More on Accounting and Ebooks

After I finished yesterday’s post and was mulling it over, another piece of information came back to me from one of my old accounting courses.

I didn’t intend to be an accountant. I took English at university, over my parents’ objections, but I had no idea, when I graduated, that there was any option for me but to get whatever job I could with an English degree. I was far from innocent about things I should have been but naive about ordinary parts of life. I had no one to tell me that there were all kinds of jobs an intelligent person with a basic post-secondary education could start with, or that I could go on with my education. (Before university, there had been a teacher, a Vassar alumnus, who had wanted me to apply there; but I didn’t believe I was that kind of student, and I didn’t understand how I could possibly get the money.)

I knew so little about the options (school loans, grants) that when I did need money for schooling later on, I just went and got a bank loan at the current rate, which was 18%.

I had worked in offices as a teenager to make money for university, so after I graduated, I opened up the want ads to office work. I got a job first as a receptionist and then as an order desk clerk at a factory that manufactured picture frames. (In those days, things were still manufactured in Canada.) By the time I’d been there a year, I was one of the most senior employees. It was that sort of place. My bosses sneered at my education and believed, in turn, that I must be mocking them behind their backs. I was too scared to.

It was odd that I decided to become an accountant. But it was a low time of my life when I thought little of myself and devoting myself to the last occupation on earth I’d ever considered made sense. I went to school at night 4 times a week, taking university courses in business. I got that loan to finance it. I studied my butt off to pass exams and I became a chartered accountant.

It was ok, really. At work I was treated with respect as a person with a brain and that was my first experience of it outside of school. And it beat waitressing as a way of supporting writing.

But back to the bit I remembered after I posted. You see dividing up your fixed costs across all your products, books as I was talking about, makes sense in terms of pricing, but it can lead to bad decisions.

Let’s say you figure out that if you sell 200 books, your fixed costs amount to $10 a book. And that your printing cost is $1 a book. The author gets $1. You set your price at $16 and you, the publisher, get $4. Fair enough.

What happens if you have the opportunity to sell another 100 books but only at $9 a book. You decline. No thanks, the price is too low. But that doesn’t make sense if the next 100 doesn’t require you to hire any more staff or expand your offices.

You’ve already covered the costs by selling your first 200 books. The next 100 are gravy. Really all it costs you are the printing and royalties. You’d be making $700 selling those books.

So if you realize that what you need to do is cover your fixed costs and then you’re free to devote yourself to whatever you, as a publisher, value–then what would that mean? These are issues I don’t see anyone looking at but it would present a range of choices for both part a) covering fixed costs (eg gamble on a bestseller, have a line of cookbooks, develop a backlist) and then b) books of value (art, experimentation, literature, young authors, niche markets, works in translation, graphic novels, you name it).

As I said yesterday, we don’t have to worry about those things. Writers just need to keep on with it. But we benefit, too, from being released from the line that we’re fed about how the market (as if it’s a thing) works and what the numbers really signify.

It’s easy as masters of words, which can create a mood or make a case, to think that numbers are different, that they’re more solid, immutable. But that isn’t the case. I’m reminded of an old joke.

People are lined up to apply for a job as accountant for the Tzar. The first person in the line goes in. He gets asked, “How much is 2+2?” Four, he says. No job.

He comes out, everyone asks what happened and he tells them. So the next person goes in and answers 3, the next 6, the next 0, the next 8, then 2, and so on. None get the job. Finally someone comes out smiling. Yes! He got the job.

So how did it go? he’s asked. How did you do it?

He says, “They asked me how much is 2+2.”

“So what did you answer?”

He shrugs. “I said, How much do you want it to be?”

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Categories Book Stuff, MiscellanyTags

4 thoughts on “More on Accounting and Ebooks

  1. Lol! Love the anecdote at the end.

    Sorry to bang on about this book, but it was so interesting. The scenario you envisage, of being in the happy position to print more books. This is good, but printers have long lead times, and it can be difficult for publishers to get a reprint quickly (plus the printers’ll have other jobs scheduled). The bigger the firm, the more they can lean on their printers for quick service. But! all books are sale or return. Suppose that one bookstore chain wants a load more books, and another, in another part of the country has returns. Now, you’d want those returns to give to your first customer, right? Only bookstores can keep those books for up to a year, and you don’t want to ask for them back because they might sell. So publishers often find themselves in the bizarre position of having to print more books, even though there may well be more than enough returns eventually to cover extra demand and those returns will eventually have to be pulped (another expense). Ebooks make a lot of sense for dealing with the returns problem – but instead they bring issues of piracy, which the printed book never had. It’s all swings and roundabouts!

    1. Litlove keep on at it, I think it’s worth the discussion. There are problems and returns are one of them. At some time I read about how that originated and I don’t remember it except that it was an odd historical contingency that had to do with how publishing got started, through subscription, which was different from other types of products. But for a long time books are sold in retail the same way as anything else, and the returns policy has been problematic, though it does have the advantage of allowing booksellers to take more risks. But do they? Ebooks have the potential problem re piracy but I haven’t seen or heard of that happening on any scale, have you?

  2. At the literary festival on the weekend I went to a talk by a bunch of editors, and they said that the real piracy problem was in China and India, where there’s a flourishing culture of piracy. They said it hadn’t really started in the UK, but given all the trouble with napster and so on in the music industry, they believed it would when the market was big enough to be worth their while. But they were also working on ways to prevent it from happening. I think everything is changing so fast it’s hard for anyone to know quite what will happen next!

    1. That was an issue with print, too. Those countries don’t really have adequate (or any) copyright laws. Before ebooks I’d hear that even Australia was an issue, not so much for piracy, but a free for all in terms of foreign publishers’ territorial rights there.

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