A terrific article in today’s New York Times shows a cost analysis of producing paper books vs. e-books:
At a glance, it appears the e-book is more profitable. But publishers point out that e-books still represent a small sliver of total sales, from 3 to 5 percent. If e-book sales start to replace some hardcover sales, the publishers say, they will still have many of the fixed costs associated with print editions, like warehouse space, but they will be spread among fewer print copies.
Moreover, in the current print model, publishers can recoup many of their costs, and start to make higher profits, on paperback editions. If publishers start a new e-bookâ€™s life at a price similar to that of a paperback book, and reduce the price later, it may be more difficult to cover costs and support new authors.