From a recent, much-linked New Yorker article on the e-book business:
Good publishers find and cultivate writers, some of whom do not initially have much commercial promise. They also give advances on royalties, without which most writers of nonfiction could not afford to research new books. The industry produces more than a hundred thousand books a year, seventy per cent of which will not earn back the money that their authors have been advanced; aside from returns, royalty advances are by far publishers’ biggest expense. Although critics argue that traditional book publishing takes too much money from authors, in reality the profits earned by the relatively small percentage of authors whose books make money essentially go to subsidizing less commercially successful writers. The system is inefficient, but it supports a class of professional writers, which might not otherwise exist.
There are not many businesses where you can be wrong 70% of the time and stay in business.
Returns — the publishers’ biggest expense are entirely eliminated by e-books. That must be why they insist that e-books should cost as much as, or more than, hardcover books.
