Why are e-books so expensive?

Why is e-books so expensive?

Michael Hyatt,a former publisher at Thomas Nelson provide an this question a couple of years ago.

Photo courtesy of ©iStockphoto.com/Franck-Boston

Let me begin by putting things in perspective. First, the retail price has already been adjusted. As you are probably aware, Amazon is selling most eBooks for $9.99. That is already roughly half the price (depending on the format) of the typical physical book.

While Amazon is currently buying these books from some publishers at a discount off the physical retail price of the book, this will ultimately change. When it does, publishers will net approximately 70% of the retail selling price or $7.00. (This is often referred to as “the agency model.”) This will fluctuate up or down, depending on where retail pricing levels ultimately land.

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Hyatt is right and amazon is no longer selling its ebook at USD 9.90. Just a cursory look at the Kindle store will show that an ebook may cost more that a paperback and cost slightly less than a hardcover. Tom Clancy's Against All Enemies kindle e-book cost USD 14.99, hardcover USD 16.22 and paperback USD 9.90. Why is the e-book so expensive if all else remain the same? It does not take an increase of so much cost to digital preparation, quality assurance and digital preparation, does it?

One reason may be about publishers and their bottomlines. The reason why amazon increased their price is due to pressure from publishers.

Amazon has given in to publisher pressure and agreed to abandon their $9.99 price point for eBooks...Publisher Macmillan felt that the $9.99 price devalued many of its bestsellers, which often sell for $30 in hardcover format. In response to the pricing dispute, Amazon briefly removed all Macmillan books from its store last week. However, the boycott lasted only a few days before Amazon gave in to Macmillan's demands...Publishers seem more interested in protecting the value of their hardcover books than competing in a digital format. Will higher eBook prices convince you to purchase a physical copy of your next novel, or will accept a modest price increase given that eBooks are typically cheaper? read more

While publishers argue that it is to protect their hardcover books ( I wonder how many people actually purchase hardcover books) I suspect it is just to increase their margins. After all, there are now less physical bookstores around for them to squeeze. I agree with Ken Anderson in his blog, The Scholarly Kitchen post The Expensive e-Book.

I’d argue with Bransford’s assertion (a recent analysis, Bransford explains why e-books can list at higher prices than print books) that the publisher’s incentives are predominantly rational — if they’re based on revenues instead of net income, they’re questionable; if they’re based on existing contracts and obligations, they’re not rational but institutionalized, a difference worth noting; if they’re based on current sales proportions (print selling the majority of books), they’re rational but only for the time being; and if they’re habituated, they’re certainly not rational but comfortable. And by pricing their e-books against the revenue model of print instead of the income model of print, publishers are creating a pricing practice that has consumers justifiably confused, as Bransford notes:

But the biggest problem . . . is that it creates a great deal of consumer confusion and angst. It doesn’t make any intuitive sense for e-books to cost more than paper. By keeping e-book prices high, it opens up a huge opportunity for the 99-cent Kindle bestsellers to exploit. Also: As the music industry found out, annoy digital consumers at your peril.

 I echo Anderson and remind publishers that they annoy digital consumers at their peril. It is the economics of value. if you sell cheap, more people will buy and you actually make more money. If it is too expensive, less people will buy and they will lose money.

I may sell my new e-book Tales from the Monastery: Spiritual Formation the Asian Way at USD 0.99. What do you think? Will you buy?

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