Toward a New Distribution Paradigm for Startups and Self-Publishers

March 2011
by Jacqueline Church Simonds

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For many years, the book business has pretty much been structured in one way: You print books in the thousands, and you employ a distributor to sell the books to the trade, warehouse the books, and accept at least 20 percent of them back as returns. This is a hard model for startups or self-publishers to sustain on the typical shoestring budget. Many try, and many fail because of the dollars involved.

Recent changes in printing and distribution programs have made it easier for startups and self-publishers to get on the playing field. That’s not to say there’s actual parity. But there is the possibility that a self-publisher or startup can gain access to bookstore shelves in the same way bigger publishers do.

Some cost comparisons help make this point. What follows shows the costs involved in the traditional method of offset printing and distributing, and then shows how a smart publisher can benefit by using Lightning Source International or Amazon’s CreateSpace.

To compare prices, I bid out a 250-page, 5″× 8″, text-only trade paperback with four-color cover and got quotes from an offset print company and from LSI. I took numbers for CreateSpace from its Web site calculator.

Using Offset

Imagine a savvy self-publisher who knows that the more books one prints, the lower the price per book (aka the unit cost), and who prints 3,000 trade paperbacks using the traditional ink-on-paper method referred to as offset printing.

This represents a substantial upfront investment—possibly more than $5,818 for a 250-page, text-only 5″× 8″ book. And that’s not counting development costs (editing, book design, typesetting, and the rest).

Those books are produced, put in cartons, stacked on pallets, and sent to the publisher or—in many cases—directly to the publisher’s distributor. The shipping alone rings up at $500 and more on the cash register because of distance and on-site delivery costs. So with printing and shipping, the book costs $2.11 per copy, or $6,318, to print and ship (still not counting development costs).

Traditionally, many startups and self-publishers rely on distributors for access to the book trade. The distributor—which sells books to wholesalers, libraries, bookstores, e-stores, and book jobbers of all types—warehouses the books, keeps track of inventory, picks/packs/ships/invoices the buyer, does the accounting for the publisher, and accepts returns as they come in. For these services, the distributor gets up to a 70 percent discount off the list price plus some extra fees (with the exact terms depending on the distributor as well as on negotiation). The distributor also carries the book(s) in its catalog, features titles on its Web site, represents them at trade shows, and presents them to book wholesalers and retailers, while marketing remains the publisher’s responsibility.

That 70 percent figure makes it look as though the distributor is getting a great deal of money. It isn’t. Here’s a typical breakdown of that discount:

• 15 percent to the wholesaler (Ingram, Baker & Taylor, Follett, and/or many others)

• 40 percent to the bookstore (which is why bookstores are failing; most retailers buy goods at a

50–80 percent discount)

• 15 percent to the distributor

So the publisher’s wonderful book, which retails at $16.95, is discounted down to $5.08 (paid 90–180 days after the sale). Subtracting the printing costs, the publisher gets $2.97 per book.

Think that sales will fund your marketing program? As you can see, you have another think coming. So many Beagle Bay clients—even well-funded ones—eventually give up on publishing because they cannot overcome the negative impact of startup costs, slow pay, warehousing and management fees, and returns. These factors often erode any meager profit, especially when marketing costs are factored in (even with low-cost guerrilla marketing techniques).

Using Digital Printing

Recent changes in the way that Ingram is dealing with its in-house digital/print-on-demand printer, Lightning Source International, have turned the old way of doing things upside down, especially for startups and self-publishers.

Here’s how this new alternative works:

Using digital print technology, which entails fewer steps in the production process, Lightning Source International (LSI) can make just one book, or a thousand or thousands (although when the count goes over 500, costs are comparable to offset costs, and for quantities of 1,000 or more, offset costs per unit easily beat digital print unit cost).

Often referred to as Print on Demand or POD because the technology can be used to print books only to fill orders, digital printing need not involve any cartons and pallets of books that need warehousing. Especially when a publisher chooses to have LSI distribute a book via LSI’s owner—Ingram, the United States’ largest book wholesaler—that book becomes available to the same wholesalers, libraries, bookstores, and online stores as it would via a distributor—at a discount of only 55 percent.

And you incur no cost besides the setup and proof fees until a book has a buyer, except when you order books for your own use (as ARCs and review copies, perhaps). Accountants tell small businesses all the time to be mindful of the carrying costs of goods. Having 3,000 books in a warehouse not only incurs a monthly storage fee (and other fees) but locks that money up in the books themselves until such time as they are sold. It’s money that could be spent on marketing and perhaps on developing other books in your line.

