Why do books cost so much?

Thirty bucks for a new hardcover! How book prices got so out of hand, who's responsible and what it will take to make reading more affordable in the future.

Published December 3, 2002 7:16PM (EST)

December is one of the biggest months for booksellers, and Brian Ritenbaugh, a supervisor at a B. Dalton Bookseller in Monroeville, Pa., is bracing for his customers. During his 10 years in the retail book business -- at B. Dalton and also at independent stores and selling college textbooks -- he's seen the same reaction time and again. "No matter what the prices are, they say it's too expensive," he says. "The first thing they ask about is price, and the reactions range from a grunt to an outright whine."

It's unlikely that Ritenbaugh will be hearing happier noises anytime soon: Book buyers now must shell out $20, $30 or even $40 or more for hardcovers that decades ago used to cost less than $10. And the sticker shock is causing many customers not to buy as many books.

"It's just too expensive," one Chicago book buyer said recently at a Barnes & Noble, putting down the new hardcover by a favorite author, Chuck Palahniuk, even though it was discounted 20 percent. "I used to buy more books and be willing to try new authors. But you don't know if the book's going to be good or not and it's too expensive to try something new or even an author I usually like."

Why do books cost so much? Consumers are often baffled at the price tag attached to what appears to be little more than a mass of paper, cardboard and ink. A whole host of factors, including the size of the book, the quality of paper, the quantity of books printed, whether it contains illustrations, what sort of deal the publisher can make with the printer and the cost of warehouse space, all affect the production costs of a book. But, roughly speaking, only about 20 percent of a publisher's budget for each book pays for paper, printing and binding, the trinity that determines the physical cost.

The rest of what you shell out for, say, the new Donna Tartt novel pays for the publisher's overhead (the cost of maintaining a staff of editors, proofreaders, book designers, publicists, sales representatives and so on), and for the cuts taken by distributors (who run warehouses that supply books to retailers) and booksellers. Promoting the book is another expense: printing up catalogs presenting each season's titles to booksellers and the media, purchasing ads, mailing out hundreds of review copies to critics and sending the author (if he or she is lucky) on a book tour. So are shipping fees and the storage costs on unsold copies.

Fluctuations in the cost of any of these elements can eat into a publisher's profits and force them to raise their prices. For example, the price of paper skyrocketed twice over the past few decades, in the late '70s and mid-'90s.

Many readers are surprised to learn that the author's cut is quite low -- as a general rule, it ranges from 10 to 15 percent, though very popular authors are able to negotiate a higher royalty and others must accept a lower one. Flashy news items about handsome advances (for hardcover or paperback rights) paid to such young authors as Jonathan Safran Foer or Dave Eggers create the false impression that writing books is a lucrative enterprise. (Advances are an upfront payment made "against royalties"; the advance is deducted from the author's royalty payments as copies of the book are sold, although many high-profile -- and even low-profile -- books fail to "earn out" their advances.) Except for a handful of bestselling writers, the overwhelming majority of authors make only $5,000 or $10,000, if that, on projects that took them years to complete. (Most must rely on other sources of income, such as teaching, journalism or a gainfully employed spouse to get by.)

Then there's that peculiar aspect of the book business known as the "returns policy." Books are sold to retailers in a process that resembles consignment. Bookstores pay for the bo oks they order, but they are able to return any unsold books for a full refund (though they usually have to pay shipping). This practice began during the Depression, when publishers wanted to keep selling books in bad economic times, and it continues today despite frequent calls for its abolition.

This means that if a publisher ships 100 copies of a book to a bookstore and only 50 sell, the remaining books are shipped back and the bookseller is given credit for them. (The returned books are sometimes destroyed, although increasingly they are sold to "remainders" dealers who in turn supply retailers with reduced-price sale books.) The estimated cost of these returns is also figured into the price of a book.

