Because publishing has historically had very high fixed costs (printing presses and distribution warehouses), the industry is threatened by lower-cost digital distribution. Simon & Schuster as well as Lagardere SCA’s Hachette Book Group have announced that they will not publish a ebook until four months after the hardcover, positioning the ebook in-between the hardcover and paperback editions.

Even as the retail price of many new hardcover novels creeps above $27, Amazon and Barnes & Noble boast many new best sellers for only $9.99 in the e-book format.

Increasingly, publishers have come to fear that the bargain prices will lead consumers to conclude that books are worth only $10, or less, upsetting the pricing model that has survived for decades.

[...]

For customers, the e-book savings are striking. Barnes & Noble sells the hardcover edition of Stephen King’s new thriller, “Under the Dome,” for $22.75, but the e-book edition is only $9.99, a 71% discount off the $35 cover price.

Retailers generally pay publishers half the hardcover list price of each book, which means retailers lose money on current best sellers discounted to $9.99 or lower. Some publishers worry that retailers will eventually insist on paying less.

via online.wsj.com

This latest artificially-imposed scarcity is ironic, given that publishers have successfully stymied the growth of the ebook market by removing the property rights associated with owning a printed book: it’s not possible to resell the ebook, it’s not possible to “gift” the ebook after reading it, it’s not possible to share the ebook with family members (except by sharing the reader itself). Some people dub this draconian DRM.

Responding to a tweet, Ian Soboroff notes: “it makes more economic sense to hold back the hardcover edition and release the e-book early. Let e-book sales drive the print run.” I’m guessing that Cory Doctorow and Chris Anderson might say something similar, if they respond to this WSJ article.

The Simon & Schuster business model cannot survive. The firm, owned by CBS, publishes 2,000 titles a year and employs 1,500. This means that on average each book’s revenue has to support not only the author but also one S&S employee’s salary and benefits as well as printing, distribution, promotion, advertising, overhead. It’s a business model that requires “hits” to survive; in 2007, S&S had 140 titles on the NY Times bestseller list.

Publishers have market power over retailers even though that industry is dominated by a handful of firms. This article implies that rewards programs like Barnes and Noble and discounts offered by online retailers like Amazon come at the expense of the retailer’s bottom-line, that the publisher can count on revenue equal to 50 percent of the cover price.

According to Robyn Jackson, a “successful” fiction book sells 5,000 copies; nonfiction, 7,500 copies. Only 1-in-5 American families bought or read a book “last year” and about 3-out-of-4 books published do not earn back the advance given the author.

No wonder the cover price keeps inching upwards.

See a list of the top publishers in the world by 2008 sales (Simon & Schuster is number 26).