Fraser Speirs is a software developer (Mac and iPhone) and a teacher. This is from his blog where you can find further exposition.
Let me make this very clear: I know absolutely nothing about publishing. I don’t know how deals are structured, I don’t know about advances or geographical rights or anything. All I know is that I’m being offered one package of words in, usually, three formats – hardback, paperback and ebook – at three different prices.
In The Design of Everyday Things Donald Norman famously wrote about the disconnect between the user’s mental model of how something works and how it actually works. I think I have this problem with ebooks.
Here’s how I think of it:
I made these numbers up and I have no idea if the relative proportions of these blocks are correct in any way. In a sense, that’s not the point. What I’m expressing here is how I think about the value proposition when presented with three different ways to read the same book.
The thing that rubs me the wrong way with being asked to pay a premium for an ebook is that, thanks to DRM, a publisher gets to sell a copy that can never ever be resold. I think that enforced reduction to zero of the resale value of a book should be reflected in the purchase price – particularly for higher-end titles such as reference books.
The graph above shows how I think of ebooks and my buying behaviour reflects that. I don’t see ebooks as luxury items. I don’t see how pricing ebooks above hardback prices is defensible when there has been no material to physically construct and ship. I particularly resent that pricing structure when so many ebooks that I purchase have obvious OCR errors or truly awful typography.
Hard to argue with that logic, however the real numbers work out. It is my opinion that ebook lack of resale-ability is more than balanced by the flexibility gained in digital formats, so I don’t see a reason to lower ebook prices based on that criteria.
And maybe if publishers were more interested in selling ebooks, they’d go through the trouble of pointing out the advantages of greater flexibility that make ebooks more valuable. This posting only highlights the disconnect between publishers and consumers, and how publishers are dropping the ball in terms of telling consumers why they should buy an ebook.
Clearly in principle Speirs is totally correct. However I find the reposting of his article here very dubious. He has no experience in the Industry. He has nothing to contribute on the subject of costings. I could go on. Yet his musings merits an Article here ?
“He has nothing to contribute on the subject of costings.”
He is a book buying customer his input is the only one that should matter to you everything else an lame excuse.
The example chosen is a bad one (again), where the paperback isn’t out yet. But there are lots of books at Amazon where the paperback is available, and the Kindle versions costs more. E.g. The Tunnel by Ernesto Sabato. The hardback came out back in 1988. this is a penguin classics reissue.
http://www.amazon.co.uk/dp/B004T4X8RA/
The paperback has an RRP of £8.99. Amazon discounts this to £5.48. The publisher probably receive 50% of the RRP from Amazon: £4.49. Out of which they pay for print, binding, storage and shipping. Say £1.00. And 10% of RRP to the author – that’s £0.90. Gross profit of £2.59. Amazon gets £0.99 — 18% of their selling price.
The Kindle edition has an RRP of £6.99. Amazon isn’t allowed to discount it. 1/6 of that price is VAT. So HMRC gets £1.16, and the ex-VAT price is £5.83. Amazon takes 30% of that, £1.75, leaving £4.08 for the publisher.
Looks pretty good for everyone except the ebook buyer!
How about is Amazon were willing to sell ebooks for 15% instead of 30%. After all, ebooks don’t require handling, warehousing or packing. And they’re prepared to do all that for paper books for just 18% of the selling price.
And suppose the publisher is willing to make a Gross profit of the same amount as for the paperback: £2.59 with the same royalty to the author, £0.90
£3.49*1.15*1.20 = £4.82. Round up to £4.99.
Except, of course, the publishers have shot themselves in the foot by agreeing to a massive 30% commission on ebooks, when Amazon is happy to make less than 20% on paper books.
Especially since Simon and Schuster has now admitted that their low production costs for e-books is making a major and positive impact on their quarterly profits. (See the TeleRead article posted today.)
An accounting error in all these comparisons is that all of the cost of display of ebooks is shifted from the publisher to the reader. Device purchase, maintenance and up-grading are all ebook consumer costs.
There is also the aspect, frequently mentioned, that ebook display is faulty as compared with print. Simple typographic and editorial qualities are lacking and navigational features continue to be deficient. Inferior ebook legibility in terms of ease of reading is another subtle display cost shifted to the consumer.
Very good points Gary. I agree.
I think it is important for publishers to begin recognizing that his little bar graph, right or wrong though it may be, is truly the picture that the vast majority of purchasers are carrying around in their heads right now. The graph acknowledges that the cost of writing the book remains the same, it acknowledges a certain (although lower) cost for the ebook’s production—and it still comes out with a lower total cost amount. The reader/customer has this little graph in their heads and is baffled that the publishers continue to insist that it isn’t so. It just defies common sense logic that an ebook should cost as much as a paper book. Nobody in publishing has really addressed this.
It is carried around in the heads of ordinary readers/customers because it is essentially true, of course. I believe it will be forcibly hammered into the heads of big publishers, in time.