What Does Self-Publishing Have to do with Economies of Scale?

Many writers enter the self-publishing industry with an expectation about what their published book’s retail price will be once it reaches bookshelves. This expectation is based upon their life-long experiences of buying books from authors like Stephen King and J.K. Rowling.

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They are often surprised and confused when they discover that their 300-page self-published print-on-demand paperback cannot have the same retail price as a paperback of comparable length that is published by Random House. “Why?” they ask.

The answer is because the retail price must be higher than the sum of the trade discount (typically 50-55%) and the production/printing cost of the book.  Why are POD printing costs so much higher? The answer is: “economy of scale.”

Wikipedia has a fairly extensive article on economies of scale that can be found here:

https://en.wikipedia.org/wiki/Economies_of_scale

Most important among that information, as it pertains to self-publishing authors, is the following paragraph:

“The simple meaning of economies of scale is doing things more efficiently with increasing size.[4] Common sources of economies of scale are purchasing (bulk buying of materials through long-term contracts), managerial (increasing the specialization of managers), financial (obtaining lower-interest charges when borrowing from banks and having access to a greater range of financial instruments), marketing (spreading the cost of advertising over a greater range of output in media markets), and technological (taking advantage of returns to scale in the production function). Each of these factors reduces the long run average costs (LRAC) of production by shifting the short-run average total cost (SRATC) curve down and to the right.”

Basically, the more books that are printed at one time, the less expensive each individual book is to produce, which thereby allows the retail price to be lower. This is why a Harry Potter paperback is “inexpensive”, even at 600 pages, compared with a POD book of similar length. The publisher of Harry Potter printed 10 million copies all at once, thereby bringing the per-unit cost down to pennies. Of course, the publisher also made that sizable, risky, investment up-front – an investment that equaled millions of dollars.  Granted, that’s not much of a risk when you’re printing a Harry Potter book, but for 99% of the writers out there (even the ones who have traditionally published in the past), it is a risk few traditional publishers are willing to take nowadays and an investment even fewer writers are capable of.

Enter print-on-demand (POD) self-publishing. A book that is published POD operates on the exact opposite pricing model. Each book’s printing cost is based upon printing only one book at time, which protects the authors from making a sizable, risky investment up front.  Of course, that means the printing cost for each book costs dollars instead of pennies. And since the retail price must exceed the trade discount AND the printing cost, the retail price is naturally going to be higher.

The good news for Outskirts Press authors is that, when combined with EDI distribution through platforms like Amazon and Ingram, self-publishing writers never incur out-of-pocket printing costs for books sold wholesale, because the book is only printed after it is sold to the consumer. The printing cost is extracted from the retail price, along with the distributor/retailer’s portion, and the printing cost itself. Whatever is left is the “profit” from the book. The amount of “profit” that the author receives depends upon the self-publisher you’ve chosen, and varies from 20% – 100%. Outskirts Press is one of the few self-publishers that pays 100% of the profit to the author.

To publish your masterpiece with the A+ rated and #1-rated self-publishing company according to the Better Business Bureau and Top Consumer Reviews, respectively, visit Outskirts Press today.

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