Book Cost Analysis – Cost of Physical Book Publishing

The controversy over Kindle Edition book prices brings up the question of what physical books actually cost and what elements ought to be improved and/or eliminated when it comes to Kindle Editions.

In particular –

  1. We really need a listing of the costs involved in producing and selling a physical book.  This post covers that.
  2. It would also be good to know what creating, distributing and selling Kindle Edition books costs, and how these costs interact/overlap/stack with the costs of producing a physical book. That’s something we’ll look at soon (although not in this post).

First, let’s look at –

A Simple Model of Book Costs and an Example

The very simple break-up is –

  1. Author – Creation. 8-15% Royalties. 
  2. Publisher – Being the Curator, Polishing, Manufacturing, Marketing. 45-55% (includes Author’s Royalties).  Note that Printing accounts for just 10% of the book price.
  3. Distributor – 10%. 
  4. Retailers – 40%. 
  5. Consumers. Just the paying part 😉

An example found at BookFinder states a cost break-up that closely matched what my research turned up –

  1. Book Retail Price: $27.95.  
  2. Retailer (discount, staffing, rent, etc.) – $12.58.  That’s 45%.
  3. Author Royalties – $4.19. Exactly 15%.
  4. Wholesaler – $2.80. Exactly 10%.
  5. Pre-production (Publisher) – $3.55. That’s 12.7%.
  6. Printing (Publisher) – $2.83. Translates to 10.125%.
  7. Marketing (Publisher) – $2.  That’s approximately 7.15%.

Note that the 3 Publisher Costs add up to approximately 30%. There doesn’t seem to be an entry called Publisher Profit.

Detailed Analysis of Cost of Book Publishing

The most helpful sources for figuring this out were –

  1. TeleRead’s Calculating a Fair Price for Ebooks post and discussion. 
  2. WriterBeat’s Profit and Loss Analysis Post
  3. Salon’s post on Why Books Cost So Much.

There are a ton of different sites that had valuable information and if there is information from your site without an attribute please leave a comment and I’ll add a link.

Let’s look at all the stages of a book’s creation, distribution and sales, and the costs at each stage. For simplicity we’ll look at a typical book published by a Large Publishing House –

Creating the Raw Book

Owner: Author.

Cut: Advance + Royalties of 8-15%.


  1. Author’s time and effort. 
  2. Agent. For Large Publishing Houses this is usually a pre-requisite. 
  3. Publicist (if employed).
  4. Marketing Costs (If author does marketing  in addition to publisher).

Notes: Advance and Royalties work in this way –

  1. Authors get an Advance. After book sales have covered the advance they get royalties.
  2. Royalties are usually 8% for the first 100,000 books and 10% after that.
  3. Successful authors, well known authors etc. get 15%.  
  4. Agents usually work for a percentage of author’s earnings. Its possible to get a lawyer (instead of an agent) at an hourly rate to negotiate your rights etc. with a Publisher.

Book Screening and Acquisition – Picking a Book to Publish and getting Book Rights

Owner: Publishing House Editor and Chief Editor.

Cut: Falls under Publisher’s Cut, which is 45% to 55%. This includes the Author’s Royalties.


  1. Staff Costs of sifting through books – Editors, Chief Editors.  
  2. Staff Costs after a book has been selected and a deal is being negotiated – Editors and Executives.
  3. Lawyer Costs (when applicable) for signing agreements and securing copyright on books.
  4. Advance to Author.


  1. The number of manuscripts (solicited and unsolicited) that publishers go through is huge.
  2. Book royalties have to initially cover the author’s advance – Authors get paid royalties on additional book sales only.  
  3. Most books are not successful and publishers do not earn back the advance (not to mention other costs of publishing them). Authors get to keep the advance even for failed books.  
  4. As opposed to the Kindle Store where there is little cost to add a book, every book that is published is a non-trivial investment of time and money.

Successful Books Subsidizing Failures

Owner: Publisher

Cut: Included in Publisher’s Cut.


