More on the sometimes crazy pricing of ebooks:
Publishers are facing an uncertain time in the digital world – but increasing the prices of their ebooks is a retrograde step
Dan Gillmor | guardian.co.uk | Friday 23 December 2011 15.07 GMT
I want to offer a word of thanks to the American book publishing industry, or at least the traditional big companies that have dominated it in recent decades. They've helped me rediscover my local library and the used book stores in neighboring communities. They've achieved this by exhibiting the qualities that come so naturally to corporate media giants: greed and arrogance – in this case, as applied to the way they've dealt with the digital world.
To understand what they've done, you need to understand a bit about how books are sold in America. Publishers have two major distribution methods. One is traditional wholesaling: sell the book to a middleman, who typically adds a mark-up to customers, but sometimes discounts a book below cost as a "loss leader" to attract more business for items that aren't discounted in this way.
The other model is called the "agency" system. In this case, publishers set the price and the bookstore merely handles the sale to the ultimate customer, for a set fee or percentage of the transaction. The "big six" US publishers all sell their physical books via the wholesale model. After years of wholesaling digital editions as well, they moved to the agency model for ebooks, with Random House becoming the final publisher to switch early last year. The publishers had been increasingly angry about Amazon's selling of new bestsellers at the loss-leading price of $10 (actually, $9.99), worrying that the giant online company was setting customer expectations at a too-low price point and undermining the sales of physical books.
Apple played a role in this switch, by essentially telling the publishers it wanted the agency model for its own online bookstore, which services the iPad and iPhone. And Apple co-operated in what was the inevitable result for e-books everywhere: higher prices to consumers.
Not just higher prices, but vastly higher; many ebook bestsellers on Amazon (and in Barnes & Noble's Nook store) jumped 30% to 50%, from about $10 to $13 or $15 or even higher, as publishers imposed higher list prices for the digital versions. And in case after case, the ebook price for a new book was close to, and sometimes even higher than, the Amazon price for a hardcover. Remember, Amazon still has the right to discount from list price for physical books, as it has always done. Meanwhile, publishers have dictated that ebook prices will be the same as they charge for paperbacks (around $10 these days).
It’s one of those strange cases where competition increases prices (there’s another one here). Apple offered publishers the chance to charge higher prices, and they were happy to do so.
It’s no surprise that Amazon’s original US$9.99 price for newly-published titles was not to the liking of all publishers, but a simple low price for a large range of titles was a great marketing message for the Kindle. No-one can really know how many sales of hardbacks were lost because the Kindle price was lower, but I’d suspect that they were more than made up for by higher overall sales.
An ebook priced like a physical book is a terrible deal for the customer. Among other drawbacks, you can't resell – or even give away – an ebook in most cases. You don't really own an ebook; you're just renting it, even if the company you rent from says you can keep it, because that depends on the life span of the seller. Maybe Amazon will be around for a long time to come (I hope so, as a holder of a small amount of Amazon stock), but why would anyone count on that?
I’m not so worried about Amazon going out of business. In the unlikely event of this happening I am sure that some alternative devices would appear, but it is completely baffling that an ebook should be the same price (or even more expensive than) a hardback book. It simply makes no sense.
And yet - although it just seems wrong for a Kindle e-book to cost more than the physical book, the prohibitive shipping charges to Asia ($10 for the first item, $5 for additional books in the same shipment) make a huge difference. Even with the totally arbitrary $2 charge for delivering an Amazon e-book to overseas customers (through Wi-Fi) the KIndle version is usually cheaper.
And plenty of books are much cheaper on the Kindle. For example, last week's SCMP had a review of a book about Walmart in China. The publisher’s price is $25 for paperback or $65 for hardback, but I purchased it on the Kindle for $9.99 (plus $2 ripoff charge), and I could download it within seconds. Hard to argue with that - though, strangely, it is now $16.97.
Another recent purchase was the first volume of Margaret Thatcher's memoirs for $3.99 (plus a very slightly less unreasonable $1.60 ripoff charge). So it’s not a problem finding books for the Kindle at reasonable prices, and easy enough to avoid buying any that are over-priced. Plus you can always download a sample to check out a book before purchasing.
When new ebooks were $10, I was buying them all the time. In almost all cases, book purchases are impulse buys – something you want to have, right now. I was buying new best-sellers at a rapid rate, and happy to do so. (The books I bought this way tended to be mysteries and thrillers – the kind of book purchases I treated like movie tickets, to be read or seen once and then put aside.) No more. I still buy some e-books, but only at lower prices.
I think that’s right – at around $10, I would buy new titles that I want to read now, but at $15+ I am likely to wait till the price is reduced (or buy the paperback if it’s cheaper). And at less than $5 it really is an impulse purchase.
Sure, I can afford the higher prices. But the greed of the publishers has inspired me to make different plans. Now I reserve bestsellers at my local library – run by people who love books: imagine that! – and read them whenever they are available. What were impulse purchases of books that sent revenue to publishers are now impulse reservations that do not. If I have to wait a few weeks, no big deal. I should have remembered that all along.
I agree that publishers need to think more carefully about pricing. In the long term it is going to hurt them - piracy is one way, and there are some interesting comments on the Guardian article, such as this one on a radically different approach:
If an author publishes an ebook via a publishing house, of the $9.99 price, they get only $0.60 in royalties at 6%. If they self-publish the same book and charge just $2.99, they get a royalty of $2.09 - but the customer gets a 70% discount!
And it's not hard to upload - you will find that indie books that have been uploaded by authors are usually formatted correctly - they take the trouble because it's their baby, while the publishing houses do a poor job, but want to take money off the author and customer for the work anyway.
There was a more recent story about how some writers are making a good living through Amazon:
Ed Pilkington | Thursday 12 January 2012 20.00 GMT
When historians come to write about the digital transformation currently engulfing the book-publishing world, they will almost certainly refer to Amanda Hocking, writer of paranormal fiction who in the past 18 months has emerged from obscurity to bestselling status entirely under her own self-published steam. [..]
Over the past 20 months Hocking has sold 1.5m books and made $2.5m. All by her lonesome self. Not a single book agent or publishing house or sales force or marketing manager or bookshop anywhere in sight.
Which is something that ought to make publishers stop and think.