Brian Doherty | May 18, 2009
Abraham Lincoln's wise answer would doubtless be, "enough to reach the floor." The market seems to be adopting $9.99 as a rough standard (though that is currently a loss leader price for Amazon, at least). As the New York Times indicated the other day, mainstream publishers think the answer is, "as close to what a printed book costs as we can get away with." As Simon and Schuster chief Carolyn Reidy told the Times, "“The concept that because a book is an e-book it should automatically be priced significantly lower than a paper book is one we don’t agree with...What a consumer is buying is the content, not necessarily the format.”
Publisher Glenn Yeffeth, whose perspicaciousness in his business is thoroughly proven by the fact that his BenBella Books published both Choice: The Best of Reason and the paperback edition of my This is Burning Man, runs the numbers and shows that, surprise, that's some mighty self-serving reasoning by the New York publishing barons:
Let’s look at an e-book:
Royalties (let’s assume these are 25% of net, as S&S and many publishers pay): $3.13
Printing and Distribution: $ 0
Marginal profit is $9.37/book.
What is the cover price on an ebook that yields the same marginal profit/book [as his calculations for a typical printed book]? It turns out to be $12.35.
There is lots of room to quibble with these numbers, but the idea that an e-book should be priced the same as the hardcover is transparently ridiculous.
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I only buy paperbacks because they are easier to carry around
(in bars, on the train, etc.)
So I find the $9.99 price outrageous for books that are over a year
old. That's one of the reasons I am avoiding a Kindle. If they
introduce some better pricing for books once they aren't quite as
new, then I might be brought on board.
I'm not expecting books for $2, but would it be that unreasonable
to have a 'paperback' version of an ebook at $6-8 a year after
publication?
What is the cover price on an ebook that yields the same marginal profit/book [as his calculations for a typical printed book]? It turns out to be $12.35.
This leaves out the vital bit that the price comparison is to a $25
hard cover. For those who don't want to read the source, that gives
you what you need to make sense of the Doherty's summary.
Abraham Lincoln's wise answer would doubtless be, "enough to
reach the floor."
Is today Bad Joke Day?
mainstream publishers think the answer is, "as close to what a
printed book costs as we can get away with."
Um, that's capitalism, isn't it? "Get away with"? When did
e-commerce become a crime?
"mainstream publishers think the answer is, "as close to what a
printed book costs as we can get away with.""
Um... duh! If you're selling something, don't you always want the
price to be as high as you can get away with, without cutting into
your profit?
I think the answer is more complicated than this. An ebook costs
less to deliver, but is also less useful to at least some people
than a paper book. there is doubtless some difference in the
aggregate willingness to pay curve for ebooks vs. paper. the supply
curve is also different, as the above analysis correctly
shows.
What is clear is that delivering a book electronically reduces
production costs dramatically. If willingness to pay remained
constant (although we know it doesn't) - that reduction in cost
gets split up somehow amoung the other actors - the user, the
publisher, the writer. Who is to say which of those three parties
will obtain what share of the new excess? no one - it's totally up
for grabs. Game theory suggests that all three parties will try to
claim it, and their reletive bargaining power/prowess will
determine the outcome. Maybe the publisher does get it - or maybe
royalties go to 30% - or maybe the consumer gets a cheaper
price.
None of the above outcomes are more right or better. this is essentially a zero sum game where the printer loses money by virtue of being eliminated, and the value he used to add gets divvied up by the others according to the free market.
are e-books going to be the end of libraries? and I don't mean libraries as institutes of research, but public libraries where my cheap-ass brother can read the latest best-seller for free?
I find the $9.99 price outrageous for books that are over a
year old
If books were steaks I'd agree. But how does a great novel suddenly
lose its value after 365 days?
"The concept that because a book is an e-book it should automatically be priced significantly lower than a paper book is one we don't agree with...What a consumer is buying is the content, not necessarily the format."
Grrrr.
Clueless about costs in her own industry or a dissembling asshole?
You decide.
I hope they keep the prices high even as volume increases. That way there will be more pirated versions available. Just like the music and film industries.
If books were steaks I'd agree. But how does a great novel
suddenly lose its value after 365 days?
