February 27, 2012
Why should the price of ebooks . . . be on the floor?
by Dennis Johnson
Given all the coverage of the feud between Amazon.com and the Independent Publishers Group (IPG) over Amazon’s demands for bigger discounts on ebooks, an Irish Times story by Declan Burke on pricing ebooks has a whole new resonance.
The story, headlined “Why should the price of ebooks . . . be on the floor?,” begins with bestselling author Stuart Neville (The Ghosts of Belfast) complaining about the fact that the Kindle edition of his newest book, Stolen Souls, has been slapped with a “$9.99 boycott” by some angry readers. “I’m amazed that people are that cheap,” he says. “Do they think a year of my life is worth less than $9.99? Do they really believe that 10 to 12 hours of entertainment isn’t worth the equivalent cost of two or three coffees, or less than two beers?”
He adds, “I think it’s the sense of entitlement that bothers me,” he adds. “It’s particularly common with those who believe they have some sort of right to download music and movies for free.”
While Neville makes a great point about the general diminishment of the inherent value of books by such pricing demands, he also raises the point about how difficult it is to agree upon fair pricing for ebooks. Or, as the headline of the article puts it, “Why should the price of ebooks . . . be on the floor?”
As Burke speculates, the problem grew out of the fact that “many early adopters of ereaders such as the Kindle and the Sony Reader were already acquainted with the internet, and particularly comfortable with the idea that, on the web, most of your content is delivered for free.”
On the other hand, as another bestselling author, Arlene Hunt, tells him, “People who use ereaders tend to be avid readers, they are people who are selective about what they read. Readers still want quality, both in terms of story and product. Books for 99 cent might be a novelty now, but there’s an element of you-get-what-you-pay-for there.”
In a consideration of ebook pricing for Teleread, Paul Biba agrees:
I’ve talked to several dozen people about pricing, and there’s a general feeling that something is still worth what you pay for it. Most people think free or 99-cent books have little or no value and must be written by amateurs or desperate people. Sure, the John Locke’s and Amanda Hocking’s can make money because they have established names and can take a small chunk of a million books and still do fine. But too cheap can work against you, too.
Neither article seems to have a grasp on the actual costs involved in making ebooks — like most commentators who aren’t publishers, they assume not having to print the book means huge savings in the area of 30-40%, which is extremely high, and overlooks the fact that ebooks have costs of their own — but Biba includes some fascinating discussion about buyer psychology and the demands it puts on pricing:
There’s a ton of research available on price theory that is instructive. For example, we’ve all seen products priced at what are called “charm prices” or numbers slightly below an even number: $2.59, $2.79, $2.95, $2.98, or $2.99. Perhaps you’ve wondered what the psychological underpinnings were for the different decisions.
Kaushik Basu, chief economist to the government of India, performed game theory research which revealed that buyers’ decisions are not materially affected by the “cents” part of any purchase. He found that since people read numbers from left to right, a left-digit blindness effect causes us to not read the last two digits, so we mentally see $4.99 as $4.00. So, according to Basu, you might as well charge the maximum cents, i.e. $4.99 instead of $4.29 because there won’t be noticeably more buyers at the lower price anyway.
If something is priced below $10, people round downward between $1-$10, but as soon as the price tops $10, the rounding moves to $10-$20, and a whole different attitude sets in about relative value. With prices of $26.99 or $29.99, you’ll see no real difference in sales. Pop the price to $30.29 and suddenly the rounding is $30-$40, and there will be buyer resistance.
Then there’s the fact that not just pricing, but the quality of what’s available nowadays may be impacting concepts of value. As Biba observes: “The ease of being able to upload books for free to Amazon, B&N and others may actually be encouraging a lot of people who aren’t really writers at all and who can then afford to just stroke their vanity.” Their willingness to sell their wares at rock-bottom prices, and the flood of such books in the marketplace, dilute the concept of fair pricing, says Biba: “Serious writers would only benefit if some way can be found to discourage some of the awful hacks that upload material so badly written and conceived …”
Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House.
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31 Comments
I don’t own any sort of e-reader, but if I did, I wonder how much I would be willing to pay for books. I like owning books and having them in my house. I wonder if ebooks are devalued not only because people are used to getting electronic content for free, but also because they’re intangible? Seeing my fat Anna Karenina on the shelf reminds me of the summer I spent reading it, not the $15 I paid for it…but with ebooks, it’s like paying for a document.