"When you're buying a book, you're not only paying for that book, but you're also paying for the book that will be returned and destroyed," explains Jason Epstein, former editorial director at Random House and the author of "Book Business: Publishing Past, Present, Future." "That means you're actually paying for a book-and-a-half, or a book-and-a-quarter."

All of this adds up, but if the high price of hardcovers may be more than some consumers want to pay, it's not a recent development. When the prices of hardcover books are adjusted for inflation, they turn out to have remained fairly flat between 1975 and 2000.

Nonetheless, for those who remember the 1970s, the escalation in prices does appear substantial. Figures obtained from R.R. Bowker, the company of record for information about the publishing industry, show that, from 1975 to 2000, the price of the average hardcover book of fiction went up 200 percent to $24.96. Average prices for hardcover poetry and drama books increased 211 percent to $33.57. Nonfiction hardcovers went up 123 percent to $40.29. The largest increase was in the juvenile category, which climbed 227 percent to arrive at the current average of $18.40.

Still, adjust these figures for inflation and you get a different story, says Robert Sahr, an associate professor of political science at Oregon State University who studies media coverage of complex matters such as budgeting and economic policies. He found that the cost of hardcover fiction in real dollars had actually gone down 2 percent, while poetry and drama and juvenile categories had risen only a few percentage points. Nonfiction hardcovers had decreased in real price by 27 percent.

"I'm not very surprised," Sahr says. "Trade books are one of the clearest examples of a completely discretionary purchase. They have to be price-sensitive."

But that's not to say that hardcover prices weren't already too expensive in 1975. And while the price for front-list hardcovers has remained relatively static, some of consumers' overall exasperation with the cost of books may derive from very real increases in the prices of paperbacks -- both mass-market "supermarket" books and trade paperback editions of backlist titles (books originally published some years ago). These are the majority of books sold.

According to Bowker, the average price for mass-market paperback fiction has gone up a whopping 328 percent (from $1.35 in 1975 to $5.78 in 2000), poetry and drama have increased by 252 percent, and juvenile titles cost a staggering 387 percent more now than they did in 1975. (No figures were available for nonfiction mass-market paperbacks.) Adjusting for inflation, Sahr found that the average price of mass-market paperbacks has gone up almost 40 percent, poetry and drama almost 15 percent, and juvenile titles just under 60 percent.

But what's taken a huge bite out of America's book budget is the rise of the trade paperback, those larger paperbacks of better quality that can now be found occupying prime real estate on tables at the front of bookstores. Since the 1980s, publishers have increasingly kept their backlist in trade paperback, and used this format to publish the paperback versions of books that don't have a mass-market appeal or million-copy sales potential, such as more-literary or specialized titles. Right now the price of most trade paperbacks hovers between $12 and $16, although nonfiction titles often cost more. (For example, this week's No. 1 New York Times bestseller, "John Adams," by David McCullough, costs $18.95, which makes you wonder how soon trade paperbacks will begin to regularly creep past the $20 barrier.)

While trade paperbacks are more presentable and easier to read than mass-market paperbacks, they have in many cases supplanted those less expensive books. For example, in the '60s, you could pick up a copy of John Updike's "Rabbit, Run," for as little as 65 cents in mass-market paperback, which when converted to 2002 dollars roughly equals $4. A 1991 mass-market paperback of the same book went for $5.99, which in today's dollars is roughly $8. Today, a new "Rabbit, Run" paperback is only available in trade paperback and goes for $14.

The practice of selling at a discount has also fueled the rising price of books. Over the past two decades, widespread discounting has made it seem as if consumers are getting a deal. Some superstores discount books on the New York Times bestseller list and other selected titles. At online venues, the savings often extend to other hardcovers and trade paperbacks. For example, the "Rabbit, Run" trade paperback sells for only $11.20 on Amazon because the site offers a 20 percent discount. To compete with larger outlets, independent booksellers have initiated "frequent buyer" programs in which a certain amount in purchases entitles a customer to discounts.

