Consumers do not care what e-books cost to make—just what they cost to buy

It’s no secret that one of the justifications behind publishers keeping e-book prices high is that they cost almost as much as paper books cost to publish, so they have to sell them at high prices in order to make a profit. But Mathew Ingram has an insightful post on GigaOm in which he points out that the crucial point in e-book pricing is not what the books cost to make, but what consumers are wiling to pay.

Ingram points out that consumers probably do underestimate what it costs to make a book, noting that publishers do “have a pretty good case” for the costs involved when you get down to it. But on the other hand, consumers don’t consider e-books as valuable as printed books because you can’t sell or give them away when you’re done reading them and can be subject to annoying restrictions in the form of DRM.

There’s not anything new in what Ingram says, of course; we’ve known about this difference in perceptions between publishers and consumers for quite some time. Still, the article is interesting, with some good links, and worth reading,

15 Comments on Consumers do not care what e-books cost to make—just what they cost to buy

  1. The major publishers should look at what O’Reilly Media is doing with their ebooks. They’ve set up quite an impressive system. When I buy books for them, I get continuing online access to those books in several popular formats with no DRM and I can download any revisions that come out. That leaves me feeling like I’ve really bought the ebook and not just rented it for the life of some device. Features like that’ll make readers more willing to pay prices that are closer to the cost of production. It also gives publishers a way to keep in touch with readers.

    Keep in mind that it often takes decades for the real value of something to be appreciated. In the late 1800s, there was a race among so-called ‘sportsman’ to kill one of the last buffalo before it went extinct. The idea of going to the trouble of keeping buffalos around didn’t seem to occur to them, Theodore Roosevelt excepted. The same was true here in the Pacific NW with centuries-old cedars cut down for kindling and roof shakes. People proudly posed in front of about-to-come-down trees that were ten feet and more in diameter.

    Moral: It’ll take time for readers to appreciate that book authoring, publishing and distribution is also an ecosystem that needs to be protected from excessive price-cutting, corporate bullying, and pirating.

  2. Good points about the diminished value to consumers of DRM-hobbled eBooks. Still, the costs of production simply have to be significantly lower for eBooks as opposed to pBooks. There’s no paper, ink, printing, binding, storage, transport or refunds to bookstores for unsold units.

  3. Frank – of course you are right. This topic has been beaten to death for a long long time, and everyone and his dog knows that Publishers costs are a teeny tiny fraction of what they are for pBooks.

  4. While the prices of some ebooks could be reduced at bit in some cases, I think readers and buyers of books are wrong to have price as the litmus test for ebooks. In the long run, demand for lower and excessive price reduction will be detrimental to the quality of books available. When I read comments from people who have the lower price mania, I imagine them banging their shoes on pedestals while shouting “I will not pay a lot for this ebook!”

    Professional publishing is no guarantee for quality, of course, (they shovel out a lot of low grade genre fiction like stevedores), but their track records off the scales above and beyond the indies. Maybe in a few years things will be different, but I don’t want to see major publishers disappear so some cheap reader can save a few buck on the cost of an ebook.

    I’m current reading a literary novel published in April of 2012. It’s a $26.00 hardcover,
    $17.16 at Amazon, and $12.99 for Kindle. I think that’s a fair price. In a year or so when the paperback is a available, $9.99 would be about right. I don’t think there would be enough revenue from this novel to support the author, the editor, the translator, and others at $4.99 or $3.99. This type of fiction might cease to exist under the demands of the cheap readers.

    I think it’s doubly true for non-fiction. Authors need time for research and they need to pay bills while doing so. That comes from publisher advances and they’re not going to pay authors a living wage if all they can reap from ebook is are the prices to satisfy the cheap readers.

  5. Greg:
    “readers and buyers of books are wrong to have price as the litmus test for ebooks.”

    Personally I have never come across anyone who uses price as a litmus test for eBooks.

    ” In the long run, demand for lower and excessive price reduction will be detrimental to the quality of books available. ”
    Well I suggest that this statement makes absolutely no sense. Why would it ? If you take the same title and look at it’s paper book and eBook and look at what price produces the exact same return to the publisher and writer … you will find that the eBook price will be substantially lower because of paper, printing, distribution, warehousing, retail margins etc.

    So the actual truth is that a substantial lowering of price should lead to the exact same quality.

    “Maybe in a few years things will be different, but I don’t want to see major publishers disappear so some cheap reader can save a few buck on the cost of an ebook.”
    Those ‘cheap readers’ are ordinary people who find it extremely hard to afford 14 dollars or euros for a book when jobs are so scarce and recession is hurting so many.