I saw someone comment that The Fallback Plan’s ebook price was too high for such a short book–but would they pay more if my book was longer? I don’t think so.
I wish we would adopt the German book pricing system, as it respects books as a valuable cultural resource. Books should not be commodities. Why should I spend eight years on writing the best book I know how, foregoing daily pleasures for rigorous discipline, just to give the result away for free? If good writers can no longer make a living at their art, our culture suffers. A book isn’t just about words, it’s about beauty and ideas. Any good reader knows this. A writer gives them not only a story but a whole world.
Even as a writer myself, I sometimes balk at the price of ebooks. But only when I can buy the paperback for less. That’s when it comes down to how badly I want it. I have no problem paying for an ebook what I’d pay for the same in paperback. (Especially because I almost never buy hardcovers. Can’t afford to.) But if the paperback’s cheaper, then it’s hard to justify paying more for the ebook.
There’s a thing when it comes to the costs of ebooks, though . . it would seem that if you create one master file and send that file out hundreds of times, the cost of producing each book gets cheaper depending on how many units you sell. Ebooks seem to have a much lower overhead; systems put in place to create and sell eBooks are snippets of replicated code rather than physical lots of books which must be created anew each batch, shipped, stored, and take up rather a lot of space. The equipment used to craft eBooks is less than the equipment needed to create real books–my puny laptop can create and store tons of ebooks, and my laptop is considerably cheaper than a printing press, a truck for shipping, a warehouse for storage, a bookstore for display, and all of the persons needed to make these things happen.
I know that labor and technology are needed to create ebooks, as well–but is it really comparable?I don’t think that ebooks have to be 99 cents, but when I’m buying an ebook that costs as much or almost as much as a trade paperback, when the overhead for creating ebooks IS lower, there is a problem. I tend to disregard comments such as “A year of my life isn’t worth the price of a couple of beers?” It’s not as though we’re suggesting rock-bottom ebook prices, but we can point to a format that we know has higher overhead and more intrinsic value (all things being equal–if the ebook is not enhanced in any way, the treebook has more value to the reader if for no other reason than it can be sold, traded, donated, or re-purposed in some way, while a copied file has no more value than the information within it) and that format has an established price range we can look to for comparison. And we do compare it. And we come up short.
I agree completely. I don’t think anyone is questioning whether a book is worth the 9.99, but it’s when you can buy an actual physical copy of the book for cheaper that the consumer is questioning. Also, the article says there are costs for publishing and ebook. Of course there are. But, once the initial costs are covered, a digital book can be downloaded over and over thousands of times at pure profit to the publisher/author. If you look at it, ebooks will probably end up being more profitable.
“Awful hacks.” Condescend much, Mr. Biba? Personally, I think Stephanie Meyer is an awful hack, but that doesn’t seem to affect the sales of her insipid books. The point is, one person’s trash is another’s treasure. And Biba really ought to climb down from his golden plated soapbox.
I use a Kindle regularly, but The Fallback Plan was one book I purchased in a physical form. The choice of which authors and which books deserve a physical space on my bookshelves is not a decision that I take lightly.
About half the books I read are on the Kindle. I was first persuaded to experiment with an ereader as I was running out of shelf space. The per square foot cost of rent is too high to keep adding a Billy Bookcase each time one fills up.
But since I started reading on the Kindle last summer, I found several advantages: 1. Riding the subway and reading is easier with just one hand on the device; 2. The font of the kindle is always the same, always clear and always with a high contrast ratio unlike many books with bad font choices, cheap paper and poor quality printing; 3. Instant gratification with making a purchase. However, none of these advantages can makeup for the fact that Kindle books can’t be resold at the Strand, can’t be lent out to friends, and can’t be placed on a bookshelf to impress potential lovers. Do the advantages outweigh the disadvantages to justify expecting the same price for an ebook as a printed book?
Or put another way, why did I choose to purchase the The Fallback Plan in paperback and in the same week Charles Bukowski’s Ham on Rye for Kindle? In some sense, I was, as a consumer, betting on the physical copy of the The Fallback Plan to pay back some social dividend: reading the book on the subway, having the book on my bookshelves, serving as a conversation starter. Physical books make a statement that Kindle simply never can.
