Thanks to e-books, publishers’ revenues are down but profits are up

The other day, I mentioned a survey showing that the growth of e-books has reduced the overall value of the book publishing market in the UK, and wondered what the figures might look like for the US. While the figures don’t measure precisely the same thing, Laura Hazard Owen reports on PaidContent that some figures released in publishing conglomerates Bertelsmann (Random House) and Pearson (Penguin) show that, thanks to the broad adoption of e-books, publishing revenues are lower but profits are higher.

In other words, publishers are making a better profit even though they’re taking less money in, because they’re paying less money out in costs. But it’s not that e-books are cheaper to make that seems to be driving these savings, however—it’s the fact that, unlike paper books, they can’t be returned to the publisher, with the attendant warehousing and shipping costs that brings. (Though presumably some unspecified “continued cost-cutting measures” have been helping, too.)

Owen hopes that this increased profitability will lead to higher e-book royalties for authors. I imagine consumers would hope that it will instead lead to lower e-book prices for them. Of course, what it’s likely to lead to is higher share prices for the conglomerates and no other changes whatsoever.

5 Comments on Thanks to e-books, publishers’ revenues are down but profits are up

  1. “But it’s not that e-books are cheaper to make that seems to be driving these savings, however—it’s the fact that, unlike paper books, they can’t be returned to the publisher, with the attendant warehousing and shipping costs that brings. ”

    In other words, ebooks are cheaper to sell than paper books.

  2. Considering that the fully-paid-return-and-pulp model was stark insanity from the very beginning, it’s amazing that it’s lasted this long. How much would books cost, do you think, if we didn’t have to pay for the 90% that don’t sell? Well, we’re about to find out.

  3. Nice followup.

    One of the reasons “the figures don’t measure precisely the same thing” is that “returns” don’t happen in the UK :). So there isn’t such a dramatic win to encourage publishers over here.

  4. “But it’s not that e-books are cheaper to make that seems to be driving these savings, however—it’s the fact that, unlike paper books, they can’t be returned to the publisher, with the attendant warehousing and shipping costs that brings. ”
    What exactly does this statement mean ? “Make” ? It seems to infer that if it were not for returns, then eBooks would produce the same profits as paper books at the same price …. and this is simply not true.

  5. Let’s get some independent economists to explain to us what the actual cost of producing an eBook is. No paper, no ink, no printing presses, no binding, no storage, no transportation and, perhaps most importantly, no buildings to house all of these activities in. Then, it should be hilarious to see publishers try to use Hollywood accounting techniques to inflate the value of eBooks they offer to the public.

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