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Publishing & pricing | Inside Publishing


Pricing - how it works

Chris Holifield 2017Pricing can be a fraught subject, as it is something which publishers like to control and regard as an integral part of selling the book. It is quite common for authors to find that their book is not priced as they think, or had expected, it would be. Even your editor will not have the final say on this, which will be the decision of the sales department.

It’s worth looking at pricing more closely, as it reveals quite a bit about how a book is marketed and sold, and may help to explain apparent – and perhaps worrying - inconsistencies.

The cost of production

There was a time when the price at which a book was sold bore a more obvious relationship to the cost of production than it does now. Publishers have always worked towards an ideal cost of goods as a percentage of the selling price, but this has been, and often still is, expressed as a mark-up. So typically they might work on a five (or six) times mark-up, meaning that the selling price in the shops would be five times the cost of production (i.e. print and paper).

Publishers’ margins

But, you may be wondering, why on earth does the publisher need to have such a high mark-up? No wonder books are so expensive! What you have to remember is that the publisher will typically get only about 50% of the cover price of a book from the wholesaler or chain of bookshops and perhaps as much as 60% from independent bookshops ordering directly. Out of that 50%, publishers have to cover:

  • the cost of acquisition, including royalty advances and write-offs
  • the cost of preparing the text (often including an index and sourcing or paying for any pictures)
  • editorial costs such as copy editing and proof-reading
  • any specific promotional costs
  • the sales department cost of keeping the sales force 'on the road' or at their desks
  • the royalty to the author
  • the cost of returned books
  • any stock write-offs
  • their own overheads

Margins in publishing are actually pretty tight.

Pricing down

What makes the whole pricing equation very much more complicated is that pricing is increasingly used as a sales tool to achieve volume sales. Thus, if a publishing house is launching a new fiction writer, it may well feel that the book will get its best chance if it is priced well below the average price for a hardback book of that size and in that format. £14.99 (or $25.95) might still be considered an average price for a shorter novel, and £15.99, £16.99 and £17.99 ($26.95, $27.95 and $28.95) novels can all be found on the shelves in a way that they would not have been a few years ago.

The publisher might well decide to price that £14.99 ($25.95) first novel at £12.99 ($19.95), or even £9.99 (the lowest in the US seems to be $19.95) to persuade book buyers to try out a new author. The sales logic is impeccable – what the author’s career needs is for their book to be bought and read on as large a scale as possible to launch them and establish their name for the future.

The effect of discounting

The problem with all this is that the book trade is also very keen on discounting, so there is pressure for the publisher to supply the ‘big’ book at a special discount so that the bookshop can discount it, from £9.99 to £7.99, from £12.99 to £9.99 and from £14.99 to £11.99, with dollar equivalents.

On more established bestselling authors there is even more pressure to fund a hefty discount, as these are the books which bring a wider cross-section of book-buyers into bookshops in search of their favourite authors and also sell well to ‘light’ book-buyers in supermarkets and discount stores. But these are of course the very authors who will have been paid a big advance, possibly creating a major unearned figure, and whose royalty rate will be at the very top end of the scale – 15% or even 17.5% on hardback sales.

The battle for market share

So what the intense competition in both publishing and bookselling has created is a fixation on market share which directly affects publishers’ margins and booksellers’ discounts. The bestsellers are by definition the very books which are guaranteed to sell in large quantities, the ‘bankers’. The publisher is determined to give their big authors, whether new or established, the greatest possible price advantage. The bookseller needs to discount bestsellers heavily to make sure they are not undercut by the competition. The independent booksellers simply cannot compete, as they cannot get a high enough discount from publishers to match the chains’ discounts to their customers.

Both publishers and booksellers are thus pricing down and discounting heavily the very books which would in the past have brought home the bacon and helped, in effect, to subsidise the rest of the list.

Other kinds of publishing

It’s a relief to be able to report that many other areas of publishing have managed to escape this particular general publishing discount trap. Niche publishers of all kinds and academic publishers in general are able to price their books according to what the market will bear. Their reasoning is that the market for their books is a committed one – book-buyers need or want a particular book – so they can safely price up and print a smaller quantity, with a reasonable chance of the book being profitable.

It is only general or ‘trade’ publishing which treats books as commodities, with all the pressures and risks that involves. But, even outside the mainstream general publishing areas, don’t expect your publisher to price your book according to your expectations or even preferences. They are likely to feel that their expertise comes into play on this and that they are best placed to come up with the right market price for the book.

Chris Holifield