P&L 4 of 4: The Future

In Tuesday's comments, PatriciaW asked about the role e-books currently/will play in the acquisition P&L. A felicitous question indeed, as we are now about to once more explore... THE WORLD OF TOMORROW™. (You'd think I'd make a lot more money with all the trademarks I apparently own.)

Currently, the ratio of e-books sold to printed books is around 5%, meaning it'll probably be a few years before e-books come to dominate the book market (which, admittedly, may never happen, but I expect it will). For this reason, e-book sales don't really figure into the acquisition P&L yet (at least, not as far as I've seen). The sales numbers just aren't significant enough.

But let's imagine the ratio were much higher—say, for every three printed books sold, two e-books were sold—which would mean a print run of 15,000 would also have to take into account an additional 10,000 e-book sales (instead of today's 750). That's a significant difference, and I imagine P&L analyses in THE WORLD OF TOMORROW™ will contain an additional field used to calculate projected e-book sales (based on historical data for that author/genre/&c).

As time goes by, however, I imagine another force will affect the e-book P&L, and that will be consumer demand to lower price point. Since many of the costs associated with traditional book publishing—printing/paper/binding, typesetting, returns, freight—don't apply to e-books, I think the average price publishers will be able to charge per book will drop significantly once the e-book reading market has reached critical mass. It'll eventually creep back up due to inflation, but if e-piracy becomes a major issue, people will be faced with either buying an e-book or simply taking it. As I've said before, I think we humans are decent to a point: we'll pay for something if we think it's worth it, otherwise, we'll either forgo the purchase or take whatever it is we want for free. With the presumed widespread availability of pirated books on the Internet in THE WORLD OF TOMORROW™, I imagine taking books will be sorely tempting unless you could skip the guilt and get said books legitimately for a reasonable price.

These are just my own speculations, but I foresee the P&L changing in the following ways over the next decade or so:

• The P&L will eventually principally consider e-book sales, taking POD sales into account for smaller titles and smaller (by today's standards) traditional print runs for books by major (i.e. bestselling, celebrity) authors.
• A shift from front-loaded advances and relatively small royalties to lower advances and higher royalties, as returns will no longer be as much of an issue.
• Costs not associated with e-books will be considered less and less, unless said costs (typesetting, printing, freight, &c) make a paper version of a book prohibitively expensive, in which case they will be important insofar as they determine whether or not a physical book is published at all.
• Profit margin will temporarily increase while costs decrease and price points stay high, but as price points are driven downward by consumer resistance, profit margin will normalize.

What do you think?