Uncertain E-book economics

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Check out this article in the WSJ today about authors/publishers “struggling” to adjust to the new economics e-book.  E-books look poised to completely disrupt the publishing industry, like digital music and movies started to do 10 years ago, if it already hasn’t. This is great for inexperienced authors who are trying to get into the business. There’s more options and channels to pursue in terms of the publishing process (smaller publishers, self publishing, etc.) and possibly even more long opportunity just to enter the industry.  It’s just more open than in the past.  However, the financial opportunity may be far less at least in the beginning.

Since I have a few friends in the process of writing books, including my business colleagues, the particular graphic below really caught my eye. In the traditional publishing world, publishers were keeping roughly 50% but publishers in the e-book realm are now taking closer to 75% to cover their embedded costs and overhead to the process. I had read previous articles that described similar margin squeezing concepts, resulting in less return for authors, but this graphic made it resonate.

Another area I would love to see more data on is the impact of e-books and e-readers on college textbooks. The article focuses more on fiction or non fiction type books (from what I could tell) but I’ve spoken to several parents of college age kids who say $500-1K for textbooks per semester is still about the norm.  And in some cases, $200+ per book. So what are the margins there?  College kids are resorting to buying the European versions of text books to avoid what appears to be price gouging. If colleges really didn’t have skin in the game, why wouldn’t e-readers or iPads be standard issue? It makes me wonder if margins in that type of publishing are not artificially propped up. If so, I hope the textbook authors are getting a bigger piece of the pie because their brethren don’t appear to be on the same economic footing.