Motoko Rich has a thoughtful piece in the Feb 28, 2010, NY Times, "Math of Publishing Meets the e-Book." Worth the read as it lays out plausible numbers in an industry that is largely opaque to those who produce its product, ahem, writers.
For a printed book with a cover price of $26, the publisher gets 50% of gross revenues, or $13, out of which a whole lot of costs have to be covered:
The publisher pays about $3.25 to print, store and ship the book, including unsold copies returned to the publisher by booksellers.
For cover design, typesetting and copy-editing, the publisher pays about 80 cents. Marketing costs average around $1 but may go higher or lower depending on the title. Most of these costs will decline on a per-unit basis as a book sells more copies.
Let’s not forget the author, who is generally paid a 15 percent royalty on the hardcover price, which on a $26 book works out to $3.90...[leaving the publisher with] $4.05, out of which it must pay overhead for editors, cover art designers, office space and electricity before taking a profit
For an e-book, it gets a bit more complicated as the model is still quite dynamic. But, for example, Apple (the retailer replacing the bookstore) is scooping 30%, i.e. for an electronic edition with a price of $12.99, the publisher gets $9.09:
Out of that gross revenue, the publisher pays about 50 cents to convert the text to a digital file, typeset it in digital form and copy-edit it. Marketing is about 78 cents.
The author’s royalty — a subject of fierce debate between literary agents and publishing executives — is calculated among some of the large trade publishers as 25 percent of the gross revenue, while others are calculating it off the consumer price. So on a $12.99 e-book, the royalty could be anywhere from $2.27 to $3.25.
All that leaves the publisher with something ranging from $4.56 to $5.54, before paying overhead costs or writing off unearned advances.
Clearly, the e-book leaves the publisher with more and the authors with less, even with royalties of 25% of gross, but it's hardly breaking news that authors get less. Period. And, as the article points out, barely 3-5% of the book market is electronic--at this point.
This quote in the article from our very first editor, Lindy Hess, who published Networking when she was still at Doubleday and who now heads the Columbia Publishing Course, is about as accurate as the math gets: “The truth about this business is that, with rare exceptions, nobody makes a great deal of money.”