  1. ‘Tax’ winning books must pay to make up for failures.


  1. A book’s cost, or to be more precise, the Publisher’s Cut, includes a multiplier to account for this ‘subsidy’ that successful books must pay.
  2. Consider the Venture Capitalist investment model. For every 10 investments, they make back money on 2, lose money on 7, and 1 is a runaway success that pays for the failures and makes them money.
  3. Publishers have a similar model and every book they acquire might be the ‘runaway success’ that supports 7 (or more) losers. This is factored into the publisher’s cut.

Finishing the Book

Owner: Publisher (working with the Author).

Cut: Included in Publisher’s Cut and Author’s Advance/Royalties.


  1. Editing.
  2. CopyEditing.
  3. Proof Reading.
  4. Cover Art.
  5. Illustrations.
  6. Book Design including Cover Design, Font, Spacing, etc.
  7. Book Jacket and Inside Jacket.
  8. Getting Blurbs and Reviews from successful authors etc. This includes the cost of sending out galley copies to these authors.
  9. Cost of getting an ISBN.  
  10. Staff Costs – All the editors, artists, and everyone else.
  11. Staff Costs – Loads of support staff including Contract Manager, Arts Director, Royalties Manager, Sales Manager, Production Editor, Rights Manager.


  1. It was interesting to see that there’s so much that goes into taking an acquired manuscript and creating a finished book.
  2. There are a lot people involved and lots of managers and executives.
  3. Large Publishers have in-house printing presses. So the next stage is all-Publisher.  

Printing the Book

Owner: Publisher

Cut: Included in Publisher’s Cut


  1. Paper. 
  2. Ink.
  3. Scheduling Costs (for the printing presses).
  4. Setting up Plates for printing. 
  5. Press Time.
  6. Binding.


  1. Printing costs vary according to type of paper, type of cover, number of pages, etc.
  2. Number of pages varies according to the book and its formatting – spacing, font, etc.
  3. After books are printed, they usually have to be stored in a warehouse, packed and shipped to a distributor. These costs are sometimes covered by publishers. 
  4. For larger print runs, the cost of printing a book comes to just 10% of a book’s price. So the perception that ebooks should be a lot cheaper than physical books because there’s no printing or binding is inaccurate.  

Book Distribution

Owner: Distributor

Cut: Distributor usually gets 10% when dealing with Large Publishers.


  1. Getting the books from publishers (sometimes covered by Publisher).
  2. Warehousing the Books.  
  3. Packing and Picking Fees.
  4. Shipping Costs to get books to all the retail locations.
  5. Working with all sorts of book retailers.
  6. Printing Catalogues for retailers to choose books.


  1. Baker & Taylor is one of the main distributors – its the main distributor to Libraries, and also a big distributor to Retailers.
  2. Ingram is the other huge distributor and describes itself as the largest middleman in the market.
  3. Distributors take a HUGE cut from smaller publishers and self published authors (40%-60%). Not sure why it’s just 10% from larger publishers. 

Book Retailing

Owner: Retailers

Cut: Varies. Around 40% for book-stores, up to 60% for general retailers.


  1. Warehouse. 
  2. Inventory.
  3. Staff.
  4. Marketing the Store.
  5. Building Cost or Rent, Taxes, etc.
  6. Electricity, Phone, Internet, etc. 


  1. Book Sales oriented Retailers are claimed to get a 40% cut.  General retailers (like WalMart etc.) supposedly take up to 60%.
  2. The rumored market share for books retail is Amazon 8% of the market, 2%, Barnes & Noble and Dalton combo – some portion of 25%, Borders/Walden – remaining portion of 25%, Independents 5%, Libraries 10%, etc. 
  3. Harlequin has tie-ups with grocery stores and drug stores so Ingram etc. talk with Harlequin too.
  4. WalMart, Sam’s Club, and Target are the other major retail outlets – since they sell other items too, they get a larger cut so books can compete with music and clothes for shelf space.

