Wednesday, 4 July 2012

Createspace v LSI, part 2.

A closer look at income per copy under the major POD distributors

On Monday we gave you all an overview of the options available to get your work into print.
Yesterday we posted up pictures of our createspace proof so you can see the quality (If anyone has both and LSI and Createspace proof, please do take a photo of them side by side - it would be invaluable!).

Today, we're going to look a bit closer at the numbers involved for the major suppliers.

This is a screenshot of page one of our 'POD' spreadsheet for Dead on Demand. Click to enlarge if you like.

Our book is 350 print pages using standard margins at 5"x8" trade paperback. We think this is more than ample sizing for a crime novel as most are issued as mass market paperbacks that are slightly smaller.



With cream paper, this comes in at 381.5g or 0.841llb per printed book (which factors into the shipping costs). Createspace only offer 'cream' or 'white' paper, but it appears from a cursory comparison with a colour chart that, like LSI, this is #55 natural.

At Createspace, Dead on Demand costs $5.05 to print. There is no volume discount at all, but shipping gets cheaper in volume. This is a two part discount.

CS shipping is a base fee plus a fee per item. They don't take into account weight so bigger books gain, and smaller ones lose relative to 'at cost' variable shipping.

CS have their 'rate tables' for shipping publisher here. Broadly, the discounts are done at the 10th and 50th copies.

One copy, shipping from the US to the UK by the cheapest method (Priority is inefficient) costs an absurd $9.93 (which is the cost for a CS proof of Dead on Demand).

At 10 copies, this drops to $6.85.

At 50, this is $6.21.

The 'price per unit' does continue to fall, but this isn't a volume discount. It is simply that the 'base' component of the postage is spread over a larger number of books. This makes anything over 50 copies comparitively less valuable as a strategy.

As I'm in the UK, I need to translate my figures into pounds stirling. Of course, the exchange rate is variable and I'm not going to get perfect midmarket rates simply using a debit or credit card. With the rate at £1= $1.56, I have assumed a nominal rate os $1.50 to the pound to keep a small margin of error, as well as keeping it all simple.

That gives me a createspace price of £3.36 excluding delivery. At my optimal balance point of 50 copies delivered this works out at £4.14 per author copy.

The flipside of this is most copies won't be done as author copies. I'll be distributing some to friends and family, using some for promotional use, and giving some away for reviews... but the important question is going to be 'What royalty do I get?'

Createspace work this out in the following way:
You set a list price. In my case this would be a nominal $14.99 or so.
List price - sales channel cut - fixed fee - per page charge = royalty
Sales channel cut is 20% for their own eStore, 40% for Amazon and 60% for everything else.

At 350 page my fixed fee is $0.85 & my per print cost is $0.012 per page.
$0.012 x 350 page = $4.25 + $0.85 = $5.05

This gives:
eStore: ($14.99*.08) - $5.05 = $6.94
Amazon: ($14.99*0.6) - $5.05 = $3.94
Everything else:  ($14.99 * 0.4) - $5.05 = $0.94

Ideally, I'd like to price lower than this but the 60% margin for expanded distribution means that the minimum price has reflect this cut.

Createspace don't take returns. So once something is sold, it's sold. Your money is safe once they report it. That makes everything nice and simple, but it doesn't help in getting stocked.

I also have to take into account UK copies are printed here. That gives faster shipping.

In the UK, Createspace would charge me £0.70 as the fixed fee, and 1p per page. This gives a cost per copy of £4.20 (or about $6.30 - clearly not as economical). To put that in perspective, my author copies above cost £4.14 including international shipping. The UK isn't as cheap to print in.

Feeding that cost in, at an RRP of £9.99 (in keeping with my nominal $1.5:£1) my Amazon Europe copies printed here will yield £1.79 per copy (or about $2.69).

EU Sales via Amazon are printed in continental Europe. Here, the fixed fee is €0.60, and per page is €0.012. This gives a per unit cost of €4.85 (or $6.10). This yields a royalty of  €2.35 (or $2.96).

Collating all that, my royalty per copy based on $14.99 list is:

eStore: $6.94 $3.94
Amazon UK: $2.69
Amazon EU: $2.96
Everything else: $0.94
Sold by hand - author copies: $8.78

This works out a pretax author share of between 6.27% and 58.57%.

Most online sales are likely to be Amazon. Very few customers will go via the eStore, but a few might if properly directed from a website. IF print stockists pick me up, I'll make just 94c (or 63p).