Movies lose retail value in a lot less time. You do have budget
theaters in your neck of the woods, right? Y'know, the one's that
show flicks at reduced price 6-8 weeks after the first run theaters
do.
"as close to what a printed book costs as we can get away
with."
Free minds and free markets clashing over free books? Of course
they should sell for whatever price they can "get away with". The
question is, how are they getting away with it?
If books were steaks I'd agree. But how does a great novel
suddenly lose its value after 365 days?
The novel is worth different things to different customers.
Hardback releases are like first run movie theater releases.
Certain customers are willing to pay more, so you give them
something exclusive (the ability to access the content sooner/in a
nicer looking book/on the big screen) at a higher pricepoint. Once
those consumers have exhausted themselves, you release it in
paperback or in the crappy theaters, and let in the people who
weren't willing to pay the premium. Later on, you release it on
ebook/dvd for the people who are only marginally interested. This
way, the seller can obtain a greater total value than by making it
available at the overall market clearing price straight away.
Well, I think we know now that if bits are dramatically overpriced, then users will turn to piracy. Peer-to-peer sharing of books will prove no more difficult than the same in music and video.
Let's ask one more question: how much are customers willing to pay for an e-book? With the answer to this question and one to the question in the subject line, we have starting points for some haggling. Whatever the two parties agree on will be the final selling price. It's called balancing the supply and demand, and I believe that's still the way the US economy operates.
It's astonishing how so many commenters on a libertarian site have such a poor grasp of what capitalism is. Half the people here presume to know what's best for someone else's business. Others attempt to justify their theft by pronouncing that e-products are "overpriced." When we lament the death of capitalism, let's not forget that many of its so-called defenders are culpable.
ed - one does have to admit that, in terms of material that is
reproducible as easily as digital information, there are arguments
that cut both ways.
After all, if we could reproduce cars or food or booze the same way
we can books, movies and music, would we really want to constrain
that ability?
ed, I don't think anyone here is proposing regulation, they're just complaining about the high prices and irrationality of the publishing industry.
These guys are crazy. A lot of what I pay for a book is the
format. When I buy a hardcover its mainly because I don't want to
wait, but a lot of it is that I enjoy the feel of the book when
reading.
If we're just paying for the content the prices should still be
significantly less than the paperback price since printing and
distribution costs are so much less when you don't have to ship
physical books around.
I'd consider the risk of losing access to content to be offset by
te convienience of being able to take my library with me.
And the publishers should reduce the price of ebooks as they get
further from publishing date. Still $10 is a lot for "just
content".
ed,
I'm not commenting on the market per se; I'm just noting that many
consumers will go black market if they perceive the price as being
unreasonable. I think they will at this price.
TAO,
I think ed's point - which I attempted to explain also - is that
the ease of reproduction definitely creates value in the
marketplace. The question of who claims that extra value is quite
different. The pro IP people will insist that the producer has a
right to it, the anti IP will claim that the consumer shoulrealize
the full benefit. I would argue that a belief in truely free
markets requires one to remain agnostic about what SHOULD happen,
and instead just accept that market forces will determine the new
equilibrium priceing.
Paul | May 18, 2009, 11:56am | #
ed, I don't think anyone here is proposing regulation, they're just
complaining about the high prices and irrationality of the
publishing industry.
Not irrational at all - they are just representing their interests
vigorously.
What's the overlap between people who actually read, and people
who pirate music?
I have trouble picturing a housewife optimizing her BitTorrent
ports so she can download the latests beach novel.
How Much Should An Ebook Cost?
Am I missing something here, or is the answer (as much as the
market will bear) just dog-simple?
What do we need all these models and allocations and bullshit for?
Let the market find a market-clearing price all on its own.
So it costs much less to produce an e-book than a print
version... shouldn't competition mean that some publisher will
offer the content at a lower price to see more sales volume than
their competitors? The fact that we have not seen this makes me
wonder about collusion in the industry.
Maybe the e-book still hasn't achieved enough critical mass for the
publishing industry to worry about it, or perhaps they have too
much vested in the process of producing a print version and are
worried that it will break their business model, so they keep the
e-book prices high so that people don't migrate to e-books en
masse.