Flip it around: Would you pay 9.99 for a paperback? And I think, for most avid readers, the answer is, depends on the book. There are books I’d gladly pay $10 for in paperback, but I have to be sure I’m going to enjoy that book for that price point. When you read over a hundred books per year, it adds up. If the paperback is $5 and the ebook is double that, there’s a problem.
Not true,, and exactly the mistaken logic that always derails this conversation: Publishing a book never involves “pure profit.” Overhead costs are unchanged, payments to authors remain unchanged, payments to distributors remain unchanged, and so forth.
I’m honored I made the cut for your bookshelf, Ian! Thanks for the nice compliment.
See my note in response to Jennifer, above; again, this describes not the reality of publishers making ebooks, but perhaps that of self-publishers of ebooks. For our business, in any case, this description — and its inherent insistence that publishers are being dishonest about the cost of making ebooks — is an unfortunate derailment of a reasonable conversation. For example, for a publishing house making ebooks (as opposed to a self-publisher on a laptop) the process actually involves much of the same “equipment” as making print books — ebooks start in the actual files made to send to printers. They have the same mechanical origins, in other words, as well as separate later costs in adapting them to different formats. Lessened costs? Yes. Insubstantial costs? No. Then there’s the fact that they share ongoing (and neverending) overhead costs, staffing, and so forth. I’ll let others decide the value of all this to the process, or whether one person doing this on the laptop is just as good as a publishing house doing it. Just to say that for the kind of investment publishing houses put into ebooks, you can’t just extract the cost of ebooks from the process and say it’s so minimal as to amount to nothing, nor does it diminish to the vanishing point over time (although of course, just as with print books, costs do go down. But that’s true of all kinds manufacturing, and I can’t think of another industry where those diminishing costs have led to such a furor over return on investment!) And for that kind of publishing house to make a transition to only digital publishing would be impossible given the kind of pricing now expected for ebooks.
My issue with $9.99 pricing is that I grew up with paperbacks costing less, while being tangible and slightly more expensive to produce, and that I can always turn to the used book market (either on amazon or through brick and mortar vendors) and get something for around ~$4.
E-books have a challenge in that they must offer competitive pricing for early adopters of hardcovers, which can be in the $15-$30 range, as well as compete with the used market a year or two down the line. (as low as $4, with New York Times Bestsellers being so cheap that used book stores turn them away).
I think that publishers of e-books should look to other industries that have been digitally distributing for longer, specifically Steam’s model on video games. Steam matches physical prices for several months after the game’s release and then slowly decreases the price.
This is a good article. I have heard of publishers putting ebooks out for free for a short time or .99 to try and build followings for their authors. I don’t know that it works. It seems the people who jump on those deals are looking for freebies more than new books to read. About the sense of entitlement, I feel that is true in many aspects of society, not just ebooks. It is a shame though. As was pointed out, a year of work and creativity should be worth a little more. Even at $9.99 the author makes very little unless the book goes viral and then that is just in the quantity of purchases, not the amount per book sold.
The real fear readers / writers / publishers should be concerned with Walmartizing the publishing industry (Now not limited to Walmart but instead any big box retailer from Ikea to Trader Joes to Amazon). These large retailers are no longer squeezing better price through volume ($1 profit on 1,000 items is still less than $0.10 profit on 1,000,000 items). Instead they are squeezing suppliers to cut costs too, which ultimately means lower quality products for consumers. Maybe, for example, a vacuum cost $20 and a big box store squeezes the supplier to cut the cost in half; the result is a $10 vacuum that breaks the third time you use it.
The pressure that Kindle and Nook create with lower and lower cost ebooks is that its very possible book consumers will expect lower prices. Well then that would likely mean pressuring suppliers — writers, editors, publishers — to cut costs to create the literary equivalent of the $10 vacuum. Maybe that means fewer copy editors, more layout mistakes, cheaper cover art. For readers, this means lower cost books, but also lower quality books.
Dear Melville House: please dig my last comment out of moderation hell and delete this one. It was useful, I promise. I just forgot that when you try to post a link here, your post gets sent to moderation hell, even after you pass the captcha test . . .