Book Marketing

Owner: Publisher.

Cut: Included in Publisher’s Cut.


  1. Publicity (in addition to Author’s Publicist). 
  2. Galley Copies for reviewers.
  3. Marketing Staff for the Publisher.
  4. Sales Staff for the Publisher. 
  5. Print Catalogues. 
  6. Ads.
  7. Author Book Tours.
  8. Getting Shelf Space, coop (money to retail outlets for advertising) and incremental coop.
  9. Printing Ads and Flyers for distributors etc. 


  1. One huge advantage of going with a Large Publisher (along-side the reputation/credibility) is the amount of marketing muscle and know-how they can bring. 
  2. Publishers have to decide what books to support with a marketing push, and their analysis of your book’s likelihood of success factors in heavily. 
  3. Without getting a Large Publisher, or giving a distributor like Ingram a large cut, it’s almost impossible to get Shelf Space in stores. 

Book Returns

Owner: Publisher

Cut: Comes out of Publisher’s Cut.


You make no money on a returned book. In addition there are –

  1. Shipping costs.  
  2. Warehouse Costs.
  3. Staff Costs for handling these returned books. 


  1. Returned books have to either be sold at outlet stores (at lower prices and sometimes at a loss) or destroyed. There were two different statistics here, which might or might not make sense together. The first is that 20% of shipped books are returned. 
  2. The second is that only 1 out of 3 paperback copies sells, and the remaining are either sent to outlet stores, remaindered (i.e. destroyed) or returned. 
  3. Books sold at outlets usually incur losses. Books that are remaindered/destroyed obviously incur losses.
  4. These losses have to be covered by the earnings from books that are sold.  

Customer’s Acquisition Costs

Owner: Reader/Customer.

Price Paid: Book Cost, and some expenses in addition to book cost.


  1. Book Cost.
  2. Time to find and get book.
  3. Driving to the Store.
  4. Taxes on the book.
  5. Reading Means – For a physical book this is free.


  1. This factor is not considered much. However cost to end customer becomes important when we start comparing brick and mortar stores with online stores, and physical books with Kindle Edition Books.
  2. Customer Convenience will become increasingly important as technology makes other purchases faster and easier.

5 Thoughts about Physical Book Publishing

  1. There are a lot more stages and costs than anyone would imagine. This convoluted process can be optimized in innumerable ways – Mr. Bezos would be hard pressed to find a more ‘improvable/kaizenable’ business model.
  2. Everyone who works for publishing companies claims that there is little money to be made and everyone does it for the love of it. Not sure if this is a function of profits not being shared with employees or there simply are no profits.     
  3. There is huge consolidation of power –
    10 or so publishers and 2 or so distributors seem to have cornered the market. While retail outlets are more spread out, the majority of retail is again owned by giants. The trifecta of publisher-distributor-retailer controls the market and each gets a large cut.  

  4. The number of people employed is staggering. A bail-out for Publishing doesn’t seem as crazy an idea.
  5. Looking at optimization opportunities, a few jumped out immediately –

    * Moving away from physical objects – The number of times a physical book is shipped, handled, stored, warehoused, inventoried is ridiculously high.   

    * Book Successes having to pay for Failures – The Internet allows for crowd intelligence, faster feedback, and a lot of other means to reduce the number and cost of failures.

    * Book Returns – Every 4 copies of a book that are sold have to pay for the 1 copy that has to be returned (not to mention the returned book’s shipping, warehousing costs).

    * Amount of Manual Labor – There are a TON of people involved in the book creation, distribution, and sales process.

    * The fact that a book takes 16-18 months after being acquired to get to stores.

My main closing thought is that Kindle Edition books and Kindle DTP are going to destroy the current model of publishing. In the ruins of the old model there will be a huge number of opportunities (such as selling customizable book covers and cover design services). Amazon and the Kindle will basically replace the publisher-distributor-retailer trifecta.