What we really need are publishers that are wedded to the e-book
market, so that they don't worry about hurting the sales of their
hardcovers. Is the market ready for that?
-- Jim
Well the only real value of a paper book as opposed to an ebook
is the ability to visibly show your book colletion to make yourself
look smart and well-read. You can't line your bookshelves with
ebooks.
Apple's entire business model is centered around selling products
to insecure people who use said products to "say something" about
who they are (i'm hip). At this point, ebooks have more advantages
than paper books (text search, less storage space, and all the
benefits of a digital medium). While some people will say
subjective if not irrational things like "I like the smell of paper
and ink" or "I like the feeling of fondling the corners of the
paper between my fingers" to justify paper books as being superior,
the bottom line is they're probably just posers with large
bookshelves prominently displayed in their home and/or office.
"Look at me, I read a lot!"
"You do have budget theaters in your neck of the woods,
right?"
I used to, until the city council chair secretly made a deal with
douglas theatre company to prevent any other theatre company from
doing business in town. Douglas then proceeded to sell it's
business to marcus theatre company, transferring the contract and
ousting all the 'budget' and competition theaters...
bubba,
I don't think that's the issue so much as the fact that most people
don't read long anything on their PCs. However, once e-readers get
down enough in price, that will change.
domoarrigato, they are being irrational. The market has already
demonstrated its willingness to widely defy legal enforcement of
copyright when faced with price inflexibility and a change in
distribution.
bubba, she won't have to optimize ports to download files a few
hundred KB in size.
@ bubba
Like your hypothetical suburban housewife, I don't engage in online
piracy. However, we do have an effective weapon at our disposal -
if the book is more than $9.99 (I've seen a few) I won't buy it,
for the Kindle or as a hardcover/paperback.
I don't know what the distribution costs are, but they ain't free. File servers, IT, software, and electricity cost real money.
It certainly should be up to the merchant to offer his books for
sale at whatever price they want.
The smarter ones are going to take into account differences in
overhead costs and lower the price. EVERY cost cannot be lower, but
some will be.
Printing and Distribution: $ 0
. . .
There is lots of room to quibble with these numbers, but the idea that an e-book should be priced the same as the hardcover is transparently ridiculous.
I can quibble with that one right there. Where is there a free,
secure hosting server? Amazon takes the majority of the sales price
as their cut, last I read.
He left out any calculation for advertising too.
OK, ML just beat me to that one.
I certainly agree that the "right" price is the one that buyers and sellers agree on. But the market is just a little more complicated than I think some of you realize. Hardcover, paperback, ebook, and audio books all compete with each other and the used market and the public library. Most books I would much prefer to read on my Kindle but some I would rather have in printed form and I always want to have something to listen to in my car. Only a free market can sort through all of that and come up with the right price.
What is this, Daily Kos? Did I somehow stumble onto the blog for
Nickel and Dimed?
Free minds and free markets, dammit! There is no "should" when it
comes to prices.
(And just between us, the convenience of e-books is so valuable to
me that I would actually be willing to pay a premium for them.)
It's astonishing how so many commenters on a libertarian site have such a poor grasp of what capitalism is. Half the people here presume to know what's best for someone else's business. Others attempt to justify their theft by pronouncing that e-products are "overpriced." When we lament the death of capitalism, let's not forget that many of its so-called defenders are culpable.
Straw man. Next?
and I always want to have something to listen to in my
car.
Isn't the new Kindle gadget supposed to do text to voice? anybody
know if iPhone already does this? Should be great for "A Brief
History of the Universe."
A pair of files with the print and voice book together so the
consumer can pick the way they want to digest it sounds like a good
idea for someone to try.
There is no "should" when it comes to prices.
Yep, that's pretty much all that needs to be said. I'm a bit
befuddled by the original post and the ensuing conversation. Why
does anyone here think that a seller's costs have, or should have,
anything to do with his price? What the heck?
I think the thing with irritation at ebooks costing what they do
is that one doesn't actually own an ebook (at least if one buys it
thru Amazon for their kindle). It can't be traded or sold or lent
(unless you're lending the reading device also). You are, in
effect, leasing the rights to it for your own personal use.