Now, I know legacy gets short thrift, but you can see why the royalties are low when you examine the numbers closely. They use offset runs which are much cheaper, but they also have huge overheads. At the standard £7.99 mass market paperback, and a similarly standard 8% royalty rate you'd be getting 64p a time from them. This is pretty comparable, but with more initial investment and no support structure. The real winner for indies is eRights which used to be considered subsidiary. 70% on eBooks very easily makes up this shortfall (Legacy typically offer 17.5%).

I actually don't think this is too bad a deal. It's wholesale, so we get full whack even if the book gets discounted. With expanded distribution Amazon typically knock 10% off the competitors prices which would bring me down to $13.49 / £8.99 which isn't overpriced for  trade paperback quality. I have no moral qualms about charging that much.

I could also consider going a bit higher. If I go to $16.99 those figures become $1.74 per expanded distribution, $5.14 by Amazon & $8.54 by the eStore. That's a pretty respectable cut by any standard at 10% yield, and the increase to the author far exceeds the increase to the reader. With Amazon's usual 10% off this brings me down to $15.29 or so anyway. It feels a little expensive, but the relative gain for me as the author far outweighs the loss to a reader. Plus, if they need cheap my eBook is far cheaper anyway - and that alternative is certainly a salve to the conscience for those that can't be totally mercenary about this.

To give an easy comparison a $16.99 list (rounded to £10.99 in the UK) would give:
eStore: $8.54 $5.14
Amazon UK: $3.59
Amazon EU: $4.16
Everything else: $1.74
Sold by hand - author copies: $10.28

This would give a pretax author share between 10.24% & 60.5%. Even if every copy is sold by the lowest channel, this beats legacy. If most are sold via Amazon US and Amazon UK the return on list is 30.2% and 21.1% respectively. Unless you are John Grisham, no legacy publisher will give you anywhere near that cut. 

Given that this is all fully automated and done for you, with no risk of returns that is pretty damn good - if it sells. That's going to come down to how good your marketing is. You won't reach the dizzy heights of Kindle distribution but a conservative estimate would be 1 print sale for every 100 kindle sales you have. Many authors get closer to a 1:10 ratio and specialist areas such as cookbooks are often at parity or better. Children's books are likely to sell well in print for example.

Lightning Source

LSI is a totally different model as we know from Monday's post.They are not a subsidy press, but a printer.

Let's start by looking at author copies. LSI charge a 90c base fee plus 0.015 per page for author copies (compared to CS who have a basic 85c and 0.012= $5.05). This gives a full price single unit cost of $6.15 for Dead on Demand author copies using the same options as Createspace i.e. a dollar ten cents more.

LSI offer tiered discounts.These are as follows:
50 copies = 5% discount
100 = 10%
250 = 20%
500 = 25%
1000 = 30%
1500+ = 35%

This gives an adjusted price of:

50 copies = $5.84
100 = $5.54
250 = $4.92
500 = $4.61
1000 = $4.30
1500+ = $4.00

So, in comparison to CS this would appear to become better over 250 copies by a marginal amount and get better there on out. My issue with this is that once we hit 1500, an offset run would be miles cheaper again. So there is a sweet spot for author copies somewhere between 250 and 1000, but who really thinks they'll sell 1000 copies by hand? My own approach with 'by hand' sales really is just that - signings, promo, review copies and local sales. If we start posting copies out and thus incurring costs for shipping, handling and packaging... then the corresponding profit decreases AND we lose valuable writing time. It's an option, but not a good one. If you need 500 copies because you are signing prolifically but can't quite justify offset this might be useful. I have a feeling this is going to be a fairly small niche.

Of course, with setup costs significantly higher than CS, LSI would need to do exceptionally well to earn out on author copies alone.

At this point you are probably thinking 'Why would I ever consider LSI?'

First, the costings on 'to order' copies are different. Not sure why they do this but they do. They charge 0.013 per page bringing them closer to CS.

This gives numbers more akin to:

50 copies = $5.17
100 = $4.90
250 = $4.36
500 = $4.09
1000 = $3.81
1500+ = $3.54

We can see this brings down the cost quite quickly. On a 'print to order' non author copy, LSI comes close to parity at 50 copies, and overtakes at 100. By 500 there's a 20% discount in place over CS.

LSI is more complicated than that though. In the USA they charge UPS daily variable rates. That means direct postage is going to be hard to compute. The only constant is their weight based discounts.

At 250lbs, they knock off 30%.
At 500 lbs, they knock off 50%

At 350 pages, my book weighs in, as I said earlier, at 0.841 llbs. This is why my spreadsheet shows odd numbers. The optimal levels shift - 298 gets me both the 20% print discount AND the 30% shipping discount. 595 gets me the 25% print discount AND the 50% shipping discount.

