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EBook Pricing – my yearly brain dump

So, yet again the wonders of ebook pricing have built up in my brain meats and need to be expunged, lest they cause my eyes to bleed any further. This is partly inspired by reading shouty arguments on CNet talking about the rights of Amazon buyers to give 1-star reviews to ebooks they consider expensive – I don’t want to get into the concept of right to review, but the things they were using as arguments for ebook pricing in the comment stream were a lot of the things that I used to consider truisms, just said with a slab of bile and uninformed anger.

If someone invokes the Libyan, Egyptian and Tunisian uprisings in a discussion related to none of them then they lose the argument, á la Godwin. This I decree. Idiots.

So, how much does it cost to produce a hardback book? How much does it cost to produce a paperback book? How much does it cost to produce an ebook? It doesn’t matter. This was the point that I’ve got stuck on in the past, but as I’ve looked into book pricing more and more the price of the underlying physical materials (and editing, and author fee, and admin, and advertising, and transport, and storage, etc, etc) means very little – books are sold at the price which the market will bear. This jumps up by a pound or two on paperbacks every few years and hardbacks bounce all over the place based on how well the publisher thinks the book will sell, but no matter how much the book takes to produce the price stays the same.

The actual physical costs of producing a book, the bit that varies between ebooks and papperbøks, is something that it’s difficult to get out of people. I’ve heard estimates of everything from 2-5% up to 75% of the overall cover price of the book, and as far as I can tell all of those numbers are probably correct – the price of the book is not to do with how much it costs to make.

Unfortunately it is here that we hit on the problem – people know that nicer things cost more money. If you have a flimsy, fall apart, US edition mass market Mills & Boon novel you don’t expect it to sit on your shelf for years in pristine condition (unless you are one of those special collectors – well done…in a scary kind of way) and they are not constructed in such a manner. If you have a hand-bound, engraved edition of one of Neil Gaiman’s books, signed in quill pen by the man himself while Amanda Palmer serenaded him on the way to their wedding then you are probably expecting it to last a while. At those two extremes the manufacturing cost will most probably impact the asking price, but probably not as much as you may think. The normal books, the ones that are £15-18 undiscounted in hard back and £7-£9 in paperback when they appear, probably don’t cost all that much different per unit (considering all the associated costs, not just physical) in the long run and almost certainly not the 2x multiplier that the cover price suggests. But the hardback is demonstrably a ‘nicer thing’ that people are more happy to pay more for, because there appears to be a reason why it costs more. The real reason is that the publisher wants the early adopters to pay a premium, before the cheaper, less profitable, paperback appears at a time in the future. Windowing, I believe this is called.

Anyways, now we come to ebooks – £15 for a newly released ebook, £14.99 for the hardback version. At the back of our lizard brains we immediately cry “No!”. Why should we pay more for an ebook, with “no production” costs and no physical object to fondle in a way that shows our money was spent wisely? There are several pieces to this, but in general I agree – if the price is just a made up figure then the publishers, understanding human psychology (as they should – if not, there are books about it), should probably tweak the price to be below the physical book price. However there are a couple of bits:

  1. Ebooks have VAT charged on them, paper books do not. This will hopefully stop soon, as I’ve heard tales of changes being pushed through european law to classify ebooks as books (although that is a legal minefield open to manipulation if they don’t get it right) but at the moment in the UK 1/6th of the cover price of an ebook is tax. So, our £15 ebook is actually £12.50, rather than £14.99 for the paper book. The ebook looks a little bit better now.
  2. Discounting. Amazon are the main place that ebooks are actually being sold in a reasonable quantity at the moment (the reason I have a Kindle is due to the woeful state of non-Kindle ebook sales, including availability as well as price) and they were originally very good at offering ebooks at a lower price than they did a physical copy (whether paperback or hardback was currently the standardly available edition). However, at the end of last year they introduced the ability of publishers to set the price of an ebook, which meant that in many cases the price then rose to above the physical copy’s price. I’m not sure if Amazon allow publishers to do this for physical copies (as I suspect the price setting was a bargaining chip used to get more ebooks into the Kindle store in order to make it a worthwhile proposition to book buyers) but Amazon do discount a lot of their physical books, cutting their margins in order to ship more units – being an online seller they can do this and it’s why brick and mortar book stores are closing all over the country. So, the £14.99 for our hardback copy was probably an RRP of £18, making our ebook look even nicer in price.

These two points don’t justify the high initial pricing of ebooks, but it does give a couple of extra reasons why it’s not as unreasonable as the shouty people on the internets think. In the end though the price of a book is really just a number plucked from the air. For physical books that go through the publisher system a large number don’t make any money (again, the percentages I’ve seen that say how many do make money vary as wildly as almost any stat publishers produce seem to) but in the end it all balances out so that some cash is finally made. Over time the publishers are learning, and some have already done so – look at the top of the non-free Amazon chart and you will see authors who you wouldn’t normally expect, all with ebooks priced at less than the regular going rate; at the time of writing there are two sub-£3 Stieg Larssons, a £5.99 Wilbur Smith and 7 books at less than £1 by authors I’ve not heard of (apart from Stephen Leather, who I know as “the guy who’s books are in the Amazon top 10 because they are sold for 71p each”).

Vote with your wallets, that’s the only way I think we’ll manage to get the publishers to change their ways. If people don’t buy the books then the publishers will either be forced to raise or lower prices to cope. However, I don’t think necessarily that book prices should fall. If I’m happy to pay more for an electronic version of Iain M Banks’s latest novel, which I was, due to the convenience of having the electronic copy delivered to me immediately and not having another hardback to find space for in my book-filled flat then I think I should pay the asking price. Paying a decent price for a book in order that the publishing industry has enough money to continue, helping to get the work of new and smaller authors into distribution channels is another thing that I’m broadly in support of, despite the spectre of easy self publishing that hangs over things at the moment (there is still a place of publishers, in my opinion. That may change over time, but that’s the way the world works), and the strange feeling of people that we should be entitled to cheap books (especially with the restricted forms that ebooks are delivered in) is one that alarms me. I can understand why most people ebooks should be cheaper (although the restrictions on them that people complain about – resale, lending, etc – are things that I don’t care so much about) and can see that over time the publishers will probably start honouring that even more than they are doing now, but as with other media that have gone digital, it’s a hard road on the way there.


Comment from minifig
Time 13th April 2011 at 5:56 pm

Well said. Indeed, I’ve gone through much the same process. I’ll look at an eBook price compared to the hardback, and go ‘that’s terrible – why should I pay that??’ then decide I actually really want it, and really do want it now, and buy it anyway. That’s capitalism in action really isn’t it?

Although I’m sure the publishers are testing the water somewhat, you can’t really blame them for setting the prices at the high end to start with, with the prospect of lowering them if necessary in the future, since if they set them really low, they’d get even more 1* reviews for raising them at a later date. Although I also accept your reasons to suggest that the prices aren’t as high as they seem.

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