Everyone likes to feel he or she is getting a bargain, but discounting has made it easier for book prices to creep upward while maintaining the illusion that consumers are getting the books inexpensively. Since booksellers' markups aren't as big as those of other retailers, discounting can be a risky strategy that slices profit margins razor thin; recently, some have thought better of it. After growing accustomed to the sight of 20- and 30-percent-off stickers, suddenly consumers are being charged full price for many types of books, another source of sticker shock. Maintaining the illusion that books are affordable has gotten more difficult.

"The chains have been very smart in their marketing and discounting message, but they've rolled back the breadth of the discounting over the past few years and the perception remains," says Carl Lennertz, publisher program director for BookSense, a marketing program for independent booksellers. "The other smart thing the chains did is put remainders in the front of the store, which gives the perception of sales throughout the store."

In recent years Barnes & Noble founder and chairman Leonard Riggio has issued numerous public proclamations asking publishers to lower their prices and was quoted in the New York Times calling some book prices "abominations." Epstein maintains that publishers are already squeezed too hard.

"The publishers aren't cleaning up," he says. "Given the very thin margins they operate on and the cost of doing business, prices are not too high. From the point of view of publishers, they're too low."

Besides, publishers are being pressured from above, as well as by consumers. During the 1990s many publishing houses conglomerated or were acquired by large corporations, which forced publishers to be more conscious of the bottom line and their responsibility to stockholders. To Epstein, this is exactly the wrong model for book publishing. Traditionally, the business was, he insists, never meant to be a moneymaker and should be seen as "more like a sport or a hobby. It was fun and culturally very useful. If you wanted to make money you'd go over to Wall Street."

"The book industry is not run the way other businesses are run, and it's unlikely it ever will be," concurs Albert N. Greco, a professor at Fordham University and author of "The Book Publishing Industry." "It's a creative industry. It's not like selling light bulbs. And publishers have been working that way in this country since 1639. I don't think it's going to change very quickly."

But according to Michael Cader, a longtime book packager and the creator of Publisher's Lunch, a Web site and e-mail newsletter service read religiously by many publishing professionals, book prices must change. He points to reports that indicate that the total amount of money being spent on books is stagnant while more and more books are published every year. According to Bowker, over 135,000 titles were published last year, compared to 119,000 in 2000.) Simple economics dictates that with more books vying for the same amount of money, there should be more competition and prices should come down.

"There's a possible paradigm shift coming up," Cader says.

Cader believes booksellers and publishers have "tapped out" the small segment of the population that reads books with any regularity. Instead of raising prices -- which can only go so high before those consumers turn away -- he argues that publishers need to work on getting more people to read and on making book publishing a growth industry. He suggests utilizing more free and low-cost promotional techniques, promoting mediums like electronic publishing, and developing long-term programs aimed at getting younger people interested in reading. He describes the average person's current school reading experience as "12 to 14 years of making people dislike reading or making reading boring."

Another way Cader's "paradigm shift" might come about is through the evolution of the entire publishing industry. Epstein envisions a huge change in the way books are sold as a result of new technology, specifically print-on-demand machines that can produce a bound copy of any book either while the customer waits or to be picked up after an order is placed online. With the elimination of the costs of inventory, shipping, returns and distributors' markups, the price of books would go down and authors might make more money from their work.

"The technology exists to bypass all that," he says. "That would mean lower prices."

Many consumers have found more immediate remedies for high book prices, however. Over the past few years used book sales have skyrocketed, particularly with the Internet making used booksellers' inventory more accessible to more consumers. And big-box retailers like Costco, Wal-Mart and Target sell huge numbers of discounted books. And in the end, for those who believe there should be no price tag on knowledge or information, there's always the library.

"Cars aren't free, neither are apartments or food," says Greco. "We live in a free market economy. Yes, books are important and play a unique role in the culture. But that doesn't mean they have to be free. Or cheap."

By Christopher Dreher

Christopher Dreher is a writer living in Plymouth, Massachusetts.

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