Profits, the bottom line, what is currently selling, what is hot, what is not are the kinds of things that publishers, and by extension editors, think about when they are deciding which products to publish.

Big print run paper publishers face a different equation than do print on demand and ebook publishers. The distinction between the two types of publishers and the differences in the equations that they use to determine the profit potential of a project is important for authors to understand because it plays a huge role in the what publishers are willing to take a chance on.

If you remember, when we talked about the way that we buy things, we talked about how manufacturers of old used to be largely limited to what they could sell in hundreds of thousands of small, local, markets. IF they could interest enough shopkeepers to stock their items then they could get those items in front of consumers who would presumably buy them. Then along came the Internet and more of the purchasing decisions and a greater share of the manufacturers revenue came from Internet purchases which were less local and more governed by what consumers wanted rather than by what shopkeepers stocked.

The same has really happened in the book publishing world. Years ago print publishers published books that they thought hundreds of thousands of small, local booksellers would stock and sell. Then super-sized bookstores came along and stores like Barnes & Noble and Borders (who today filed for bankruptcy) came along. The super stores with their larger stores and more shelf space were able to stock more titles on more subjects and over time began to squeeze out a lot of the smaller stores. As this happened publishers began to notice what was selling in the superstores and to pander more to that market. Then along came Amazon which lists hundreds of thousands more books on its virtual shelves than would fit on the real shelves at even the largest Barnes & Noble or Borders. It didn't happen immediately, but over time Amazon with its ability to stock everything (even things which might not sell in large numbers even in large local markets) began to take market share away from the large bookstores as well as the smaller bookstores.

This has proven to be a big problem for large print run publishers who rely on being able to sell large quantities of books. Most industry estimates suggest that a break even point for most large print run publishers is 5,000 books.

What this means to the publisher, and by extension to the author, is that a book which is written by a new author without an established following, a book that doesn't grasp a sizable audience is destined to lose money. What this means is that a large print run publisher is going to look at more than whether a book is well-written, has likable characters and a believable plot. They will be concerned with those things. But they will be more concerned with whether the book is one which has the potential to bring in a number of sales greater than it takes to break even. In big print run publishing the number is different for each publisher and for each book, but most likely rests somewhere around 5,000.

Ebook publishers on the other hand are looking at a different equation. Like their large print run counterparts they are concerned with whether a project will sell enough copies to break even. The difference for ebook publishers is that it takes many fewer sales to reach the break even point. Because an ebook is created one time (a file is made) and copies of that file are sold again and again there is a cost involved in creating the original file. The author writes the book, an editor edits it, a proofreader proofreads it, a graphic design person creates the ebook layout, a cover artist designs a cover, an ebook formatter creates the formats. An ISBN number is purchased for the book, a copyright is secured. There are some costs, and the costs can generally be covered in as few as 100 sales on some books. What this means is that if a book breaks even at 100 sales, 200 sales, or 500 sales as is the case with most ebook and print on demand titles the threshold for profitability is much easier to attain.

What this means for authors is that a well written book by an unknown author with no following represents a potential profitable title to an ebook/print on demand publisher if they can see it selling 100, 200, or 500 copies (whatever is the break even point for the particular book at the particular publishing house).

That break even points are so much lower for ebooks and print on demand titles means that ebook publishers and print on demand publishers can take chances on authors and topics that don't have the huge following to support minimum sales of 5000 copies. An ebook that sells 1000 copies is likely to be a very profitable project for an ebook publisher while that same number of sales is going to represent a big loss to a big print run publisher.

Big print run publishers still have much of the distribution structure tied up because booksellers largely don't stock books by unknown authors or books published by publishers who don't accept returns. This means that big print run publishers are able to get their books out in front of the consumers who visit brick and mortar bookstores. However, how strong of an asset this is, and how long it continues to be an asset is dependent upon how many people continue to buy their books primarily from brick and mortar locations.

We've already seen huge shifts in this matrix and it looks as if more and more consumers are going to shift toward ebooks in the future. Both Kindle and Nook are reporting escalating sales and there are tons of new book reading devices joining the market and more ebook stores coming on line all of the time. There are also studies that suggest readers who read in ebook format actually purchase and read more books than do paper book readers.

As more readers choose ebooks large print run publishers will need to adapt because they simply will not be able to count on the distribution through brick and mortar stores to garner the kind of sales they need for their publishing model to work. Fewer people are buying their books through brick and mortar locations. Market share is slowly but surely shifting toward ebooks.

Undoubtedly this has ramifications for authors who are trying to figure out where to place their books and whether their print rights or digital rights will be more important in the future.

We will talk about this facet in tomorrow's lesson.