Putting a Price on Words

The Cost and the Value of the Things We Write

“The cynic knows the price of everything and the value of nothing.”
—Oscar Wilde

Cost is a funny word. It can mean:

• The amount of money that you pay in exchange for something: “The ticket costs five dollars.” But also,

• A loss you incur in the process of gaining something: “Her promotion came at the cost of her work friends.” And don’t forget about,

• Opportunity cost, the loss of a potential gain that occurs when you make a decision: “When I spend three hours writing Shelf Life, the opportunity cost is the three-hour nap that didn’t happen.”

Some other words will come into play today so I want to define them carefully right up front. To wit:

• Value. The worth, utility, or importance of something. A consumer compares value with price (among other considerations) to make a purchasing decision.

• Price. Pretty much the same as cost, but for the sake of this article I will use price specifically to mean the monetary cost of something you buy. What’s on the price tag.

• Customer. The person who makes the decision to buy a book. Sometimes this is the end user (person who reads the book)—but you can’t conflate these roles. The customer and the end user are not always the same person.

Today’s article is all about what goes into pricing a book and includes some thoughts on pricing your own book if you’re thinking about self-publishing, how word-work is measured and paid, and the value you get for your money when you buy writing.

Full disclosure: You were going to get a completely different article today but I just got out of the shower and while I was washing my hair I got to thinking about book pricing and book costs. What they cost the consumer, what they cost the creator, what they cost the publisher—anyway, now you get this instead. That’s the editorial process in real time. Shelf-Life-or-Shelf-Death decision making.

Bennets and Swans

How do you determine a fair price for words? For the words you write, for the words that are your work, for the words you consume? How much of the price is based on the value of the words? And what other considerations go into the pricing besides the value of the words?

Here are some things to start you thinking:

• Daily Science Fiction, an online-only sci-fi magazine, pays $0.08 per word for stories to publish.

• The Sun pays up to $2000 for a short story, and they’ll consider short stories up to 7,000 words; there’s potential, then, to earn about $0.28 per word.

• A client used to pay me $0.008 per word that I copyedited for them.

• That client also paid $0.0025 per word for proofreading.

• Pride and Prejudice, by Jane Austen, clocks in around 120,000 words.

  • You can buy the Penguin Classics paperback edition at Target for $8.99, or less than $0.001 per word.

  • You can also get it for your Kindle for less than $1 at the Large Internet Book Retailer™.

  • You can get the text electronically for free, because it is in the public domain.

• Twilight, by Stephenie Meyer, is almost exactly as long as Pride and Prejudice (119,000 words) and the paperback editions cost about the same amount.

  • You can get Twilight for your Kindle for $10.99 at the Large Internet Book Retailer™.

• A textbook that comes in at 120,000 words, on the other hand, will be considerably more expensive than Pride and Prejudice and Twilight put together.

• The seven-installment Harry Potter series contains about 1,084,625 words and has generated approximately $7.2 billion in revenue—more than $6,500 per word.

All that might raise some questions in your mind, like:

• Twilight and Pride and Prejudice have similar prices but do they offer similar value?

• Why is a textbook so much more expensive than a novel for the same quantity of content?

• Why are people still paying for Pride and Prejudice electronically when it’s available for free?

• Why is Twilight on Kindle more expensive than the paperback, when the Kindle edition doesn’t have to be manufactured or shipped?

• Why did we give J.K. Rowling so much of our money and can we get a refund?

Loose-Leaf Textbook Thought Experiment

Ever seen a loose-leaf textbook for sale in a university bookstore? If you haven’t bought any textbooks in the last ten or fifteen years you probably haven’t. They’re becoming more and more prevalent. If you haven’t seen one, try to picture this: The pages of the textbook are not bound together and they have three holes along the left margin so that the student can place them in a three-ring binder (binder sold separately, of course). The pages are laid out the same way as a traditional textbook, four-color printed and lined with photos and illustrations. They look just like normal textbook pages. There’s just no binding.

Does this make you think:

• “Wow, the publisher will cut any corner they can to make a higher profit.” Or perhaps,

• “This book cost less to manufacture, so maybe the publisher will pass some of those savings to me.”

Would it surprise you to know that a loose-leaf textbook costs more to manufacture than the exact same book with perfect binding?

A loose-leaf textbook needs to be printed, three-hole drilled, and then shrink wrapped. The three-hole drilling is handwork at the printing press. That means every copy of that textbook needs to be taken off the automated production line and handled by a human being for the drilling process—that’s an additional cost above printing a traditionally perfect- or casebound textbook.

Some of those drills won’t be right because you have a larger margin of error when humans are doing handwork. That means some percentage of stock will be lost during manufacturing, so more copies are printed up front than the publisher plans to sell. The printer doesn’t absorb the cost of that wastage; the publisher pays for it.

It costs the publisher more to create a loose-leaf textbook than a traditional textbook. But they can’t sell it at a higher price point because what they’re selling has less value. The publisher eats the additional manufacturing costs. Why would anyone ever do any of those things?

• The university bookstore won’t buy back that loose-leaf textbook at the end of the semester, because they can’t easily determine whether pages are missing. That copy never enters the used-book economy. The publisher sells more copies over time—many more—because the same copy can’t be bought more than once.

• The customer (who in this case is not the end user) perceives this book as being a lower-cost alternative to a traditional textbook. It’s not actually less expensive. It just seems less expensive to the person making the purchasing decision—for the same reasons you might have thought it was less expensive for the publisher to produce.

