Joe Esposito gives us a typically thoughtful piece at The Scholarly Kitchen which basically aims to remind us that the costs of publishing a book amount to more than the costs of producing it. The Journal of Electronic Publishing Vol. 19, No. 1 is devoted to this question, but as Mr Esposito points out the “cost of publishing” isn’t the same as the “cost of production”. My only problem with this is trying to figure out why we’d really need reminding of it.
Analysis of the cost of publishing can be approached from the other end of the telescope, by considering self publishers, and the costs they avoid. The biggest single cost saving in self publishing is of course staff, but this means the self publisher has to do all the work him/herself. Publish a second book, and you’re probably fine with that same single-person staff. Three, four, five, ten, twenty — at some point you’re going to need a second person. And so on. Some of your staff might be said to be there because of your on-going operations not as the basic irreducible cost of having a publishing company, like an accounts clerk, say. If you have one editor only but want to expand, you’ll need to hire a second. That second editor might be said not to represent a fixed cost but to be the consequence of getting more books out. Such distinctions between staff functions are ultimately probably impossible to parse out, so staff costs, office costs, pension costs, cost of paper clips etc. end up representing the irreducible cost of running the company. We call this overhead, and allocate it on an averaged basis to every single book (individual copy of a book) that we publish. We take the total of all the relevant costs in the previous year, divide that by sales, and calculate what percentage the first is of the second. We use this percentage to allocate future overhead costs to all the books we print in the following year. It’s all a bit finger in the wind, but it’s what we do, even though it can lead to our regarding our books as less profitable than they really are.
Mike Shatzkin undersells his latest blog post by warning readers off it. He’s wrong: I enjoyed it — maybe I’m just a geek. There’s a horrible temptation to do this thing or that thing because we’ve always done them. We always did X; we’re still here: X obviously works. This is the sort of thinking which lead to welcoming the sunrise with some sort of rite. As Mr Shatzkin suggests some of our thinking about profit falls into this category. Overhead recovery probably oughtn’t to be so rigidly tied to the individual copy sale. After all at some point you hope to have earned all your overhead costs back from sales, but you can’t switch in the middle of November to making sales without any overhead recovery. Does this mean all your books were overpriced? It might, though it’s obviously never disastrous to earn extra profit.
I did once succeed in persuading the company I worked for to do reprints without P&L calculation. I argued that the time spent doing the calculation could be better spent on more productive things, and that it was just displacement activity: whatever the answer to the net profit calculation it would always better to do the reprint than not to do it — our policy of conservative reprint quantities meant that there was only a tiny risk of the books not selling, and calculating the profit wasn’t providing any information that we could really work on. In fact the only consequence of doing a P&L calculation on a reprint is likely to be a temptation to overprint in order to “improve” the margin or to raise the price so high it might end up killing the sale. It was just a (bad) habit. It’s true we did have a policy of regularly increasing all prices in step with cost inflation, so there was even less risk in forgoing the exercise.