I have a Kindle. I love my Kindle, but there are a lot of books I
won't but until the price goes down. I do think that Amazon itself
helped spark the current $9.99 boycott there by actively selling
the idea that most handcover books would be 9.99 or less. The
second the K2's shipped out, the prices started rising.
The publishers/authors should be allowed to charge whatever they
want, but I, as a consumer, also have the right to wait them out
until the prices come down. I've often found Amazon ebooks costing
MORE than their paperback brethren. I however, have the power to
just say no, which I do. A lot.
Why does anyone here think that a seller's costs have, or
should have, anything to do with his price? What the
heck?
In a sense you are exactly right.
However, with competition the orgs that can lower production costs
are in a better position to compete on price.
Granted we are talking books here and each work should be somewhat
unique. But isn't there a huge market for "cookie cutter" books,
like romance, that are almost commodities?
The economic ignorance on all sides of this debate is stunning.
Retail prices shouldn't be set on some perceived intrinsic value to
the customer, or some multiple of the production cost, or even "as
high as the producer can get away with". Retail prices should be
set at the profit maximizing price -- not the profit maximizing
price per unit sold, but the profit maximizing price for the
aggregate of all units sold.
Finding this price is the tricky part. Set the price too high, and
you will sell too few units. Set the price too low and you'll leave
profit on the table. For a tangible good like a paperback book,
there is some physical production cost that puts a floor under the
retail price. For a digital product, there's almost no floor -- the
incremental cost to produce another digital copy is
minuscule.
I suspect that ebook, online music, and pay per view movie
distributors are charging way too much, and hence selling (or
renting) far fewer copies than they otherwise might. Pay-per-view
movies on cable tend to priced about the same as a movie rental at
the video store, yet I've long thought they could price them much
lower and bring in a lot more revenue. The same may be true of
ebooks and online music, but I guess it's up to the distributors to
find out on their own, and for those who discover the best pricing
strategy to make the most money.
I suspect that ebook, online music, and pay per view movie
distributors are charging way too much, and hence selling (or
renting) far fewer copies than they otherwise might.
I suspect that these people know their business better than I do,
and have a very good idea what the maximum market-clearing price
for their wares actually is, consistent with generating sufficient
royalties to make them competitive in acquiring the rights to their
wares.
Folks, we're talking about what the price "should be" because of
the nature of IP laws.
Sheesh.
Libertarian: set whatever price you want and I will let you know
if I will buy it.
Reason: It is immoral to set your price so much higher than your
cost.
I only buy paperbacks because they are easier to carry around (in bars, on the train, etc.)
So I find the $9.99 price outrageous for books that are over a year old. That's one of the reasons I am avoiding a Kindle. If they introduce some better pricing for books once they aren't quite as new, then I might be brought on board.
I'm not expecting books for $2, but would it be that unreasonable to have a 'paperback' version of an ebook at $6-8 a year after publication?
That's what's keeping me from buying a kindle as well. $9.99 is
only cheap compared to hardcover editions of new books. The value
of most books drops to a few dollars or less used within a year. On
most books, a used version sells for less than five dollars, the
kindle version sells for 10, and the brand new version sells for a
little over 10. I am willing to pay a little more for a book for
the convenience of the kindle, but not 2-3 times as much as I was
paying before.
Not irrational at all - they are just representing their
interests vigorously.
Yes, they are being irrational.
Craig's comment above highlights the 'profit maximizing price'. I'm
sure that's a complex task with all the various versions, but I
think they would increase volume significantly if they cut ebook
prices after a certain time period (6 months, 1 year, etc.). That
would decrease margins some, but would you rather have lower
margins and $10 million in profit or higher margins and $8 million
in profit?
Patrick, where are people saying it's immoral to set a high
price? I am arguing (and I'm sure a few others) that the book
publishers can make even higher profits if they take a closer look
at their pricing structures. They need to do a better job of taking
into account demand and how that changes over time.
I say the same thing for movie theaters...there is no way it should
cost the same amount to see a movie on a Monday or Tuesday as it
does on a Friday or Saturday. That's just stupidity.
Libertarian: set whatever price you want and I will let you know if I will buy it.