This ability to order just a small number of books, or produce books only when they’ve been ordered, gives a small press better monetary flexibility.

It’s true that LSI has a higher price per book. Our 250-page, text-only 5″× 8″ title is going to cost about $4.65 per copy to print. But there is no shipping charge for fulfilling an order (LSI does charge to ship to the publisher) and no charge to ship from printer to a distributor’s warehouse, as in the offset model. Also, remember, the discount is 55 percent, not the 70 percent a distributor would demand.

That means your $16.95 book is going to yield you $7.63; subtract printing costs of $4.65, and you get $2.98—slightly higher than the comparable net with offset printing, and you have no monthly recurring warehouse charges.

The Amazon Alternative

Not to be outdone, Amazon, through its CreateSpace printing arm, has a way for you to print and distribute. If you buy into its ProPlan program (for an initial fee of $39.95 and $5 annually per title), your book will be available not only on Amazon, but to the same wholesalers, libraries, and retailers as LSI/Ingram serves (so Amazon says, at any rate; I don’t know anyone who has sold a book to an outside store from CreateSpace, but this may be due to my limited acquaintance with the program).

In this model, a “royalty” plan determines what you make on the book, which is calculated after discounts and printing costs.

It’s very important to note Amazon’s own warning about the outside distribution program: It farms printing out to third parties, so there will be variations in print quality for both interior and cover.

Our 250-page book costs $3.85 to produce in the ProPlan. For sales outside Amazon, the royalty paid would be $2.93, close to what you’d get from LSI, but the discount looks to be about 60 percent. For straight Amazon sales, the royalty would be $6.32. For sales via Amazon’s e-store, it would be $9.71 (the e-store is a dedicated CreateSpace Web site, and I wonder whether anyone goes there who isn’t using it to sell). Whatever the amount, the money is paid directly into your checking account monthly—no holds for future returns as with LSI (although returns during a given month will affect the payment for that month).

For some, this might look like a great deal—especially in terms of the direct sales to Amazon. But use caution. In 11 years of dealing with this vendor, I’ve come to understand it has no love for small fry. Caveat emptor.

CreateSpace also offers a sort of plain-Jane plan with no distribution outside Amazon’s proprietary sites. Its printing cost is quite a bit higher—$6.60 per unit in our example. And royalties are lower: $3.67 on Amazon and $7.06 on the CreateSpace site.

An alternative to selling only through Amazon might be producing the book via Lighting Source International but not using its distribution service and, instead, setting the book’s discount at 20 percent. The title might be picked up by a library as the result of a search, and it will be picked up by Amazon. But Amazon will not offer it at a favorable discount, because the discount it’s getting is low.

Remember that Amazon buyers are very discount driven. The regular discount Amazon offers on most books is 30 percent (because it gets at least 40 percent). Also remember that many prospective buyers will compare your book with others in its category and go with the cheaper one, not to mention the brand-name author if a competing title is penned by someone the buyer has heard of. So be mindful of your business plan when choosing this method.

The New Paradigm

In my opinion, printing via LSI and opting-in to its distribution contract makes the best sense for startups and self-publishers, because this provides the best digital-print per-unit price and the broadest access into the book trade.

This printing and distribution method also helps solve a problem that self-publishers and startup presses typically face. Invariably, fantasy creeps into a beginning publisher’s marketing plan, and sales projections are based more on wishes than on facts. Once a traditionally printed and distributed book comes out, 3,000 copies are all too likely to gather dust while the newbie publisher tries to figure out how to get them to sell. This recipe for disaster can sink even the best book, but with digital printing, the effects can be less than fatal.

And if the book succeeds? Then you can easily change to an offset run—and approach distributors with evidence that the book does sell—to take advantage of the demand. I suggest that you look at offset printing and traditional distribution if a book sells 500 copies in a three-month period. Yes, you’ll be making less per book with offset than you did with the LSI option, but you’ll make up for that in volume—just as bigger publishers generally do.

Jacqueline Church Simonds is a publishing consultant/book shepherd specializing in startup presses. She is the co-owner of Beagle Bay, Inc., an award-winning publisher and distributor of small press titles. She is also the author of “The New Self-Publisher’s FAQ,” found at creativemindspress.com/newbiefaq.

 

 

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