Understanding book costs, retail prices, selling discounts and author royalty - Zaccmedia – Christian Book Publisher
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Understanding book costs, retail prices, selling discounts and author royalty

Understanding book costs is vital for authors, publishers and buyers. This article provides a detailed overview of how the costing process works for a UK Christian book publisher – and for most book publishing companies. We explain the steps between creating a physical book to getting an author royalty after a sale. Understanding book costs is key to knowing how important your retail price is.

The purpose of a retail price is to add a value to a book that customers are willing to pay for and that offers a fair portion of financial return to the remaining stakeholders – these being: the author, publisher, printer, wholesaler, distributor and retailer. If you can deliver those two goals from a retail price, you have achieved a good service result.

Let’s go through the different scenarios to establish what you should be charging for your book.

There are a few questions you need to first ask:

  1. What is the genre of my book?
  2. How do I manage my profit margin? To understand what this is, you need to ask what are the physical attributes of the book and other profit related questions:
    • What will the final page length of my book be?
    • What physical size book do I want to sell?
    • Is my book colour or black & white?
    • Is my book going to be in hardback or paperback, or will it just be eBook?
    • What will the print cost be, based on the above?
    • What discounts will I offer to my wholesale buyers and to retail buyers?

The genre
Since we are a Christian book publisher, we often work with a variety of sub genres within Christian publishing. To understand the relationship of genre and price, there are two organisational names every UK author and publisher should know, which are Nielsen and the Book Industry Study Group (BISG). Nielsen registers all details about a book (ISBN, price, number of pages, format i.e. paperback, hardback or eBook etc, description, genre, distribution source data, and so on), and BISG provides the book industry with a standardised categorisation service known as BISAC (Book Industry Standards and Communications) code.

Nielsen, metadata and BISAC
Whenever a book is professionally published, Nielsen is involved in two main ways:

  1. Nielsen is the only place to buy and register a UK ISBN (which gives you the barcode that identifies your book to a set of data provided to the book trade, including price).
  2. As mentioned, Nielsen (their “Bookscan” division) is the UK publishing industry’s database for every UK book published with a registered ISBN. Within this database is the book’s data – which in the industry is known as bibliographic metadata. If you come across this phrase, this is exactly what metadata is: it is bibliographic book information stored on Nielsen’s database. Nielsen’s role isn’t just to hold the data but feeds it out across the globe. Importantly, BISAC codes are included in Nielsen’s database feed and provide the category and genre of the book.

It is because Nielsen supplies BISAC category codes to the book trade, that every book will have its genre category, and therefore books of those categories will be displayed together with similar books to potential book buyers. Hence the categories you find in bookshops and on retail websites.

The price of your book will be competing with books in your category/genre. It’s therefore good to research similar titles to ensure your price isn’t uncompetitive.

Capitalising your niche
If your book is in a particular niche, that has a defined audience, but is specialist, such as academic theological works on specific subjects, then as a reference book you can have a higher retail price than is perhaps common to a book of its length. A standard 160 page book may be priced at £7.99, but with valuable specialist information, you could make it £12.99. It depends on how sought after you think the information will be. If the demand is high for your information because it’s scarce but needed, people will pay. The price is justified to the author, because the higher price compensates for lower volume sales due to its speciality of subject. This is worth knowing for authors setting out to write – know your audience and genre, and what they are looking for and where they are looking for it.

Popular Genres
If you are in the populist genres, then competition is high and retail prices can be driven down accordingly. This is hard for self-publishing authors where the cost to print each book is a lot higher than popular publishers, who print thousands of books at a time to drive unit costs down. They can sell cheaper because they have the profit margins to do so. This introduces the second factor for what affects a book’s retail price – calculating a book’s profit margin and its viability to sell at a profit.

Profit Margin
To calculate your book’s profit margin, you will need to know, or estimate, the factors listed at the beginning of this article. The physical attributes of your book will determine how much the actual print cost will be. For instance, a 300-page book will cost significantly more than printing a 128-page book. A full colour book will cost considerably more than a black & white book. Paperbacks are cheaper than hardbacks to produce. Simple so far. Let’s go into more detail.

Let’s say you have a standard B-Format paperback book, it’s 160 pages, and you want to sell the book. You researched your genre and think £7.99 is a great price point to sell it at. The price looks competitive and you want the price to be accessible to customers. It’s all very reasonable. But how does this retail price measure up when taking into account the following:

The Author: The author will want a royalty return for their efforts writing the book. The royalty is simply a portion of sales from the book.

The Publisher: The publisher will want a portion of sales for their efforts in packaging the book, making it available to buying partners, administrating orders and sales and depending on the type of publisher, compensating for the book production & marketing investment. Sometimes the publisher may be the author.

The Printer: Every physical book needs a printer. They will charge a fee to produce books.