63 thoughts on “Book Cost Analysis – Cost of Physical Book Publishing”

  1. A couple of qualms from someone who has been in publishing finance for 18 years:

    I think you’ll find that very, very few publishers own their own printing presses.

    The royalty rates you quoted are for mass market fiction. I’m sure you’re aware that this is a very small fraction of the total publishing pie. Rates in other segments vary from a low of 7.5% of net to a high of 15% of list. Breakpoints (the point at which royalty rates shift from one rate to the next) also vary, but outside of mass market, the most common ones are at 5,000 copies and 10,000 copies.

    Return rates vary with segment. For scientific, technical and professional books, you’re likely to see 10%. For mass market, you’ll see something more like 40 to 50%. And in mass market paperbacks only, you don’t actually get books back: you get the front covers.

    Improvable processes: Good luck with that. We’ve had some pretty bright folks trying for centuries. You see, most of the kaizen techniques work on things that are more uniform than book production. If you think the steps you’ve found are complicated — just wait until you start talking details with a text designer or compositor!

    I can answer the profit sharing/no profits question with another: why do you think that all the conglomerates who buy publishers back off and bail out? [Answer: Because, even in the large houses with the biggest economies of scale, and the best chance of getting the blockbusters, there is very little money to be made. The gallows humor in a publishers’ finance department is very real, and very black (when it’s not red!). ]

    Other than that, you’re more or less on the money. (Sorry, I couldn’t resist!)

    1. Relatively speaking, yes very few publishers own their own presses. But I’ve found that usually depends on their size. I don’t know of too many significantly sized publishers who don’t either own a press or their patent company has another corporate offshoot that does printing. I worked for a couple pubs who had the latter kind of deal, and boy did they pad the printing bill. I suspect it’s one of those things where as long as the money is kept under the overall corporate umbrella, it didn’t really matter if one part of the company gouged another. In fact, I’m pretty sure it helped them by keeping down any % of net payouts and any objective-based bonuses for management by fluffing up expenses.

  2. Online retail of ebooks does, indeed, present an opportunity to fix the publishing mess. Print-on-Demand is the other half of that opportunity. Imagine a B&M store that houses 1-2 copies of a large number of physical books. The function of those physical copies are to help buyers make serendipitous finds by browsing, or to compare different books on a similar subject. Having made their choice, they could then purchase the ebook or have a copy printed on the premises. That cuts down on the shipping, handling, storage, and inventorying. The reduction in number of mass printings to be used for these sales purposes would help drive down the demand for and cost of printing. It still keeps the creative talent (cover artists, publicists, etc) employed.

  3. FYI – Regarding your notes under distribution, Baker & Taylor is not a distributor, they are a wholesaler. A distributor typically warehouses the entire print run of a book, and they in turn sell to wholesalers like B&T (who orders based on demand), as well as directly to retailers. A distributor gets 65%-70% off; a wholesaler gets 50% – 55% off. This is why your note #3 doesn’t make sense to you – you have merged two different channels into one.

    1. And I should have given you an example of a distributor, so you will see what I mean. National Book Network aka NBN.

      1. You make an excellent point by distinguishing between the distributor and the wholesaler. The two terms are *not* interchangeable. Thanks for delineating the two.

  4. And what about educational books? Like books for students? I’m searching for information about this like crazy. I started asking publishers in the Netherlands for numbers but no one is willing to give me any information. Is there a difference with educational books or not?

    1. Jeroen – this industry loves to confuse and bewilder.
      Textbooks are a completely different beast. A picture from the National Association of College Stores (search nacs) shows the break-up.

      It might be biased though because its released by College Stores and they’ll probably want to depict themselves as saviors of college students.

      I’d say textbooks have a similar model as books, with some key differences, a few of which are –
      1) Supposedly textbooks cost $1 million or so to develop because they work with specialized topics.
      2) Textbooks of advanced courses that very few people will read supposedly cost more since there isn’t a large enough audience.
      3) Book Stores are a new type of retailer and have a lot of power.
      4) There’s a huge used textbooks market.
      5) Supposedly a lot of piracy of electronic textbooks goes on.

