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The cost of creating ebooks

09 April 2010


There's an interesting discussion taking place on the forum for Retro Gamer magazine at the moment. As I said in my recent post about how ebooks are changing writing, Retro Gamer has created an iPhone/iPod app for buying and reading the magazine.

Retro Gamer has many fans who are committed, or perhaps should be (as the old joke goes). They collect every issue of the mag, and now there's an iPhone app, those with iPhones will collect that too. What's interesting, though, is that several people are saying that subscribers to the print mag should get the digital version for free or for a reduction.

Editor Darran Jones said: "Why should you be given it for free? After all you don't see people saying. I've already got Die Hard on DVD, why should I have to buy the Blu-Ray version? I'm sure that some sort of deal will eventually come along that will give subscribers a better discount over those who are buying it fresh, but it doesn't normally make good business sense to give away something for nothing. After all, you're not being forced to buy it, it's just there as an option."

Reader Opa-Opa (not his/her real name) said: "The thing with your DVD/Bluray argument is that you would be paying for the media and packaging, which will cost the production company a certain amount of money to get produced and shipped etc but with the digital version of any magazine (not just RG, I'm not having a pop at you guys) the magazine is already made, it's already put together and it costs next to nothing to make all the time the paper version is being made. Do you get paid twice because you are now making two different magazines, one paper and one digital.. Because we have to pay twice if we want a digital copy..?"

There seems to be a perception that there are no costs in creating ebooks, which is not true. Even when the print version has been created, it takes time to generate the digital version, upload it to the app system and to test it. There are often significant setup costs too. I contacted PixelMags (who created the Retro Gamer app) to ask about their pricing a month ago for an article I was writing but I haven't heard back. Typical prices for creating a corporate app might be £20,000, although it's possible to do it much more cheaply and to do it on a revenue share basis. If it did cost £20,000, then it would take over 9,500 sales at £3 per copy to break even on that cost. (Apple takes 30%, and Imagine Publishing can probably amortise some of this cost across all its titles).

What about the other costs? Well, let's estimate that it takes about a day of somebody's time to look after each issue (including generating, uploading, and customer service) and that the cost of that (including office rental, furniture, employer taxes etc) is about £500. In that case, Retro Gamer needs to sell over 235 copies to break even on the cost of any one issue.

It's easy to question the figures. We could say that the cost of the staff time is half that, or equally argue that it takes twice as long. But it does demonstrate that however you slice it, digital content isn't free.

I have no idea how many copies they are selling. But Retro Gamer is a highly specialist magazine which had a print circulation of 5,000-7,000 last time I heard a rumour about it a couple of years ago. There are lots of people with iPhones and iPods, but how many of them are in the target market? It's clear that Retro Gamer has taken something of a gamble here, and won't make any profit until a significant proportion of its potential buyers have bought an issue. Only then does it start to make the profit which rewards its risk.

(It is possible it's doing it all on a revenue share basis and that PixelMags is absorbing the setup costs. But in that event, the costs are still in the system, and it's still not viable to give the content away for free).

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