In the UK postage is at Parcel Force standard rates.
If you are midlist, and need these quantities, LSI becomes significantly cheaper. If you are selling less than 298 copies (PER batch not sum total don't forget - you might sell thousands, but if you're printing 50 at a time you won't get bulk rates) then there is a sweet spot for LSI's POD offering between the lower volume CS sweet spot, and the point at which you should be doing an offset run.

There are two more factors to LSI that createspace doesn't let you have:
1. Variable Discounts for Wholesale
2. Returns

I'll deal with Returns first as it's shorter. Book stores usually work on sale or return. If they can't sell it, they ship 'em back to the publisher at the publishers expense or destroy them if the shipping exceeds the return value (at publisher discretion). This is usually done by stripping the cover and sending that back as proof.

Hardbacks are remaindered - but I won't deal with the economics of hardbacks here as most indies will never get the volume required to make this work, and fewer still will plan ahead with remainder contingencies.

CS doesn't allow returns. That means shops won't take a risk. LSI lets you decide - they are just a printer after all. That means you CAN target small bookshops, chains etc. They usually expect a 55% discount. That gives a marginally better cut than the expanded distribution option at CS which is 60%. However if they don't sell, and statistically anything up to half might not, then you'll be destroying copies or reshipping which will eat into your margin - and could see you make a loss.

I also noted yesterday that there is a sharp practice of returning then immediately re-ordering. I don't want to tar everyone with that brush but be aware it could happen. That will again cut into your margin.

That's a full discount or better than full discount approach. It's risky, and I don't advocate it unless you have deep pockets and balls of steel.

What I can advocate is a short discount. Most shops won't stock you, but LSI lets you set a 20% minimum wholesale cut. Amazon DOES stock books on this basis. CS give Amazon (who are their parent company) 40%. They also don't require returns.

Therefore a potentially viable model might be:

Print over 296.
Warehouse them or drop ship them (LSI offer both services)
Set them to non returnable
Set a short 20% wholesale discount
Sell primarily via Amazon

If you are selling at the same $14.99 I used above, that makes Amazon's cut $3. That leaves $12 to split between shipping, warehousing, printing and the author cut.
At a print price of $4.36 at the 296 volume, that leaves $7.74 to split between warehousing/shipping and the author. This MIGHT give a better yield than CS who pay $3.94 royalty on this price point. It depends on shipping and warehousing - you'd need to speak to LSI to get a quote.

I suspect this will suit only those with enough titles to get decent rates on shipping and warehouse. this is for those who are not just indie authors, but actually are becoming/ already are running a small press.

At the $16.99 I substituted in our CS calculations that gives a 20% short wholesale cut of $3.40. Minus print at the static $4.36 for the same volume, and the warehouse/shipping/ author cut becomes $9.22.

There might also be tax advantages in some jurisdiction in terms of 'expense deductibles' for warehousing etc. You'd need to consult an account or lawyer about this.

My conclusion, as it was on Monday, is that the numbers for most indies mean Createspace wins. They don't even need an ISBN and that can be a huge up front saving. It costs nothing to get into Amazon & the eStore/ order author copies, and Expanded Distribution is just $25. It's a very low risk way of doing things. For those in doubt, I would attempt a CS run to test the market.

A final question I want to address in this blog post is 'Should I do a print run at all?'

My answer here is 'Probably yes'. If you can do formatting yourself - and it isn't rocket science using word templates, then the cost is minimal.

Doing it this way means the capital investment required is only art if you are doing the bare minimum. Presumably you already have Kindle cover art. My artist, Nadica Boskovska, charged me 70 euros, or £60/ $90 approx to turn my kindle cover into the print version I have today (again - the link is at the top of this post so you can see what this level of investment actually buys you).

At $10.28 per hand sold copy back, it's a mere 9 copies for Dead on Demand's print edition to earn out. I already have orders for those 9 copies, and will easily make a profit. At the lesser $14.99 rate, it's still only 10 hand sold copies - and most of us can sell ten without much effort.

Once my initial 50 authors copies are gone, my intention is to concentate on further books - the best marketing any author can do is release more work.

That makes both the eBook and print editions completely passive income. No further input required, and I just get remitted my payment by Amazon for Kindle, and Createspace for the print edition.

Self publishing takes alot of work, but with the percentages outlined above it should pay off long term

As a final benefit, a real edition can be linked on Amazon with your kindle edition for pooled reviews. It also gives you an actual page count. Amazon's estimates are notoriously low, and can make a full length book look a bit short. A meatier looking book may sell better.

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