I don't know much about the particular costs inherent in paper book publication. Only the accountants in houses like Harper-Collins and Random House know those, and they ain't sayin'.
So how can I estimate the price of a paper book? By analogy.
The 1970s were the heyday of the boardgame. Game designers like James Dunnigan, John Hill, and Frank Chapman were each turning out a new game every month. They produced famous games like PanzerBlitz, The Battle for Hue, and Harpoon.
At a time when the cost of a new game was $8, the physical content--the box, board, dice, playing pieces, and rulebook--cost $1.88.*
In truth, the games were underpriced. They should have been priced $9.40--five times the unit cost.** This difference between the price they charged and the price they should have charged killed many game companies, including the innovative leader S&T. How innovative were they? Innovative enough that their chief competitor, Avalon Hill, hired them to design a game for them.
So if, as Mr Bransford said, the physical costs total $1.50, then books should be sold to readers for $7.50. I don't see that happening.
On Amazon, I see Donald Rumsfeld's Known and Unknown*** marked down to $19.46 from $36.00. That tells me that the unit cost TO PRINT THE BOOK is either $3.73 (re: $19.46) or $7.20 (re: $36.00). If those costs are wrong, then 1) the TradPubs practice voodoo accounting or 2) the TradPubs' cost structure is so badly out of whack that it would be easier to replace it with a new model than it would be to fix it.
Number 1 on the New York Times Bestsellers List in Fiction is James Patterson's Toys, listed for $27.99 but marked down to $14.28. Did Little, Brown and Company spend $5.60 or $2.86 on the paper? Who knows? I don't. Does Little, Brown and Company know?
The problem with taking apart the TradPubs' pricing model is that no one knows how they arrive at their prices. It makes no difference whether you are inside or outside the industry. Why is James Patterson priced at $27.99 and selling at $14.28 while Donald Rumsfeld is priced at $36.00 and selling at $19.46? The pricing is illogical and the discounts are unpredictable.
This pricing structure is inefficient and unmanageable. It is doomed to fail or to fall. It will fail whenever and wherever it has to compete against a more efficient pricing structure. It will fall when the weight of accumulated bureaucracy becomes more costly than it can support.
Next time: Lurching Toward a New Pricing Paradigm
* This is the reason I do not believe Mr Bransford's estimate that the paper and distribution costs of a new book total $1.50. I do not believe that paper costs LESS today than it did 40 years ago.
** This '5x' scheme makes pricing tractable. Labor costs are subsumed in the markup. In fact, all costs that are 'amortized' are subsumed. But management can do cost breakouts and work to keep their labor costs within set goals.
*** You can love Rumsfeld or hate him, but you know his book is gonna sell.
If you have not read Joe Konrath's interview of Mark Coker, the founder of Smashwords, please do so. The read was worth my time. I bet it will be worth yours, too.
Be sure to read the comments. Mr Coker's answers to readers' comments are included there.