provide up to three ISBNs for the one title – hardback, paperback and eBook.

I now turn to just the pricing and distribution of eBooks. So far I have outlined some costs: creating the eBook, pricing it at around 20-30% lower than its paperback counterpart, giving it a new ISBN, writing new contracts and paying VAT, which is all beside the usual costs of paying your authors and marketing the book. If you then add to these the hefty discount of 60% demanded by big online retailers the profit gained from an eBook starts to seem small.
However, over the longer term the profit will rise due to no reprinting/shipping/storage costs and I have already mentioned some returns – namely the 70% royalty you will get if you decide to sell with a major eBook distributor.

The future

ebook selfpublishAfter reading some of the latest reports about the future of the eBook market and keeping up to date with newspaper reports on the subject I’ve found the general consensus to be that eBooks are NOT about to replace traditional bound books. If radio, cinema and vinyl collecting have survived the digital television and music revolution, so too will the book. Old habits die-hard and people continue to enjoy books – the look of them on their shelves, the feel of them in their hands and this is not about to change anytime soon. However, the latest developments in technology, such as smartphones, eReaders, tablets and the prolific use of the internet will change the landscape within which books are situated. There is a new digital territory being built and the traditional book industry would be well advised to explore it and its potential.

From a publisher’s perspective, eBooks can be considered as a nice addition to a title list and will provide customers with a choice. As customers are becoming increasingly more aware of eReaders and their potential uses they are more inclined to read on them and, as a consequence, customer’s shopping-habits are evolving to embrace online shopping more readily. With this in mind, eReader developers have designed their products to include WiFi and 3G, which makes it easier for people to purchase books directly onto their devices from almost anywhere!

The eBook market is now getting stronger. eBooks are being discussed more frequently and by more people, which inevitably means a growth in the number of people who a) know about them and b) are willing to purchase them. In the report I read by PricewaterhouseCoopers, it was suggested that the projected growth of the eBook market in the US will be 22.5% of all sales by the year 2015 with 14.5% being the figure for the UK market.

With this predicted change in the book market how should the small publisher respond? Do we want to join the digital revolution? Personally, I believe it can’t hurt the small publisher to get involved with this new aspect of the book industry – to provide an electronic copy of a future or existing title won’t cost a huge amount and might actually benefit a business. The digital transformation is underway and it would be good to be a part of it. It might seem a little risky at first to develop eBooks alongside physical stock – after all it will incur extra expense if you cannot digitise your books in house or have the facilities to sell them once they have been created – but the cost of converting titles are relatively low compared to printing a book and usually represent a one-off cost. Perhaps an experiment with a strong selling title would be a good way of gauging your entry into the digital world of eBooks.

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Images used:
1: http://cac.ophony.org/2011/10/28/how-disruptive-is-digital-publishing/
2: http://institutechildrenslit.net/Writers-First-Aid-blog/2011/01/
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