This article about the large screen Kindle that Amazon is about to introduce suggests that the real market that Jeff Bezos wants to capture is not newspapers or magazines but textbooks. It’s not clear to me why the current Kindle is deficient in that area, but the article goes on to note that the textbook market is very lucrative, and that eliminating the physical book could lead to major cost savings.
Well, the market is indeed very lucrative. Just poke around on Amazon’s textbook site and you’ll see some heart-stopping prices. In fact, we once carried the college text version of Joseph Williams’s book on writing style, but dropped it because it not only listed for three times as much as the shorter but just as good consumer version, but we could only get a 5% discount from the wholesaler, as opposed to the usual 40%. Textbook prices are very much a scam, depending on a captive audience which is forced to buy whatever book a teacher chooses, and is probably using student loan money to pay for it.
But the physical cost of the book is negligible. Here’s a breakdown of where your textbook dollar goes, courtesy of the National Association of College Stores (you’ll find a fancy graphic version here).
- Publisher’s paper, printing, editorial costs: 32.2%
- Publisher’s general and administrative costs: 10%
- Publisher’s marketing costs: 15.4%
- Publisher’s income: 7%
- College store operations: 7.3%
- College store personnel: 10.9%
- College store income: 4.5%
- Author’s income: 11.7%
- Freight expense: 1%
So many different categories make for misleading numbers. Summing them up, we see that two-thirds of the money goes to the publisher, one-quarter to the bookseller, one tenth to the writer, and one one-hundredth to freight expenses. But given that freight expenses were broken out separately, why were the printing costs hidden in the “paper, printing, editorial” category? Probably because they are so low. I would estimate that it costs between three and four dollars to print a $100 textbook.
Assuming four percent for printing, we see that the physical costs would run about 5% of the list price, an amount that is probably lower (at least in the beginning) than the expense to Amazon to get folks converted from physical copies to Kindles, and even then not all that much a cost saving. Whatever the reason that Amazon wants to conquer the textbook market, it almost certainly isn’t to capitalize on the absence of shipping and printing costs.
For extra credit: does the two-thirds to the publisher, one-fourth to the seller, one-tenth to the author distribution of income seem fair to you?