    1. What is ignored here is that the publishing industry is in turmoil at present and is not making a lot of money based upon the current printing model. Print, shipping, distributor fees all take a piece of the pie. Combine this with the fact that a VERY significant number of books are returned to the publisher and you find that the majority of revenue generated by publishers is lost in the process of dealing with the physical product. The cost of production:writer, editor, vetting process, layout, artwork etc. are unaffected by digital delivery. The promise of digital is to recover already dwindling profit, so if we expect to continue seeing books, or more appropriately, written stories, come to market, we should fully anticipate that prices for content will remain where they are. Maybe some *minor* reduction in consumer cost will be possible, but that will need to wait until the publishing industry can recover from it’s current dire circumstance.

  5. Oh, and by they way, the Kindle is too expensive for the majority of readers. If Amazon wants to see a more rapid integration, and the near term survival of the publishing industry, they need to rethink their pricing model. If they already plan to take a piece of the action, then there should be some room for taking a hit up front. This is a long term play, Mr. Bezos, don’t screw it up with greed.

  6. Bottom line on all of this is that an eBook would NEVER cost a publisher MORE than a paper book. So an eBook should ALWAYS cost less than a hard-back. And if they can make money on discounted paperbacks later on, an eBook should ALWAYS be a lower price than what they then sell the paperback for. In each of these cases the eBook will ALWAYS cost them less than what they are already providing. But in lots of cases, you’ll see a Kindle book going for the same price as a hard-back, and in many cases, more than the paperback. If they can get the money, great – but there shouldn’t be whining about not making any money. The eBook NEVER costs more to them than the paper book, and they should NEVER charge more than they do for that.

  7. Thanks for the analysis. I was wondering where and how you did your research. I also had the feeling that amazon’s market share in physical books was higher than the “rumored” 8%. Where did you hear those rumors, or do you think it has changed significantly since you wrote this post?

    1. Would have to search around again to be able to answer your second question.

      Went through an insane number of posts and comments. Perhaps 30 or 40. Some of them are attributed but some were just lost. Not sure about the 8% number.
      The post is basically just a bunch of educated guesses.

      1. Thanks for the quick reply… Just one more question. Could you disclose what book on bookfinders you were looking at?

        1. What book on bookfinders? Am at a loss here because the post is perhaps from 1.5 years ago. There have been over 1,000 posts since. Sorry but nothing comes to mind.

    1. #1 Was this research paid for and if so by whom. Ads for Kindle all over page.

      #2 Where are the locations of jobs created due to e-books?

      #3 What effect is this having on Public Libraries?

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  9. These are very astute and intelligent responses from some very smart people. Here’s a response from a simple book fan: I love books but my shelf space is limited and entirely filled with hard back editions. I have a Kindle and continue to read while enjoying the convenience of the e-book. However, I feel I am getting fleeced by Amazon. Example, the new Grisham book cost twenty-three cents less in the Kindle Store than the hard cover book costs. Amazon claims the publisher sets the price, however, this is hard to accept in today’s retail environment. I feel they (Amazon) are simple exploiting their captured market of Kindle readers by jacking up the cost of new e-books. This is the result of having zero competition; I can only by Kindle books from Amazon. My solution is to build more bookshelves!

  10. Hello AMAZON and the PUBLISHERS…we are not stupid!!! I have a Kindle (actually my 4th)…but I am dismayed by the escalating prices..conveniently tagged by Amazon as set by the publisher…Such GREED. I was and am willing to buy books when the ebook price is much less then published price..after all you are not printing, paying someone to print, distributing,etc. To see the price now at 12.99, 16.99, etc is nothing but SHEER GREED. I will not do this, I will wait for it in paperback at my used book store..for $4 or less. I was and am willing to pay 9.99 to get it early..but not to be taken advantage of…And I am avid reader…8-10 books/week. Your loss for upping the price and being so greedy. Doesn’t matter the platform.

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