Of course book prices reflect a lot more than the cost of physically producing a book. We'll look as some of the sheer craziness in the business later.
In the meantime you have to ask why, if book prices are so inflated, someone doesn't come along and publish books for something closer to the actual production costs? That is what is supposed to happen in a free market, right? The cost of goods should shrink toward the cost of production.
In a word: Distribution. Conventional publishers have a lock on distribution through conventional channels. You either play by their rules or you face a long, hard road with little chance of success.
A modern publisher of the conventional sort today really owns only one thing and that is a distribution network. Almost all of them sold off their presses years ago because of the cost of running them, they may or may not own their own warehouses, most of their low level editorial work is probably farmed out. What's left is essentially a few key editors and such and a network which is specialized in getting books into conventional book stores or the paperback rack at your local supermarket.
The key part of that distribution operation are the sales reps who constantly visit bookstores, buyers, wholesalers, etc. to convince them to stock their publisher's books. (I say "stock" because typically publishers offer book sellers a return policy. If the book doesn't sell it goes back to the publisher for credit.
The big publishers have very large distribution networks and the little publishers usually work a deal with one of the biggies to have them distribute their books. For example Baen books has such an arrangement with Simon and Schuster (or did -- since Jim Baen died I don't have an inside source on the industry.)
Of course the little guy who's trying to do it without a big publisher is basically screwed. No matter how hard he or she (girls can be guys these days) the self-published author simply can't get the reach to get a book into bookstores. In fact most booksellers hate to see self-published authors at all, deeming them a nuisance.
It is this lock on the distribution channel that keeps conventional publishers in business. No distribution, no sales, at least under the conventional model.
Which is where e-publishing breaks the cycle.
E-publishing allows authors to avoid the big publishers and their distribution networks altogether. There's still often a big company, like Amazon, involved, but they're acting as a bookseller more than a publisher. In e-publishing the jobs like editing, which are done by conventional publishers, are the responsibility of the author.
The thing that makes this work is that the distribution potential of e-publishers is literally world wide. Anyone with a computer can sign on to their web sites and order a book. In fact the distribution network of an e-publisher is bigger than the network of any conventional publisher. It also bypasses the conventional bookseller entirely and goes direct to the customer.
In effect it's disintermediation at work because the supply chain reduces to three: The author, the e-publisher and the bookseller. What's even better is that because the cost of producing an e-book is so low for the e-publisher the e-publisher doesn't have to act as a gatekeeper. There is little or no barrier between the author and the customer.
The result is, if you want to write a book, you can easily and cheaply e-publish it. Of course you can also e-publish it no matter how bad, illiterate or just plain wacko the book is. This leads to the conventional publisher's claim that e-books are all crap.
There's enough truth in that to make it sting badly. That's why it's going to be the topic of the next post in this series.