The Wholesaler: The wholesaler is the company that book retailers buy from. Retailers usually don’t buy direct from 100 different publishers, but prefer to buy books from a few large organisations that supply (and sometimes print) books on behalf of the publishers. Wholesalers have no other service than simply to buy and sell a book to retailers demand.  Wholesalers typically take 15-20% of a books retail price, for a sale they supply to a bookshop. This covers their warehousing, shipping and logistics. Book selling is a volume selling business, so wholesalers don’t typically supply small publishers as the small volume of sales makes the administration costs higher than the actual value of book sales.

Zaccmedia sells to bookshops through Ingram Wholesale, one of the world’s largest book distributors. Bookshops order from them via their online iPage facility.

The Distributor: Often confused with but is different to the wholesaler, distributors are often working in closer interest to the specialised areas of the publisher. Distributors usually provide marketing services for publishers, including sales agents. Distributors supply to wholesale services, but can often sell direct to retailers. How this works depends on retailers arrangements with their suppliers – whether there are exclusive supply contracts, which often give retailers favourable discounts with wholesalers or distributors. Distributors take a portion of all sales through them, for their service in marketing (if applicable), and for handling/shipping books to wholesalers or retailers. Distributors can take anything between 50-70%, out of which they assign discounts to wholesalers and retailers themselves.

The Retailer: The retailers provide the connection with the customers. They pay rental for staff and physical store overheads and provide a gateway to browsing customers. Small independent bookshops usually take 30-35% of the book sale, but some can be as much as 40% or more – for instance, Waterstones. Especially online retailers, such as Amazon.

Who takes from the book pie in a Zaccmedia example?
Let’s subtract from the retail price who takes what and see the proportion of sales each receives. To make this example relevant, the distributor has been removed, as Zaccmedia books are sold via wholesale.

When a minimum retail is set:
A retail price of £7.99 is set:

Specification: 160 pages long, standard B-format, on standard 80gsm paper, paperback

Printer Cost:  £2.65
Wholesale takings at example of 20% per book: £1.60
Retailer takings at example of 30% per book: £2.40
Subtotal of income received by publisher less printer, wholesaler and retailer costs: £1.34
Author’s royalty (Zaccmedia gives 60% of the subtotal): £0.80p per copy sold
Publishers earnings: £0.53p per copy sold

NOTE: Combine the wholesale discount of 20% + the retail discount of 30% = 50%. This combined discount is often referred in the trade as the “wholesale” discount. The wholesaler takes 50% discount but sells to the retailer at 30%.

When a retail price is competitive, but not viable
If the retail price is set at £5.99, here are the dramatic consequences:
Subtotal of income after costs deducts (print, wholesale, retailer): £0.34p
Author royalty: £0.20p
Publisher earnings: £0.13p

When a retail price is set higher
If the retail price is set at £11.99, here are the dramatic consequences:
Subtotal of income after costs deducts (print, wholesale, retailer): £3.34
Author royalty: £2.00
Publisher earnings: £1.33

The above calculations will of course change if you increase the number of pages, or go to hardback, or colour and so on. It’s balancing your retail price with your book’s overheads per sale.

The retail price of a book must be viable
Some authors want a very low retail price for their book, to make it easily accessible for their readers. They might be unconcerned about making money from their books. This works fine for the personal distribution of books to friends. However, within the ecosystem of bookselling there are costs for the printer, publisher, wholesaler and retailer to consider to administrate and service the book sales – all of which need adequate recompense to a) cover the costs of serving the book, and b) to make a profit from the sale as part of the business purpose of selling. If a too low retail price is set, the expenses can easily result in a loss for each book sale – where the cost of supplying is more than the value of the sale.

Recommendations for self-publishing authors
If the genre is highly competitive, then I suggest a baseline strategy is to formulate your author take home royalty to be at least £1.00p per sale. If you are confident of high volume sales, then that minimum royalty can be moved down a scale.

If you have specialist information that is niche, then I strongly suggest a robust retail price that gives a stronger £1.40p or more royalty return.

Be cautious on your expectations of making income
If you are self-publishing and paying a publisher like Zaccmedia to produce your book, then your profit only starts once the publishing costs have been covered. It can take the sale of around 750 book sales to cover your initial outlay, on a retail price that gives a high £2.00 royalty return. This is challenging, and few manage it. The book needs to be exceptionally good to gain high book selling gravitas. Lowering the retail price means you have to sell even more to cover the costs. Whilst self-publishing offers a turn-key solution, do make sure it’s affordable for you.

Final advice – Direct Selling
Don’t give up on the thought of recovering your publishing costs. Bookshops are one route to bookselling. Another route is direct author selling. If your retail price is set well, your profits will be dramatically higher if selling your book direct to friends, colleagues, contacts and your wider networks. If you have a strong network and able to direct sell to 300+ people, you are in a strong position to recover costs and move towards profit.

For most self-publishers, the genre of Christian book selling is highly competitive. Yet, if you feel compelled to spread God’s light through your life experience or Christian teaching, then Zaccmedia shares the same vision and will assist you on that journey of faith. We provide an exciting publishing experience and hope you choose Zaccmedia to express all that God has shown you to share.

Christian Book Publishing

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