Reason: It is immoral to set your price so much higher than your cost.
you set these two things together as if they contrast. They don't.
you're too stunted to realize it, probably.
You folks don't think any of this is about protecting the print market? Most major publishers have a great deal of money wrapped up in printing infrastructure.
Libertarian: set whatever price you want and I will let you know if I will buy it.
Reason: It is immoral to set your price so much higher than your cost.
Straw man. Next?
If you young whippersnappers are so smart, then go ahead and make your millions selling new $1.00 e-books. No one's stopping you.
"What a consumer is buying is the content, not necessarily
the format."
Does that mean Naomi Klein's books are now free?
You folks don't think any of this is about protecting the
print market? Most major publishers have a great deal of money
wrapped up in printing infrastructure.
Amazon doesn't.
Does that mean Naomi Klein's books are now free?
I hope she's crying in her Fair Trade chai.
I won't speculate on what the optimal price for ebooks will be. I just hope publishers are smart enough not to go pleading to the government about regulating pricing on ebooks so they can avoid being undersold or preventing ebook reselling (through DRM)
This whole thread is a great example of RC'z Third Iron
Law:
3. The less you know about something, the easier it
is.
Meh
Go to
www.gigapedia.org
register
go to the Search at the top right select "gigapedia"
Search for a book title or author
click on the book your interested in
click on the links tab
and click on a link
download the book
you may have to enter an anti-bot code
I've just download
The Time magazine top 100 books of the twentieth century
Loads of books about materials engineering, lasers and bio
materials
the complete works of Thomas Paine
and a load of Frank Miller and Alan moore
The site is fucking awesome
One point that hasn't been mentioned here is that technology has
shifted the capital requirements of publishing. The publisher used
to have to spend money on paper, presses, warehouses, trucks, etc.,
etc.; a lot of the need for this has been eliminated (or at least
lessened) by technology; but some of it hasn't been eliminated so
much as it's been shifted to the consumer.
The consumer buying a paper book brings just a $20 bill to the
table; the consumer buying an e-book brings money and a $400
investment in a machine without which the e-book is of, at best,
limited use.
(The same is true of other sectors of the publishing business. My
TV, DVD player, iPod, internet connection, and computer all
substitute for things that the publisher, record company, or movie
studio or cinema used to pay for out of their cut.)
The publisher still should, deservedly, seek the profit-maximizing
price for his wares. If he does not consider the capital investment
on the part of the consumer, though, he's likely to get that price
wrong.
And this is all before you consider that a paper book has financial
value, in that is can be re-sold (or given away or at least lent)
by the consumer. If I read a commercial, non-warez e-book and
recommend it to my friends, that recommendation is more likely to
result in additional sales as I can't just lend them my copy.
Everything I know about economics, I learned from the Lone Biker
of the Apocalypse:
Price, it's not what you say it is, it's what the market will
bear.
[T]here is no way it should cost the same amount to see a
movie on a Monday or Tuesday as it does on a Friday or Saturday.
That's just stupidity.
I don't have anything for sale at present, but when I do,
I'll be sure to consult the geniuses here at Hit & Run
first.
R.C. Dean: Bingo. I may be the only commenter in this thread who
has actually worked for a book publishing company (though decades
ago), so let me add my $.02.
At least back then, publishing consultants used to say that the
rule of thumb was that you had to price your books at five times
the cost of paper, printing, and binding to make any money. So the
costs of creating the physical, on-paper object were only about 20%
of the total cost (plus profit). The others were editing, overhead,
distribution, and all the other expenses publishing companies have,
including all the costs of publishing duds.
With ebooks you are (nearly) eliminating physical production and
distribution costs, but you still have all the rest. Compared to
the standard hardcover cost of $25-30 these days, a $10 ebook is
only 33-40% of that price. This does not sound unreasonable to
me.
The consumer buying a paper book brings just a $20 bill to
the table; the consumer buying an e-book brings money and a $400
investment in a machine
Last I looked, they were charging $99.99 for the machine.
Not to mention $6.99 for the paperback.
