Strategically Speaking: How Will E-books Impact Your Bottom Line?
1. Production Cost. Production cost refers to the personnel expenses associated with managing the processes of print-book manufacturing. It includes the cost of production management, manufacturing staff, inventory planning and expeditors—all of the folks who support the traditional production process. When (not if) e-books become the primary form to deliver publishers' content, the traditional production department is likely to be one of the first components of the organization to face substantial restructuring.
2. Distribution Cost. Distribution cost refers to the personnel associated with warehouse and customer-service activities associated with the order intake, fulfillment and returns processes—in short, the folks who pick, pack, bill and collect on behalf of the current business processes. When e-books become the primary form to deliver content, the traditional distribution organization, like the production department, is likely to undergo dramatic change and may potentially become completely extraneous in a world dominated by e-books. Many publishers have already taken steps to convert the fixed cost of distribution to variable by outsourcing their distribution needs to third-party providers.
3. Editorial Cost. Editorial cost is the cost of acquiring and developing content—the folks who identify the product, find the authors and edit the manuscripts. The e-book's impact on editorial cost is likely to be significant, with some suggesting that the improved gross margins and lower operating costs resulting from a significant shift from print to e-books will be more funding available for product development—with less risk and lower investment required to bring the product to market.
4. Information Technology Cost. Technology costs are likely to change in both scale and nature as the functions associated with publishing change with the transition from print to digital. Investments in large enterprise resource planning systems designed to manage inventory, track production costs and manage the physical fulfillment (and returns) processes will become largely extraneous.