4. Incremental costs approaching zero.
An empty ebook reader makes a very poor doorstop. Filled with content, it’s invaluable.
Content, as the saying goes, is king. It’s king because readers are seeking not an object but an experience — the experience of reading (duh).
That’s why, despite well publicized challenges to their business models, publishers with big fiction backlists are still making pretty good money.
In the modern world of intellectual property, the cost of producing one more copy approaches zero. This is why Microsoft (whose intellectual property is software) has gross margins that players in other industries can only envy.
The difference between Microsoft and, say, Random House, however, is that Microsoft created—and therefore owns—its intellectual property. Most big publishers have licensed theirs from authors. Yet these publishers, adding some value (see previous posts) but not as much as they used to, are still taking a majority of the revenue from sales of each incremental copy. Sales that—once fixed costs are recouped—cost them essentially zero. What's a poor novelist to do?
Dilemma: Is the validation that derives from having the name of an established imprint on your book worth the outsized cut that a big publisher takes of the proceeds?
