Authors without any trade experience who decide to try their luck at self publishing are often shocked to learn that the standard discount at which books are sold by publishers into distribution is over 50%. Trade authors learn about discounts the hard way when they read the first royalty statement from their publisher and find that their percentage of net is a percentage of something less than half of the cover price of the book. Unfortunately, I've heard from a few self publishers over the years who have gone as far as getting books printed, with the retail price embedded in the cover design and barcode, only to find that they'd be losing money on every sale through distribution. Self publishers and small presses who work with exclusive distributors (ie, distributors who insist on becoming the sole source for distribution sales) can find themselves selling returnable books to that distributor at 65% to 70% off the cover price.
Lets look at a 200 page trade paperback, the standard 6x9 size, with a cover price of $20. The net to the publisher at a 70% discount is (20x0.3) = $6.00. The net to the publisher at the standard (trade) discount of 55% is (20x0.45) = $9.00. On the short discount POD model, using the lowest discount of 25%, the net is (20x0.75) = $15.00. Now lets take the printing cost into account. A 200 page trade paperback on offset can get down to about $1.00 for around 5,000 copies. That doesn't count shipping or the cost of money (you have to come up with the $5,000) but it's a decent ballpark figure. The same title printed by Lightning Source and supplied by them into distribution would cost ((200x0.013)+0.90) = $3.50
The publisher using the exclusive distributor and offset printing could net $6.00 - $1.00 = $5.00 on distribution sales. The publisher using standard distribution would net $9.00 - $1.00 = $8.00 with offset or $9.00 - $3.40 = $5.60 with on demand printing. The short discount publisher (me) would earn $15.00 - $3.50 = $11.50 on distribution sales. So, the publisher taking the biggest gamble, laying out $5,000 for printing before selling a single book, nets $5.00 per book, and the publisher using short discount POD nets $11.60 a book, more than twice as much. The publisher using the exclusive distributor will have to sell more than twice as many books to make the same bottom line. Why does that sound unfair?
The answer depends on how much that exclusive distributor does to get your books onto brick-and-mortar store shelves. Because selling books is hard and because some self publishers have built a business around an exclusive distributor and live to tell about it, many new publishers think it's the only way to go. Ten years ago that may have been true, but today the world's biggest bookstore is Amazon. I know some self publishers who have gone the exclusive distributor route and who are very happy with the results. However, when I've poked and prodded for information, I'll be darned (like a sock) if I can figure out just what they think the exclusive distributor is accomplishiing for them, other than acting as a very expensive middleman. I suppose I'm also biased because two of the exclusive distributors who have approached me over the years about distributing my self published titles have gone bust. I'm not saying the exclusive distributors don't work for their money, I'm suggesting the model they represent is obsolete and expensive for today's web savvy self publisher.