|E-Books = Higher Margins|
Have I bitten off more than I can chew? Probably --- but, what the hell.
Basically (simplistically), the profit margin can increase when you cut or eliminate costs associated with the production of the product (books in our case - and costs such as printing, binding, warehousing and shipping, etc.). The lower cost to produce the product results in a lower unit price and therefore overall revenues --- but, the profit margin made on each lower unit cost can rise due to these same eliminated production costs.
Matthew Flamm, writes this for Crain's New York Business :
In last hurrah, Random House books record profits
E-book Sales Bolster Publishers' Bottom Lines
Higher e-book sales bolster the bottom-line at the big five while curtailing revenue growth
Although costs associated with reaching e-book settlements with the Department of Justice and state attorneys general cut into some houses’ profits, none of the big-five trade publishers posted a margin of less than 9% in 2012. And more than one publisher (or parent company) said higher sales of e-books is boosting its bottom-line—even if e-books are curtailing revenue growth—and should lead to higher margins in the future.
In its 10-K filing with the Securities & Exchange Commission, Simon & Schuster parent company CBS observed that “underlying publishing results reflect margin growth associated with an increase in the mix of revenues from digital book sales, which have lower production and distribution costs than print books. As the publishing business continues to transition to an increasing mix of digital book sales compared to print book sales, profit margins are expected to continue to grow.” S&S was one of the companies whose profits were hurt by legal and settlement costs. In both 2011 and 2012, S&S’s earnings also reflected restructuring charges—$3 million last year, primarily reflecting costs associated with combining several of S&S’s adult imprints, and charges of $2 million the year before due to severance costs.