People buy Kindles and the like not to save money on books, really,
because you can get the book cheaper on paperback (or used) than
you can via download. They buy it for fun (they like gizmos) and
convenience (the features, the storage, etc.).
Papaya -- I used to work for a publisher, too. Everything you
say is/was true.
The place I worked for published academic titles. We regularly got
complaints from grad students and such that our prices were too
high and that if we lowered them, our increased sales would make up
for the lower unit price. Periodically, when we had a title with
crossover appeal, we'd lower the price to trade-paperback range.
And you know what? We'd sell almost exactly the same amount as we
would have at our standard price. This was consistent with
conventional book-selling wisdom. I.e., most books have a
set number of buyers, and changes in price won't change that very
much.
I don't have anything for sale at present, but when I do,
I'll be sure to consult the geniuses here at Hit & Run first.
Promise to stay away until then?
R.C. Dean: Bingo. I may be the only commenter in this thread
who has actually worked for a book publishing company (though
decades ago), so let me add my $.02.
Will that add to the price of the e-book?
Yeah, they can charge any price they want. But it seems like
they aren't getting the hang of the new possibilities.
One of the possibilities is piracy. More importantly, they have a
great opportunity for price discrimination (which is a Good
Thing).
They can charge a really low price for something that's as plain
text as you can get. Pretty formatting for a bit more. Author's
special notes for a bit more. Synopsis for all chapters and overall
for twice the retail price (for people who want the Cliff Notes
version so they can sound smart at Georgetown cocktail parties). Et
cetera.
The correct answer to how much should they charge is whatever price will not turn off so many customers as to not turn a profit. That being said, if the economics are as Doherty and his source claims there is plenty of wiggle room for a publisher to underprice his competitors for the high volume market. This is an immature market sector and the price equilibriums for it have not yet been found. The publishers are guessing where it is right now while trying not to undercut their own dead tree editions.
I don't have anything for sale at present, but when I
do,
I'll be sure to consult the geniuses here at Hit & Run
first.
You would be well-served if you did. It would be some free
consulting.
Specifically, go learn more about demand-based pricing. Have you
actually been in a movie theater on a Monday or Tuesday? They
should be offering 20-50% off so they can get more than 5 people
per showing.
It's idiots like you that actually work for companies and run
businesses. There is quite a lot of stupidity in the world and most
companies can make more money if they keep people like you away
from making decisions.
JB,
Good advice.
I noticed that most Kindle books were priced around $9.99, so I did
the MSRP for mine at $6.69, which Amazon has discounted by 20%
right now anyway. The PDF is $6.69 at E-Junkies and I control that
price.
Since I am a new, unknown author, I priced lower than others, offer
free downloads to people who might spread the word and will start
an affiliate program soon too.
Need to clean up the website. Getting decent traffic, but it is
sloppy.
Added lots of "extras", like a Google map to the story events, a
narrative backdrop to the story and character profiles.
Just hoping that people like it and provide feedback to make the
next one better.
It's idiots like you that actually work for companies and
run businesses. There is quite a lot of stupidity in the world and
most companies can make more money if they keep people like you
away from making decisions.
Stupid Circuit City manager doesn't recognize my true greatness! I
could be in charge if I was a kiss-ass like him. I'm happy wiping
hard drives for stupid customers if it means I don't have to whore
my genius like rich fucks do.
Stupid Circuit City manager doesn't recognize my true
greatness! I could be in charge if I was a kiss-ass like him. I'm
happy wiping hard drives for stupid customers if it means I don't
have to whore my genius like rich fucks do.
Sounds more like a case of "Workin' at the Car Wash Blues".
25% royalties? Oh man, you are FUNNY. (And I speak as someone
who's written a dozen books in my particular niche, for a variety
of publishers). I *wish* I made 25%.
That said, even if Amazon's only giving 30% royalties when you
publish to the Kindle platform yourself, that's practically 3x what
you'll make from a "regular" publisher, and you don't get paid a
mere 2x per year.
Stupid Circuit City manager doesn't recognize my true
greatness! I could be in charge if I was a kiss-ass like him. I'm
happy wiping hard drives for stupid customers if it means I don't
have to whore my genius like rich fucks do.
That said, apparently the management of Circuit City could have
used a little help.
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