Strategically Speaking: How Will E-books Impact Your Bottom Line?
While many publishers are investing in some measure of technological infrastructure to support e-books, many third-party providers are creating and fulfilling e-books. E-books technology is still in its relative infancy, and most publishers are unlikely to commit to replacing their existing infrastructure to support e-publication when there are so many capable third-party providers—many with far lower labor costs then U.S.-based publishers face.
Different technology skills may become more important, including product enrichment of e-books, but for the most part, information technology will undergo changes that may prove to be as significant as those faced by production and distribution.
5. Sales and Marketing Cost. The impact on publishers' sales and marketing organizations may be as sweeping as the changes faced by other functional specialists. The sales rep's role will change dramatically, and the expertise required from the marketing organization will place continued and expanded emphasis on e-marketing for securing shelf space and driving sell-through to consumers.
6. General and Administrative Cost. General and administrative costs are expenses associated with the executive, accounting, human resources and legal staffs.
Publishers' infrastructures—design to support the printed product—include accounting and procurement personnel whose roles include placing purchase orders to manufacture books, recording cost information associated with each purchase order placed, tracking inventory in and out of the warehouse, evaluating inventory balances and making reprint recommendations. What role, if any, do these resources play in a world dominated by the e-book?
Little doubt exists that a significant move from print to electronic has the potential to result in a dramatic reduction in these resources as a business transitions from labor- and process-intensive to digital.
Operating Income
The total, shown on an organization's income statement, details the profits generated by a company's principal business. In the previous discussion, operating profit would be calculated based on the following equation:
