Breakdown of book costs

There is an interesting article in Money Magazine this month that helps explain it a little bit.  They took a bestselling hardcover novel; in this case they took The Associate by John Grisham and broke down what the various costs are.  These costs are obviously estimates, and will differ greatly depending on print run but I think it is really interesting to see the basic breakdown.

Based on a list price of $27.95

$3.55 - Pre-preduction - This amount covers editors, graphic designers, and the like
$2.83 - Printing - Ink, glue, paper, etc
$2.00 - Marketing - Book tour, NYT Book Review ad, printing and shipping galleys to journalists
$2.80 - Wholesaler - The take of the middlemen who handle distrobution for publishers
$4.19 - Author Royalties - A bestseller like Grisham will net about 15% in royalties, lesser known authors get less.  Also the author will be paying a slice of this pie piece to his agent, publicist, etc.

This leaves $12.58, Money magazine calls this the profit margin for the retailer, however when was the last time you saw a bestselling novel sold at its cover price. 

Most books are sold to retailers at X% discount of the cover price by the wholesalers.  The size of X pretty much directly corolates with the size of the print run (basic economies of scale), on a bestseller like Mr. Grisham the discount is estimated at about 50%, so we can assume a midlist novel might be 20-30%

From this number take away the consumers discount, as well as staffing, marketing, and rent costs the retailer pays before you get to the actual profit margin.

While it's not exact it does take away some of that "WHAT!?! $30 for a book?" shock I have when browsing my bookstore.

Comments

[Sylvia]

Interesting, but don't publishers and printers have all those costs too? And I imagine their staff make quite a bit more than bookstore clerks. I think the bottom line is you can't make money off books that are priced too high to move.

[Duncan]

I'd also add that many, perhaps most valuable books don't get any promotion. Terry Macmillan has written about how she herself marketed her first novel, Mama, because the publisher didn't. I suppose the figure you give is the average between someone who gets none, and someone like Grisham who gets lots.

[Avid Book Reader]

Seems like self publishing with a site like Amazon's Createspace (not Booksurge) is even more appealing considering the author sets the price of the book, uploads the text and cover, and doesn't have to worry about all that other stuff. They can clear $3-$6 a copy depending on the page count. African American authors of fiction have been doing it for years, and publishers and manufacturers are taking notice to their success and strategies. With the marketing power of the internet, it's no longer a 'street corner' business. A simple Paypal account, professional website, and a reliable POD can supplement any aspiring author's income without the headache or the heartache.