Most of you probably aren’t out there writing textbooks but this does come into play in the larger contemplation of how written content gets priced.

The Lifespan of a Book

So why do books cost what they cost? Publishers must want you to buy e-books, right? They make a killing on those, since they can charge the same that they charge for a paperback but they don’t take on any manufacturing, warehousing, or distribution costs. Why don’t they incentivize them somehow, like by making them cheaper than the paperback? And since the publisher pays most of the costs of publishing a book up front, any money they make on the book in subsequent fiscal years is profit, right?

When a publisher makes the decision to publish a book, they have a pretty good idea of:

• How much it will cost them to publish the book.

• How many editions of the book they will put out (eg, trade paperback, mass market paperback, hardcover, e-book).

• How many total copies the book is likely to sell in its lifetime if it neither hits the bestseller list nor flops.

With that information, the publisher sets the book price so that over the estimated lifetime sales of all the editions, the book will earn back the cost of publishing it and turn a profit. Does the e-book edition generate a larger profit than the paperback or the hardcover? No, not once you factor in higher author royalties and a large pie slice for Bezos. Believe it or not, the unit cost of paper, printing, binding, warehousing, and distributing a paperback is less than the cost of the e-book’s greater author royalties and additional cost to sell it at the Large Internet Book Retailer™. Printing a book is one of the cheapest components of its unit cost to produce.

All the money generated by all the editions of the book together, over the book’s expected lifetime, go into one pool of money generated by that title, and that’s what pays the expense of making all of those editions. The costs are amortized over the title’s selling life. That’s why:

• The hardcover traditionally comes out first, at a higher price point. True fans, libraries, reviewers, and early adopters won’t mind paying a premium to get access to the book right away. Although the hardcover costs slightly more to print in terms of materials and labor, the profit margin on it is usually a good deal higher than on the other editions.

• The paperback and the e-book have similar price points. A lot more paperback copies than hardcover copies will sell if the book takes off, but the revenue generated per unit is less. The paperback usually pays a lower royalty to the author than the e-book edition does, but the paperback has additional unit costs in terms of manufacturing and distribution so the publisher ends up with similar per-unit revenue for both these editions.

I mentioned lifetime sales, or a book’s lifetime, a couple of times. What is a book’s lifetime?

Most titles don’t keep on selling forever. Some books will never stop selling copies as long as someone is publishing them (eg, To Kill a Mockingbird by Harper Lee). Textbooks have a discrete lifespan compared to other books, and it’s easy to predict exactly how long they’ll sell for. The moment the 2nd edition publishes, the 1st edition dies. So a textbook has a selling life from when one edition comes out until the next edition comes out. Varies from discipline to discipline but this is usually just a few years. A novel, on the other hand (if it does not become a hit), will probably do most of its selling in the first months after it comes out, when it’s getting reviews and the marketing budget hasn’t yet run out. Once that initial burst of sales ends, it’ll still continue to sell some copies but the drop-off is sharp.

I’ll tell you the tale of the “long tail” another day.

When pricing a book your (unit price) times (expected number of lifetime units sold) must be enough to pay:

• The author who wrote the book.

• The literary agent who brokered the contract between author and publisher.

• All of the editorial, production, design, marketing, and sales personnel at the publishing company.

• All of the other personnel at the publishing company, like the accounts payable clerk and the mailroom gal.

• The overhead of the publishing company (rent, electricity, water, office supplies).

• All of the personnel at the printing press, and all of that company’s overhead and specialized equipment.

• The material costs of the book: Paper, obviously; but also ink, glue, stitching, cellophane.

• The cost of warehouse space and staff to store those books until and while they sell.

• The cost of distribution, not only in terms of gasoline but in terms of the specialized personnel who get in touch with the places that sell books, and find out how many units they want, and then get them those units.

• The cost of the retail workers at the Barnes & Noble where the book sits on a shelf waiting to be purchased and, indeed, the cost of the shelf it sits on.

Self-Publishing, Self-Pricing

If you self publish, you’ll cut some or most of those folks out of the process. That can give you more flexibility in pricing your book since you have fewer people to pay. You’ll also likely have a very hard time projecting out how many lifetime units your book will sell, so it’s tough to figure out how to price the book to earn back the money you put into it and make a bit of profit for your hard work.

Though you won’t be able to apply the same formula as a trad publisher—and you wouldn’t want to even if you could—there are still some important considerations for pricing your self published book.

• The price should be comparable to other books with similar characteristics to yours. For example, if you’re a first-time author self-publishing a 256-page romance novel, you should consider what other 256-page self-published romance novels from first-time authors are selling for.

• If you make the price too high, readers will not take a chance on your book. If your price is higher than your competition, you need to have a value proposition that is evident to even the most casual browser.

• If you set your price too low, readers will think that your book doesn’t have value. If you’re giving something away for free, some people will assume that you’re doing so because no one would pay for it. (I’m ever so glad you don’t feel that way about Shelf Life.)

• The price needs to build in the cost of returns if you’re allowing returns. What are returns, why do they cost you anything, and why would you allow them at all? That’s a long story for another day but, in short, if you offer a print edition and you make it returnable, plan for the possibility of having to buy back copies.

Whether you’re trad-published or self-published—or vanity- or hybrid-published, which are whole other things—there’s a tremendous amount of consideration and research that goes into pricing your written work. Pricing writing is an art and a science, and the first step to being able to do it well is to understand it.

TL;DR: Make sure you assess the value and the cost of the words you write before you put a price on them.

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