Twenty or thirty years ago the single biggest cost item in the production of an academic book was typesetting.  Printing, broadly defined, came next, and paper last.  If you don’t print many copies, you don’t use much paper.  The picture for a trade publisher has always been different: probably paper has always been the biggest item.  When I started working for a trade publisher in the mid nineties it would make me wince that we would keep resetting books to make them fit an even working.  Luckily I quickly got used to it, because, of course, by doing so we avoided having that extra sig or two, and thus reduced our paper consumption over the 10,000 or 20,000 run by an amount that dwarfed the extra expenditure on typesetting.

The academic book that prints 10,000 copies is a very rare bird.  What used to be an automatic average run of 2,000-3,000 has now become more like 500.  Of course typesetting costs have totally caved in: we now expect to pay about a third or a quarter of what we used to.  We pay less for all prepress services, so the total plant cost is likely to be getting smaller over time, even though it may often still remain the largest item on the cost list.  Printing and binding costs have moderated too, partly because of equipment efficiencies, partly standardization, and partly because publishers are now willing to make compromises in specifications which they previously resisted — like unsewn binding and groundwood paper.

The elements in the cost picture for a book consist of

1. Paying the author (usually a royalty, probably with an advance against it, but occasionally a fee).

2. Plant cost (copyediting and perhaps rewrite, design, permissions, typesetting, proofing, indexing, origination of art etc.).  Some publishers include the cost of printer’s prep and plates here.

3. PPB — paper printing and binding + freight.  PPB costs vary with quantity whereas plant costs are invariable.

4.  Discount given to booksellers and wholesalers.

5. Overhead — the cost of running the business, which has in the end to be recovered from the sale of your books.

6. Net profit — what’s left over after all the other bits have been accounted for.

One of my bosses used to make me do net profit calculations in my head.  Receipts minus royalty, minus plant cost, minus PPB equals gross margin, then subtract overhead and you’ve got net profit.  Along the way an allowance had to be made for free/unsold copies.  Better than Sudoku as a brain work-out.

As academic books move towards digital, even on-demand, manufacture, the proportion of the total cost picture that is “printing” shrinks.  Paper is likely to be come the cost driver in all types of publishing: unless we all go e-book crazy before that happens.

The days when the publisher’s raison d’être was that he fronted the money to fund the inventory required to publish, are rapidly passing.  Sure most books are still printed in volume in the first instance, but it is now possible to be a publisher without ever holding any inventory.  Several such companies exist, doing all their printing by POD, only making the book in direct response to the receipt of an order.  Their cost picture is quite different from the conventional publisher’s.  Overhead is much lower — they have no warehouse — while PPB is higher (printing one copy will always give you a higher unit cost than printing 1,000).  The barriers to entry into our industry are now almost non-existent: if you only print after you’ve sold the book, your need for capital is obviously less.

See also Costing.