FORTUNE -- Whenever I write about the e-book business -- especially in the context of the Justice Department's antitrust suit against Apple (AAPL) and five book publishers -- someone in the comment stream invariably suggests that e-books are vastly overpriced because the publishers who sell them incur none of the usual costs of printing and distribution.
E-books don't write or edit themselves, of course, but I've never seen a good accounting of what it actually costs to publish one. So I was gratified to find, high up in "Paper Trail," Ken Auletta's smart piece about the e-book business in the current issue of the New Yorker, this paragraph:
"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.
Twenty percent doesn't seem like much of a savings, especially considering that Amazon (AMZN) has been selling electronic versions of books that cost $30 in hardback for anywhere from $14.99 to $4.99 to $0.00
The accounting gets even more complicated when you consider that most books cost publishers more than they earn. Amazon's Jeff Bezos argues that traditional publishing is infuriatingly wasteful, and that his model is far more efficient and better for both readers (by lowering prices) and would-be authors (by eliminating the "gatekeepers" that prevent them from reaching readers).
As Auletta points out ...
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."
The Justice Department may regret trying to make its e-book antitrust suit stick to Apple
FORTUNE -- I haven't had so much fun reading legal documents since the Watergate trials.
I loved U.S. v. Apple et al. for the juicy details: the 56 phone calls, the clandestine meetings in swank Manhattan eateries, the secret e-mails "double erased" to ensure they couldn't be traced.
But what makes Apple's (AAPL) response, filed Tuesday, such a MOREPhilip Elmer-DeWitt - May 26, 2012 7:57 AM ET
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* Apple (AAPL) has responded to the Department of Justice's antitrust charges of colluding with book publishers, claiming the accusations are not true. "The launch of the iBookstore in 2010 fostered innovation and competition, breaking Amazon's monopolistic grip on the publishing industry," the company said in a statement. "Since then customers MOREJP Mangalindan, Writer - Apr 13, 2012 11:34 AM ET
Cupertino breaks its silence, laying out its legal defense in four sentences
The company's response to US v. Apple Inc. et al., when it came Thursday evening, was as succinct and carefully crafted as any Apple (AAPL) marketing slogan.
What the Department of Justice characterized as a "per se violation" of the Sherman Antitrust Act, Apple is going to paint as an act of liberation.
We got our copy the company's four-sentence response to MOREPhilip Elmer-DeWitt - Apr 13, 2012 6:13 AM ET
I love my Kindle. And, I've been waiting for a long time to be able to borrow rather than buy books. But, Amazon's latest push is part of a larger trend that raises a red flag.
FORTUNE -- There's a lot to like about the Kindle ecosystem. Jeff Bezos and Amazon have made sure of that, from one of the largest digital book selections around to a cross-platform syncing feature that MOREJP Mangalindan, Writer - Nov 4, 2011 12:21 PM ET
Jeff Bezos's strategy of giving customers the best e-reader and e-bookstore possible is paying off for Amazon -- not that it's saying by how much.
FORTUNE -- Sales of the Kindle and of e-books are so good, and growing so fast, that they are now becoming a driver of Amazon's overall growth, says Citigroup analyst Mark Mahaney.
We can't know for sure how many Kindles Amazon (AMZN) is selling, because the company MOREDan Mitchell, contributor - Jun 8, 2011 11:49 AM ET
Even as big publishers strike deals to put content on the iPad, a small ebookseller bites the dust
In an bitter letter to users, BeamItDown Software's Philip Huber makes no bones about whom he blames for the fate of his company and its iFlowReader app, both of which will cease operations on May 31.
"The crux of the matter is that Apple is now requiring us, as well as all other ebook MOREPhilip Elmer-DeWitt - May 11, 2011 7:41 AM ET
With 2013 looming as a tipping point for ebooks, the struggling giant should regroup behind its Nook ebook business, fast.
In the late 1990s, the book industry was upended by the rise of the superstore. With big footprints in exurban shopping centers, Barnes & Noble (BKS) and Borders (BGP) superstores offered what many shopping-mall-sized and downtown mom and pop stores couldn't: aisles upon aisles of hardbacks, paperbacks and magazines, and cushy MOREJP Mangalindan, Writer - Apr 13, 2011 5:00 AM ET
The book industry thinks its digital transformation is happening even faster than it did with music and movies.
At the GigaOm Big Data conference in New York City this week, Barnes & Noble (BKS) executive Marc Parrish took the stage to discuss rapid changes in the book publishing industry.
"The book business is changing more radically now, and quicker, than movies or music or newspapers have, because we're doing it in a MOREJP Mangalindan, Writer - Mar 25, 2011 1:31 PM ET
That, says a team of Merrill Lynch analysts, is the hit it would take in Kindle book sales
The button circled at right on Amazon's (AMZN) popular Kindle app for the iPhone will have to be removed if the company wants to continue doing business in Apple's (AAPL) App Store. That's because it takes customers out of the store to Amazon's website, where readers have been buying books for nearly two MOREPhilip Elmer-DeWitt - Feb 23, 2011 10:54 AM ET
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