Brilliantly put. Thank you. — DJ
Thanks for this. Some good points. All roads lead to Amazon, it seems: they exploded book discounting to such a level that compensating cover prices no longer reflect a knowable reality, it’s true. (Yes, discounting has been going on for a long time, but Amazon took it to a whole ‘nother place.) — DJ
Might we even go further and say that in many cases, as authors and agents get alarmed by seeing headline figures like 70% bandied around, publishers are squeezed into paying a higher royalty for ebooks?
Ha! We might indeed. Might we also suggest that those royalty figures — whatever they may end up being — could more reasonably be different for small presses and indies than they are for the international conglomerates? — DJ
“The story, headlined ‘Why should the price of ebooks . . . be on the floor?,’ begins with bestselling author Stuart Neville (The Ghosts of Belfast) complaining about the fact that the Kindle edition of his newest book, Stolen Souls,
has been slapped with a ‘$9.99 boycott’ by some angry readers. ‘I’m
amazed that people are that cheap,’ he says. ‘Do they think a year of my
life is worth less than $9.99? Do they really believe that 10 to 12
hours of entertainment isn’t worth the equivalent cost of two or three
coffees, or less than two beers?’
He adds, ‘I think it’s the sense of entitlement that bothers me,’ he
adds. ‘It’s particularly common with those who believe they have some
sort of right to download music and movies for free.’”
Here’s what Mr. Neville is missing: If I wished to read his book I could
1) Check it out from the library for free;
2) Buy a used paperback at The Strand for $7.00;
3) Buy a used hardback for $1.25 plus $3.99 shipping, right from the Amazon site;
4) Buy a used paperback for $2.17 plus $3.99 for shipping, right from the Amazon site;
5) Buy a used paperback for $5.72 and get free Amazon supersaver shipping if I buy $20 more of Amazon merchandise;
6) Buy it used from any number of other online used book purveyors for less than $9.99; or
7) Borrow a copy for free from a friend or relation who happened to have it.
And all this is before I type “Ghosts of Belfast” and “torrent” into a search engine.
Furthermore, although Neville’s thrillers may be very, very good there is no scarcity of very, very good thrillers. I might opt instead for the very, very good one a friend recommended or the very, very good one that I never got around to reading when it was new — especially if they cost less than two beers. That way, I could have a thriller *and* a beer.
I might also decide that I just can’t keep plunking down ten bucks a pop to feed my book habit and fill my ereader up with free classics from Project Gutenberg instead. If I were willing to shell out just a little bit more, I could get a well-formatted omnibus edition of, say, Dickens or Wilkie Collins for less than half the price of one of Mr. Neville’s thrillers. (Or, I could get one of Melville House’s Hybridbook editions with a ton of curated additional material …)
And finally, yes, it just may be that the cost of more than two beers is too much for a twelve hour read, irrespective of how many hours it may have taken Neville to write it.
Well said
I love to read. I am not a writer, but my daughter is a blossoming writer. She spends hours, days, months writing books. I would like to think that her efforts someday may pay off. I know what she sacrifices for her writing. I have an eye condition that now makes it hard for me to read. Not many books come in large print. So over the years as my vision decreased so did my reading. Then I purchased a Kindle. Now I can read most of the books I want to and enlarge the font and the line spacing enough to be able to read it. Yes, I miss the touch and smell of a real book and the visual of the books I have read. However I still have an extensive library. I do not have any problem paying for the books I read. I used to pay for them when they were on paper, why should that change because the format I read them on has? I believe an electronic book should cost the same as a book you would buy in the store. I am getting the same experience, the only thing that has changed is the format. Why should I expect to pay less? I am not rich, but I will still buy a book instead of going to the movies. One evening out is way more expensive than a cost of a book. And the book experience lasts so much longer and can be relived over and over.
1. Sure, but an average to mildly successful book will sell 2,000 copies, not 200,000. There is a limit to this endless copying. Cutting the average price from $10 to $5 doesn’t double the total sales of all books — it may work for a few books, but at the cost of others, and at the cost of hardcover sales of the same book, etc.