    You appear to be unaware of the fact that writers are not ‘entitled’ to a living wage. They are only entitled to income if they sell and readers buy. And the fact is that in the world of epublishing and independent writers an self pubbed writers, they earn far more per copy that they ever did from paper books.

  6. Jon Jermey // May 6, 2012 at 5:23 pm //

    The elephant in the room here — the OTHER elephant, apart from copyright violation, that is — is that the actual number of titles published will come down rapidly once a decent universal distribution and reviewing system is in place. We really don’t need twenty different Introductions to Python Programming, for instance — just one really good one. We don’t need fifty authors writing about sparkly vampires and studly werewolves, just enough good ones to supply the demand. Every price drop on an A-grade product pushes some B-grade competitor out of the market.

    It’s not only superfluous publishers who may have to find alternate jobs soon; it’s superfluous authors as well.

  7. “Personally I have never come across anyone who uses price as a litmus test for eBooks.”

    Well, maybe we’ve been reading different comments, but I’ve seen numerous people claim they will only purchase an ebook if it costs less than (x) for (y) reasons. A litmus test, in politics at least, is a determining question or factor asked to a candidate for office that will be decide if an appointment or nomination will continue. I say if a reader is thinking about buying a book, but refuses because the cost is more expensive than the predetermined limit of(x) then, that is, in effect, a kind of litmus test. Aren’t you the one who said no book, absolutely no book, is worth more than $10.00?

    “So the actual truth is that a substantial lowering of price should lead to the exact same quality.”

    No when your factor in the entire cost of the ecosystem. There is cost to infrastructure. Haven’t you read the justified complaints about poor formatting and OCR errors? If readers keep driving the costs down, a cut will need to be made somewhere

    “You appear to be unaware of the fact that writers are not ‘entitled’ to a living wage.”

    Authors deserve a fair return, or wage, for the books they write. Even in a poor economy I wouldn’t want workers accepting lowers pay because someone else might be willing to do their job for less–unless you want a Grapes of Wrath type of economy for authors. Pay people what they’re worth for the job they do. I’m willing to pay more than $10.00 for good quality fiction and non-fiction I’ve read my share of low grade genre fiction which, I admit, is not always worth $10.00.

    “Independent writers an self pubbed writers, they earn far more per copy that they ever did from paper books.”

    That’s true, but their quality, to date IMHO, is mediocre to subpar. Last year, there was a posting here, listing the “Best of the Indies.” I read one of the (low grade?) genre fiction selections and it was completely average, nothing special at all; one of those books that would have skipped the hardcover edition and went straight to mass market–worth about the $2.99 it cost. But it was supposed to be one of the best available and I guess I thought it would be a bit better than it was.

  8. Greg:
    “Well, maybe we’ve been reading different comments, but I’ve seen numerous people claim they will only purchase an ebook if it costs less than (x) for (y) reasons.”

    I only buy eBooks under 5 or 6 euros, but you infer it is a litmus test for quality, which it isn’t.I find it strange that you don’t understand a hell of a lot of people live on a budget !

    I’ve been reading exclusively sub 6 euro titles from self pubbed writers and indie writers for the last year or more and have found far better quality than many or most of those in the best seller list. I’ve read so many absolutely rubbish best seller titles I am sick of it. At least when I bump into a sub par title I only lose a few quid, and not 14 or more!

    And no I don’t think writers deserve ANY wage at all. None. The only earning by a writer should be by sales and if they write well they will sell, if they don’t they won’t.

  9. Binko Barnes // May 6, 2012 at 10:48 pm //

    Digital media is a disruptive technology. It doesn’t just add a new layer of digital formats to mainstream physical formats; instead it breaks up existing distribution systems and forces a paradigm shift.

    For example, how many film cameras have you seen people using lately? What are Kodak and Polaroid up to these days? I’m sure when digital cameras first came out the suits in the boardrooms at these companies said “that’s an amusing little technology. let’s pay lip service to it but be sure to always protect our core business first”.

    People talk about ebook pricing as if it will always be linked to physical book pricing and will always be determined by traditional publishers in their Manhattan offices with their massive bloated overhead structure.

    Wrong on both counts. Within a decade the big publishers will die off or be absorbed by larger media conglomerates. Ebooks will be just another form digital media and will be distributed just like digital music, movies and applications.

  10. “I find it strange that you don’t understand a hell of a lot of people live on a budget !”

