Tuesday, March 01, 2011

E-Book Pricing: This Will Not Stand

A book chosen at random from the coming week's New York Times mass market paperback fiction best-seller list: The Midnight House, by Alex Berenson. Haven't read it. Don't know if I ever will. That's not what this is about. Here's what this is about:

Mass market paperback cover price: $9.99
Amazon Kindle e-book price: $8.99
Borders e-book price: $8.99
Barnes and Noble e-book price: $8.99

Materials cost of an e-book: $0
Printing cost of an e-book: $0
Storage/warehousing cost of an e-book: $0
Shipping cost of an e-book: $0

Okay, not exactly $0. There's hard drive storage space, bandwidth, etc. But the efficient cost of storing/downloading a single copy of an e-book is damn close to $0.

Another difference between paperbacks and e-books is returns. Send 50 copies of Midnight House to Wal-Mart, and the publisher may get 25 ripped-off covers of copies that didn't sell sent back for a refund of the wholesale price. An e-book that's sold generally stays sold.

And yet e-book prices hover around (and sometimes exceed!) paperback prices.

Why? Because you're willing to pay those prices. If you weren't willing to pay those prices, those prices would come down.

How far down? Well, as far down as they can come and still bring in a profit for the seller. And the seller would continue to produce e-books as long as they continued to produce a better profit than he thinks producing something else would.

A little Googling says that the average author's royalty on book sales is somewhere in the range of $1 to $1.20 per copy. I don't know anyone who doesn't want authors to get paid for their work. I'd like to see them get paid more than $1-$1.20 a copy, actually.

And yes, even absent dead-tree considerations, a publisher still has costs. An editor has to evaluate the book, decide whether or not to publish it, and work with the author to make such changes as are required to get it "there" for publication. The author usually receives an advance on royalties, which means some of the publisher's money is put at risk. There are overhead and administrative costs (data entry/formatting/cataloging, etc.). And that storage and bandwidth and such. There are affiliate commissions. And so on, and so forth.

Still, it seems to me that as a stand-alone operation -- i.e. if the e-book sales are not expected to subsidize hardcover and paperback losses -- an e-book that sells at all well for $5 a pop should produce a fat profit.

The obvious exceptions are titles like textbooks: Books with a limited market but whose readers really, really have to have them and will pay whatever it costs to get them.

For "normal" e-books, the $8-$11 pricing scheme that seems to prevail at the moment looks like it was intentionally designed to encourage bootleg/pirate epubs.

Assuming that DMCA, DRM and all the other schemes to crush that phenomenon fail miserably -- and that's a very safe assumption -- I predict a $4.99-$5.99 price point (in March 1, 2011 dollars) for "current catalog" mass market e-books within two years.

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