2. There is a reason that publishers do not typically produce both a $30 hardcover and a $10 paperback on the same day; and it is for a similar reason that a $5 e-book on the release day of the $30 hardcover is nonsensical. You’re not paying for the electrons: you’re paying for a particular story by a particular author at a particular time. If you want the e-book more cheaply: simply wait a year or two, just like those who wait for the paperback currently do.
Why would authors have to compete with both prices at the same time? It is a trivial database update to change an e-book’s price when the paperback is published. In fact, this is what we see happening as the e-book lifecycle matures. (Remember, the Kindle is barely over 4 years old; there are not that many “very old” e-books.) E-books like A Game of Thrones (out in mass market paperback) cost less than the e-book for the (still bestselling in hardcover) A Dance with Dragons.
Sorry — I didn’t read your last paragraph closely enough. We are suggesting the same thing, it is just that I note that it is already happening.
Excellent point CW. It’s easy to reduce an Amazon price after time, especially just in time for your next release.
Very interesting arguments about eBook publishing costs and eBook pricing. I agree that the publishing an eBook is cheaper than publishing print books only by a small %. Also there are always going to be costs involved compiling and creating good content. So I kind of agree that not all eBooks can be priced at, say $0.99.
The question that comes to mind is how much cheaper should eBooks be than print books? Would it make sense to let publishers set the price of eBooks than eBook retailers, like Amazon, forcing a price on them?
The true value of a book (or eBook) finally depends on the consumers of the book (or eBook). So would it make sense to let consumers/readers decide the price of content?
The problem with eBook pricing is that at the moment its subsidizing the cost of the ebook device. 5 years ago there was no Kindle or Nook or iPad. Sony had an expensive, experimental reader without creating the ecosystem that modern readers have. Right now every ebook seller wants market share; they want to dominate ebook sales like Apple dominated music not because they care about the price of content but because they want to be the only sellers of content. Consider the “outrage” from the RIAA when iTunes became the largest music store selling individual tracks at $0.99 rather than Singles discs and Albums at the absurdly high rates the music industry enjoyed in the 1990s. Yet now most songs are are 30% higher on iTunes. But iTunes is still the number one music store.
Its likely Amazon recognized by the early 2000s that to remain a seller of books in the future, they needed to get into ebooks, and to ensure that they locked customers in they created a proprietary format. They’ve also made Kindle available on every idevice, Android and desktop computer. They would probably make Kindle software for the Nook if Barnes and Noble allowed it. The point for Amazon is to become THE store that consumers go to for electronic books in a future where fewer physical books are sold.
The trouble for Amazon is that ereader hardware is still expensive. The first Kindle was $400. How does Amazon convince book buyers to invest that kind of money without even having content for the device? At least with the iPod, music buyers converted CDs to a device, so even if they never bought music through iTunes they had some content (and not to mention downloading content from Napster, Kazaa and others). But by insisting that ebooks cost less for the consumer, then the outlay for the device can be offset by savings on the content. “Buy the expensive reader, get discounts on books.”
The price of ereaders has plummeted. Entry level Kindles are $80, and if you just want the software, they are free. That’s reduced the disparity, but still not enough to allow ebook prices to creep up. When Kindles are $30, full color, and have flexible displays, ebook prices will begin to rise just as iTunes song prices have risen 30% to $1.29.
In the long term, ebooks will eventually cost readers more. There is no overstocking ebooks, and so fewer discount sales. There is no buying used copies or selling copies back to the store or borrowing books or lending books to a friend.
There is certainly a place for the $0.99 book, just as there have been dime novels and pulp fiction and mass market paperbacks, but in the long term new books will eventually be released at higher rates. There will be fewer store options — I suspect eventually only iBooks, Kindle and possibly, maybe, Nook, survive as closed device platforms.
That’s a really smart observation about the possibility of ebooks actually eventually costing more. Now there’s something a lot of people never thought of! Thanks for this. — Dennis Johnson
Why is S. Neville complaining about his ebook selling for only $9.99 –he
makes a larger percentage royalty on sales of his ebooks then on sales of print editions.
For many of us, ebooks are an add-on service, not our primary reading source. If I’ve paid £18.99 or more for a hardback novel I think I should be given a voucher to download to my kindle for free – it’s what happens when I buy a bluray or some DVDs and receive a one-time code to upload the film onto a hald-held device or computer – and DVDs are cheaper than hardback books