    The cost of ebooks is not determined by your budget. Just because one someone can’t pay 8 euros for a book doesn’t mean that book should cost less. My current book cost $12.99 (or 7.99 Euros at Amazon.uk) and I think it is a fair price, more or less, for a new novel just released in hardcover. And not every book I read costs that much, there is a range, sometimes as low $6.99 or $4.99–excluding shorts and special deals. But I don’t have a preset limit or expectations that book SHOULD cost less.

    I do agree that bestsellers are mostly rubbish. I quick review of the NYT showed zero books of interest in fiction and only 1 in non-fiction.

  11. In a free and open economy, price is determined by the intersection of two curves (supply and demand). Maximizing revenue (key to profit) is done by anticipating that “sweet spot” intersection. With pBooks, supply is the first print run, a guess by publishers. The suggested retail price is also an estimate. If these guesses are correct, all pBooks are sold and profit (total revenue minus total cost) is maximized. A second printing may be undertaken. Otherwise, there are unsold pBooks that are offered at increasing discounts until all are sold and no second printing occurs. Supply is said to be highly inelastic. Price is highly elastic.

    Maximizing revenue with eBooks is a very different situation. One is not held hostage to pre-sale estimates because there are no print runs. The cost of duplication is inconsequential. Both supply and price are highly elastic. Risk is also much lower because the front-loaded (pre-sale) part of the investment by a publisher is much lower. No paper, ink, printing, binding, storage or transportation needed.

    If readers are willing to buy more copies at lower prices, maximizing revenue is a simple matter of meeting that lower price expectation. Publishers who are 100% digital can do this but publishers who are transitioning from print to digital have a millstone around their necks. They are still risking significant capital with print operations so they consciously decide not to maximize eBook revenue to protect that print investment. Exclusive contracts with popular writers enable this to happen. Without those contracts, this house of cards will fold. All digital publishers, including self-publishers, will fill the void thus created.

    It’s a dangerous game that the big publishers are playing — something like Russian Roulete.

  12. Frank – well said. Unfortunately there are people who don’t really grasp why pricing needs always to be demand led, and not driven by the producers concept of what his product is ‘worth’. The fact is that nothing has any value other than what other people are willing to pay for it. Nothing. The tragedy is that so many publishers follow this misguided strategy and by doing so their writers lose out substantially. if they priced according to demand, sales would grow and most of their writers would earn more.
    Don’t get me wrong, people are free to do what they want. if they insist on pricing according their precious feelings of ‘worth’, let them do so. But let them not them come back and whine about writers not earning enough. Because their misguided pricing is the very cause of them not earning. Either than or they are just rubbish writers, of course ….

  13. Gary Frost // May 7, 2012 at 9:15 am //

    I wouldn’t worry about the millstone (preoccupation of established publishers with print business). For one thing the millstone is revenue; in university presses about 90-95% of revenue. And print publishers have digitized print infrastructure so that print-on-demand and drop shipment realizes most screen distribution advantages.

    Print publication does have a disadvantage compared with screen publication as there is less flexibility to shift delivery and display costs to the reader. Screen reading requires end user purchase of the display device and delivery connectivity.
    Sale of generations of devices have already been managed for increased revenue.

    I have been going to “future of the book” conferences for over ten years now. I am just returned from an excellent one at MIT. What I have noticed is that the one constituency with the best grip on the prospects is the publishers’. Scientists, engineers, scholars and artists perspectives on book prospects tend to be distorted and lack authentic immersion in the continuities and changes in reading behaviors. To be fair it (the future of the book) is an extremely wide domain but the MIT audience is unusual in its high interest in cross-disciplinary study. The recent conference only extended the reach of the topic. The MIT press provided the reference coordinates. They are watching reading behaviors, attention band-width, added cross-product values.

  14. Clytie Siddall // May 12, 2012 at 2:15 am //

    Of course pricing is important. People won’t buy your product if they don’t believe it’s worth the money charged. You won’t succeed financially unless enough people are willing to pay your price.

    Like Howard, I have a price ceiling: USD7.99. I find a lot of enjoyable ebooks well under that price. I refuse to buy the most recent titles in popular-fiction series I’ve followed for years, because Hachette and HarperCollins are charging over $20 for the ebook to Australians, while the new paperback is $7.99.

    I am quite willing to abandon favoured authors if their publishers insist on extortionate prices. While I’m not buying those ebooks, I buy and read others, and discover other authors whose ebooks I will continue to buy.

  15. Gary wrote:
    “I have been going to “future of the book” conferences for over ten years now. I am just returned from an excellent one at MIT. What I have noticed is that the one constituency with the best grip on the prospects is the publishers’.”

    This must be the quote of the year. What a laugh.

Leave a Reply

wordpress analytics