Archive for November, 2009

Guest Post: Pete Masterson on CreateSpace Vs. LSI

Tuesday, November 24th, 2009

Pete Masterson is a very generous man who shares his experience as a printer and a designer with many new publishers. He participates on many listservs, including the Yahoo Group Self-Publishing. It was on that group that the following piece first appeared. He has graciously given me his permission to quote it in its entirety:

Using the CreateSpace Publishing Plan Calculator that you can download from the CreateSpace web site (this is an Excel spreadsheet with macros). These prices are all based on a color cover and a black interior book.

A softcover book of 212 pages, 6 x 9 with a list price of $16.00:
CS standard plan, sold via estore you receive a net $7.06
CS standard plan, sold via Amazon you receive a net $3.86
CS ProPlan, sold via estore, you receive a net $9.41
CS ProPlan, sold via Amazon, you receive a net $6.21
Purchased direct from CS in small quantities for delivery to the publisher,
standard plan, you pay $5.74 per copy (plus shipping)
ProPlan, you pay $3.39 per copy (plus shipping)
Larger quantities may have a discount, but I did not see one show up
in the calculator up to 250 copies.

The CS ProPlan has a $39 start up charge per title. A $5 per year per
title fee is charged to maintain the listing.

———————————————
Using Lightning Source figures as comparison:
the same book with $16.00 list price:
With a 20% wholesale discount, you receive $9.14 per copy sold via LSI/
Ingram
With a 40% wholesale discount, you receive $5.94 per copy
With a 55% wholesale discount, you receive $3.54 per copy
The print cost per copy (in all cases) is $3.66 per copy
There is a start up cost of $75. A $12 per year per title fee is
charged to maintain the listing.

If you purchase copies direct from LSI for shipment to the publisher
this book would cost $4.08 per copy plus shipping.
This charge also applies to shipments made direct to customer at order
of publisher. (This charge is based on .015 per page instead of .013
per page for the interior. Cover charge is unchanged.)

orders of
50-99 units receive a discount of 5% (reduces unit cost to $3.88)
100-249 units receive a discount of 10% (reduces unit cost to $3.67)
250 – 499 units receive a discount of 20% (reduces unit cost to $3.26)
Over 500 units receive a discount of 25% (reduces unit cost to $3.06)
(plus shipping).

======
Analysis:

So, the CreateSpace ProPlan offers a slightly lower unit cost for
books shipped directly to the publisher — but does not seem to offer
any discounts for quantity purchases. (Per page rate is .012 for the
CS pro plan and .013 at LSI — the ‘cover’ charge is .85 for CS Pro
plan vs .90 at LSI — and this is the price difference.)

LSI gives greater flexibility in setting wholesale discount rates and
terms. Using LSI/Ingram distribution, the book is available to all
booksellers where CS is only available to Amazon. Using the CS
‘estore’ would allow a slightly better return on direct to buyer
orders from your web site.

In the end, the deciding factor is if the 20% discount through LSI is
more appropriate for your business plan or if limiting sales to Amazon
(and the CS ‘estore’) is suitable.

===============================================
Pete Masterson, Author of
Book Design and Production: A Guide for Authors and Publishers
Aeonix1@Mac.com
Aeonix Publishing Group http://www.aeonix.com
===============================================

A Typical Trade Title’s P&L

Wednesday, November 4th, 2009

I’m sure many of my frequent readers know these numbers by heart, but some of you are new around here. So, . . .

Let’s look at a typical non-fiction trade book. (Fiction makes less money, by the way, unless it “goes big.” And we all know that’s as rare as finding gold in the gravel.)

So, let’s say, for simplicity’s sake, that your hardback has a list price of $30. (Those greedy publishers!)

The bookstore buys that book for $18. Now, some of those books will be sold for less than $30, but not most. That means the bookstore has $12 (40% of list) to cover rent, salaries, utility bills, and so on and so forth. Given that they’re not selling all that many books on a given day, you can see why so many bookstores are going out of business.

The bookstore doesn’t buy from the publisher, all that often, though. They buy from a wholesaler. Why? Because there are 100,000 active publishers in the US alone. And they can’t afford to deal with even 1% of them as direct vendors.

The wholesaler takes 15% of the list price ($4.50) to cover their costs of operation. And that’s a very, very slim sum. Our net is now $13.50. Out of $30.

But wholesalers don’t deal with more than the top 1 or 2% of those 100,000 publishers. The rest need a distributor. That distributor takes roughly 15% of the list price in combined commissions and other fees. (Another $4.50 gone, leaving a princely $9.)

So, the publisher is getting $9. From that comes:

–Pre-publication preparation: (cover design, text design, structural editing, copyediting, proofreading, indexing, file preparation to meet e-book or printer standards, . . . ). This costs about $3,500 to 10,000 per title. And that tends to work out to $0.75 or $1 per copy for most mid-range books. (We’re netting $8.25, if you use the better number.)

–Printing: At a mid-range volume, that might be $3.25 per copy. (The net is now $5)

–Royalties. Non-fiction, hb, standard rates of 10% of list for the first 5,000 copies, 12.5% for the next 5,000 copies and 15% after 10,001. Let’s be conservative, and call it 10% of $30, or $3.00 per copy. (The net is now $2.)

–Marketing of 5% of revenue, or 0.05 * $9, or $0.45. The net is down to $1.55.

From that $1.55 (or 5.2% of the original $30) comes the salaries, utilities, rent and maybe, just maybe a few pennies of profit.

Now, there are other complications I didn’t treat. Sometimes bookstores buy directly from distributors or the larger publishers. That happens about 1/3 of the time, so you’d get back an average of 1/3 of the 15% that the wholesalers take. That raises your bottom line by another 5% of list, or $1.50.

BUT you also have to accept returns from anyone in the trade, in any condition, at any time. (Yeah, that’s not how the terms of trade on the invoices read, but it is what really happens.) Most of these books will have a 25 to 30% return rate. And that eats up your bottom line with books you printed but can’t sell. (It adds another $0..90 in cost, on a good day.) And then there are the copies you never quite manage to sell, and freight, and . . . .

In the end, a large publisher usually gets 2.5 or 3% of list through to the bottom line. A smaller one is lucky to break even.

And fiction? It’s worse!

You don’t go into this business for the money.

Last word: Publishing is addictive. If you haven’t get gotten hooked, do NOT start until you have consulted your accountant and therapist!