This is a cross posting from my main blog, that I think is pertinent to post here as well.
It came about due to yet another spate of complaints about ebook prices because ‘everyone knows ebooks cost nothing to make’.
Oh, really?
What about all of us who produce mainly ebooks, and may later add a print version? Perhaps those people were only bitching about traditionally published ebooks, which are usually after thoughts, even now.
But the thing is, if people believe that ebooks cost nothing to make or produce (there’s a difference!), then it affects everyone who releases ebooks adversely when it comes to pricing.
A point to make: Indie authors often price below that $9.99 ‘best sellers’ line that Amazon drew when releasing the Kindle. Lower prices have been our big marketing gimmick.
However, that’s not because of a lack of expense overhead. It’s because of a lack of print and transportation overhead – many of us don’t order large numbers of print books for our titles that cost us an arm and a leg and fill our garages while waiting to be sold.
Yet we do have expenses associated with creating and producing ebooks, and those expenses, while perhaps not as giant as what traditional publishers may have, can still be pretty astronomical per title for your average indie writer.
I’m going to do a walkthrough of getting my entire Discord Jones series out, so that the developmental and production costs are plain to see. This isn’t bitching, but just stating what’s behind the scenes in getting ebooks out into the wild.
The series will consist of nine titles, and the first is already out.
Title 1: Arcane Solutions
- Time spent writing, revising, self-editing: About 400 hours.
- Time spent formatting for ebook and print: About 6 hours.
- Time spent creating the cover: About 4 hours.
- Time spent ‘releasing’ (uploading it to retailers): About 20 minutes.
So before any actual monetary costs enter the picture, I’ve invested over 410 hours of my time and skill into it. My last retail management position paid me $12.92 an hour (for the record, I make almost $16 an hour delivering newspapers at my current PT job), and it wasn’t really ‘specialized’ work. Seriously, a monkey could’ve done the manager job there with a little training. 
Formatting, cover creation, and writing fiction is ‘specialized’ work.
Anyway, we’ll go with that hourly wage: 410 hrs x $12.92 = $5,297.20.
Which I won’t see a penny of unless the book sells enough to earn back expenses and I start earning my ‘paycheck’.
Not earning profit, but pay for those hours I spent working, which I also have to pay self-employment taxes on.
Now for development expenses:
- Cover cost: $9.98 for 2 RF stock image licenses.
- ISBNs: $19.98 (custom ISBNs through Smashwords for epub version/CreateSpace for print version)
- Editing: The final word count was 70,381 when I sent it to my editor, so the cost was $1,127.18.
Total of those expenses (which come out of my pocket): $1,157.11.
Total of all ‘developmental expenses’ (including my hourly wage): $6,454.31
And that’s before the book was released. I chose to initially release it with a cover price of $2.99, because it’s the first book in the series. I raised the price to $3.25 yesterday, which is still less than half of the expected cover price of the other eight titles.
I price by word count. More words, higher cover price. The other eight books are probably going to be longer, possibly 85k each, so I’ll go with that word count.
Estimated Hours: About 483 per title, which includes writing, revising, self-editing, cover creation, formatting, and uploading to retailers.
- 483 x $12.92 = $6,240.36 per title
Other expenses (still per title):
- Cover costs: $9.98
- ISBNs: $19.98
- Editing: $1,360.00
Total developmental costs per title: $7,630.32
Total developmental costs for the whole 9 book series: $67,496.87
Excluding my wages (which I may never see): $12,276.79
Over $12k out of my pocket just to get them released, that has to be earned back before I have any hope of earning my ‘paycheck’.
$55,220.08 in time and effort wearing four different hats (writer, cover artist, book formatter, and publisher) which I have no guarantee of earning, before they begin making an actual profit.
Then there are the production costs. Each retailer takes a cut of each sale, to cover storage, reproduction of the files, and delivery costs.
My cover price for an 85k novel is $7.95. I’ll go with Amazon royalty percentage and costs, since that’s where the majority of my sales come through.
$7.95 x 70% = $5.56 – $0.38 (storage/repro) = $5.18 – $0.06 (delivery cost) = $5.12 royalty per sale.
I have to sell 272 copies to earn back expenses for each title.
Then, I have to sell 1,219 copies to earn my ‘paycheck’ for all my time and work on each title.
I don’t begin earning an actual profit off a title until I’ve sold 1,491 copies. To earn back all expenses for those eight titles, I’ll have to sell 11,928 copies.
For Arcane Solutions, I still need to sell 483 copies to earn back expenses (lower cover price, lower royalty), and then another 2,334 copies to earn my paycheck before it begins earning an actual profit.
As far as paperback, Arcane Solutions costs $6.49 to produce a print for Amazon sales. At $7.99 cover price, I earn $1.50 in royalties for each sale. Ebooks earn a lot more, since I try to price my paperbacks reasonably in order to sell them, and I don’t think pricing a 204 page book at $12.99 or higher would result in a lot of sales. Call me crazy.
Though I do my best to write entertaining stories well, and bring in a pro to put a final polish via editing, there is still an element of luck involved in actually selling any books.
I have no guarantee of sales.
It’s kind of a crap shoot. I could write great stories, promote my ass off when releasing each title, and still never sell enough to recover just the developmental expenses. In that way, my writing is still very much a labor of love, even though I put prices on my work.
Of course, if the first couple of books don’t earn back their expenses, the series dies in the water, because I’m not going to keep writing it. That would be extremely stupid, as I’d basically be throwing away my time and money.
It’s far more cost effective for me to only write novelettes or novella length works, because my time and editing expenses are the Big Costs, and those costs are less for shorter works.
It’s somewhat easier to earn back expenses for shorter works, and start earning a paycheck from them, as long as I don’t bargain bin price my work.
But, I’ve seen over and over again ‘longer, please’ from those who’ve read my work and liked it. They bolster my confidence that I’m a good writer, or at least an entertaining one, because they want more of my characters and stories. They want LONGER stories from me. Squeeee!
Ahem. 
Obviously, in order to make my business a success, I have to try and deliver what my readers are asking for, and just hope that more readers will be attracted so that my sales increase.
Just as obviously, I can’t do that if I don’t earn enough through sales to at least recover developmental expenses. I need that expense money back in order to release more books.
Sure, I could skip having my work edited, or spending any money for cover creation or ISBNs, but I’m relatively certain that would have a detrimental effect on sales, putting work out in its gory, self-edited glory without pretty covers at the cover prices I’ve settled on.
I would still need to earn my paycheck. I spend a good portion of my time working this gig, and if I’m not going to make money doing it, I’ll probably stop writing for public consumption, and only write for myself and a few friends.
Which may not matter to most of the world, and isn’t intended as any kind of threat or temper tantrum.
It’s simply business.
I invest time and money into putting my work out there. I have to justify both by earning money, or my business model sinks like the Titantic and I simply can’t afford to do it anymore.
I won’t be able to do it by pricing my longer works at 99c or under $2.99. That’s just not cost effective, because my works don’t sell at bargain bin prices. Believe me, I’ve tried to sell them at those price points, hoping to really boost sales. Guess what? My sales almost always wither away to NOTHING when I drop prices.
So yes, ebooks do cost to create and produce. The production costs may be minimal, but the developmental costs pack a punch, even though I’m an indie writer who does a lot of the work myself. Ebooks aren’t a ‘tacked on after thought’ for many of us who publish books.
They’re the Main Event, the Big Kahuna, the Actual Product we’re making.
