< back to full list of articles
A POD Case History:
The Nitty-Gritty of Costs and Sales Channels

or Article Tags

I recently signed up with Lightning Source for my first POD book, Start Your Own Computer Business. It’s a short book, only 168 pages, and each copy costs me $3.42 as a short run (one or more copies, shipped to the publisher) or $3.09 as sold into distribution (to Amazon or Ingram). While a copy could have cost less than a dollar from an offset printer in quantity, these sales into distribution are completely hands-off. I just cash the checks.

So why did I choose the POD route? Not to avoid the sunk costs of carrying inventory, though that doesn’t hurt. The three reasons I signed up with Lightning Source were: (1) Access to Ingram distribution, (2) short discounts, and (3) the savings on shipping and handling from not having to take delivery of books sold to Ingram and Amazon. Because barnes&noble.com and other retailers order from Ingram, the only books I handle are the direct retail sales I choose to make.

Between direct sales and distribution, I sold approximately 300 copies within the first four months.

Doing the Numbers with Discounts

The discount that Ingram normally requires from publishers is 55% of cover

price–assuming, of course, that you have enough titles in print for Ingram

to accept you. However, Ingram carries books from its Lightning Source subsidiary on a “short-discount” basis, allowing discounts as low as 25% (any lower and they’ll re-sticker the book with a higher price). While some booksellers will order a short-discount book for a customer only if they are paid up-front and while they may even impose a handling fee,my own experience indicates that bookstores are willing to order short-discount titles through the Ingram system, perhaps simply because it’s convenient.

Since shipping from Lightning Source to Ingram and Amazon costs me nothing,I felt I could do well with a 35% discount on my $14.95 cover price. This means that Lightning Source sells the book for $9.72, leaving me $6.63 when my cost of $3.09 per book is subtracted.

To make life interesting, I also sell copies to Amazon Marketplace shoppers for $13.95, and right off my website, using the PayPal service, for $11.95 plus $2.25 S&H. PayPal collects state sales tax for me and supports graded shipping options.

I earn 44% of the cover price on the hands-off wholesale orders through Lightning Source and 55% on the books I retail direct to customers.

 

An Offset Comparison

To print the same book using offset, I would have had to increase the page count to the nearest multiple of 8, namely 176. One cost estimate was:

Quantity 200 500 1,000 2,000 5,000 10,000
Price $5.26 $4.50 $2.60 $1.63 $1.04 $0.83

I worked these figures out online at the print broker Rjcom.com, which I’ve used before to publish quality offset books. It’s important to note that the prices don’t include expenses for shipping or fees.

To get the offset cost down to the POD cost, I would have had to print about 750 books, and I would have had to pay for delivery from the printer to me. From that point on, if I wanted to sell only via direct mail order, great. But if I wanted Ingram to carry the book, I would have had to give them the 55% discount AND accept returns, something very few Lightning Source publishers opt for.

Of course, accepting returns makes it more likely that a bookstore will order for stock, but returns are a killer, and the 55% off the $14.95 cover price means I would get paid $6.72 per book, but I would have to pay for shipping. So even if I gambled on a print run of 10,000 books, my maximum profit would be $5.89 per book ($6.72 -$0.83), minus returns, warehousing, shipping and packing materials, and the cost of money. And since Ingram and Amazon (via the Advantage program) have the habit of placing small orders with small publishers, I’d be lucky to clear $4 per book, not counting returns, and I’d need somewhere to keep the other 9,000+ for quite some time. In this context, that profit of $6.63 a book from Lightning Source starts looking pretty good.

 

On a Fast Track to Breakeven Point

My book’s basic costs were $600 for artwork, $500 for editing, $400 for book design. If you add in some basic business expenses, such as a new ISBN block at $225 for my POD imprint and the Lightning Source title setup fees, my sunk cost to set up as a POD publisher and produce this book came to around $2,000.

With a healthy $6+ profit per book, I needed to sell only 300 books to reach breakeven within four months. For the first couple of months of that period, I was letting visitors to my website read the whole book online for free, which understandably hurt sales. After some experimenting, I settled on posting the first couple of chapters plus small excerpts from the rest of the book as a compromise between attracting visitors and giving away the store. The only marketing for the title has been my Foner Books website–

www.fonerbooks.com–and word of mouth.

 

Leaving Lightning Source Aside

A fair POD comparison requires looking at alternatives to Lightning Source.

 

Many POD printers offer similar or better pricing on POD books than Lightning Source, but none that I’m aware of has the direct Ingram tie-in. Distributors who can get your book into Ingram even if you only have one title require a discount of roughly 60-70%, and often order and return large quantities of books, sometimes in poor condition. You can sign with Baker & Taylor and give them a short discount, but they don’t always order for stock, even with the trade discount, and I find their ordering system balky.

If you forgo getting a distributor, bookstores and distributors may come to you with any special orders they get for your book, and you can set pretty much whatever price and terms you want (e.g., 20% discount, prepay) but this doesn’t happen often.

Or you can try being a seller at Amazon or Half.com (Ebay’s book subsidiary). Amazon takes 99 cents per copy plus 15% of your sale price, or just the 15% if you pay a monthly shop fee, plus they give you a $2.25 shipping credit.

 

Where the Sales Are

The greatest surprise for me in publishing my first POD book was that most of my sales didn’t go direct to Amazon. They came through the Ingram distribution relationship. Customers walking into bookstores and requesting my book were usually able to get it in a few days, without any hassles, since most bookstores are set up with Ingram’s iPage ordering system.

I recommend that customers visiting my website order through their local bookstore, and I’ve had only one report of problems with getting the book. While the bookstores will charge them the $14.95 cover price, they save the $2.25 I charge for shipping and handling, and going through the bookstore saves both of us worrying about media mail shipping time.

Judging by my experience, POD has changed everything about the way books will be printed and distributed in the future. But it’s changed nothing about marketing. Books don’t sell themselves. You have to sell them.

Morris Rosenthal is the Founder and Co-moderator of the POD publishers group on Yahoo. To participate, visit http://www.fonerbooks.com/ and click on “POD Publishers FAQ” on the left side of the page.

 

Connect With Us

1020 Manhattan Beach Blvd., Suite 204 Manhattan Beach, CA 90266
P: 310-546-1818 F: 310-546-3939 E: info@IBPA-online.org
©2016 Independent Book Publishers Association

Visit Us On FacebookVisit Us On TwitterCheck Our FeedVisit Us On Linkedin