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Old 11-12-2006, 11:00 PM   #1
Bob Russell
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Some thoughts on e-book pricing at the Sony Connect store

After a little digging, it's clear that there are some patterns which seem to characterize how the pricing generally works at the Sony Connect online e-book store. Some of thie following information was also gathered from general publishing information and Sony sources. Hopefully, while it may not satisfy everyone hoping for lower e-book prices, this information will help take some of the mystery out of the pricing equation.

First of all, let's consider how "List Prices" work with the publishers – it's a bit of a tricky business. For example, when a new hardcover comes out, most are roughly $25-$30. Each major publisher has a different strategy for discounting the list price to Sony Connect. Remember that it's basically the publisher that sets the pricing. Simon & Schuster seems to be the most aggressive, sometimes discounting the list price up to 45% from the print list price. That means that Sony is giving maybe 20% off the list price as a further discount. In other words, a book with a hardback list price of $25 might have an e-book list price of $15, and then Sony Connect might further discount that to about $12.

Sony gives a portion of the sale back to the publisher, and 20% back to the consumer to try and keep the price down as much as possible and make a business. But until the publishers get their list prices down further, there's not going to be any significant changes in e-book pricing from a retailer to the consumer. Bundle pricing helps, but doesn't solve pricing across the board, which still can have a tendency to appear too high to the average consumer.

Here are some examples:

* State of Denial by Bob Woodward (Simon & Schuster). Print List = $30. eBook List = $16.99 (45% discount). Sony Connect Price = $13.59.

* The Mission Song by John Le Carre (Hachette – formerly Time Warner). Print List=$26.99. eBook List=$17.99 (33% discount). Sony Connect Price = $14.39.

* The Audacity of Hope by Barack Obama (Random House). Print List=$25. eBook List = $17.95 (28% discount). Sony Connect Price = $14.36.

* Freakonomics (Rev Ed) by Stephen Levitt (Harper Collins). Print List=$27.95. eBook List= $19.95 (23% discount). Sony Connect Price = $15.96.

Then there are other major publishers like Penguin and Holtzbrinck who do not discount at all between their print and e-book list prices. Over time, as the e-book market heats up, hopefully there will be some more competition for customers that will move other publishers towards and beyond the more aggressive e-book pricing discounts.

As we have heard from many sources, attractive pricing in the the e-book market is critical for the market to expand. Especially with the current DRM restrictions and issues with format compatibility. Fortunately, the Sony Reader has really make a big step forward for the reading device side of the equation, and Connect offers competitive pricing for the e-books. They still have a way to go to resolve pricing anomolies, increase available titles, and improve the store functionality, but it's encouraging to see this significant step forward. With increased success will come increased visibility of the e-book market, more titles and more reasons for publishers to reconsider pricing to attract more customers.
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Old 11-13-2006, 12:36 AM   #2
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Nice analysis, Bob. I hadn't spent nearly enough thinking on it to puzzle that out.

I'd only quibble enough to say that Connect's prices (when they're not just whacked) are probably what most folks would call "more" reasonable, as opposed to just "reasonable" -- personally, I think there not bad, but I agree I'd like to see them a bit lower with the DRM and format uncertainty that's currently built into them. But that's part of being an early adopter too, I s'pose.
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Old 11-13-2006, 11:39 AM   #3
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One interesting issue here is that the prices are based on the hardback. So once the paperback edition is published - does this mean that the ebook will be more expensive compared to the paperback? If so ... it gets hard to justify ebooks again through this channel as a mass market, surely?
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Old 11-13-2006, 12:22 PM   #4
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i noticed that also, i think the price should be discounted on paper back, otherwise it's very difficult to attract people to go for e-book, don't forget you've put 350 bucks already! Some stores like Target will give 25% discount on the new bestseller paper back, i guess i'll buy e-book if the price < $5.
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Old 11-13-2006, 12:36 PM   #5
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Quote:
Originally Posted by pdam
One interesting issue here is that the prices are based on the hardback. So once the paperback edition is published - does this mean that the ebook will be more expensive compared to the paperback? If so ... it gets hard to justify ebooks again through this channel as a mass market, surely?

Well, the Connect store talks about "print list price", which means the price of the hardback or paperback edition, depending on which is actually available. So the price will come down once the paperback is out.
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Old 11-13-2006, 04:32 PM   #6
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At least it's supposed to, not always the case in Sony Connect it seems.
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Old 11-13-2006, 04:46 PM   #7
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I like the others question the sensibility of pricing based on the Hardback price.

The Hardback price is justified in paper due to the extra printing costs etc in doing a hardback book compared to a paperback.

However in e-book form there is no difference in the product between the e-book released at Hardback or Paperback release dates.

So how do they justify the price?

Are you paying the premium to have the book released earlier?

Do they think releasing the e-book at paperback prices would destroy the hardback market?

Should e-book releases be timed with the paperback release instead of the hardback and priced accordingly?

At the moment the prices are too high to justify the market. look at the ipod and how cheap downloadable songs are compared to the CD single.
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Old 11-13-2006, 05:58 PM   #8
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There is no price justification for the hardcover. It's a matter of economics. Price discrimination is what companies do (legally) when they own a monopoly. Publishers own a monopoly for Book A (Let's use Freakonomics). Only one publisher has the republication rights to Freakonomics. For those who CAN'T WAIT TO READ IT, the price is set higher because those purchasers are willing and able to pay the higher price. For some, they would like to read it and will wait until the paperback release. Still others are interested in reading but will either wait to get it at the library or buy it used at a still lower price. It's argued that in a perfect market economy, the price each consumer would pay for a widget would be different depending on each consumer's ability and willingness to pay.

Ebook pricing, imo, is engaged in a bit of price discrimination. You want a book in a certain format? Then you will have to pay for that.

Sony is buying the books from the publishers and reselling them to us (they are the wholesalers, we are the retail customers). They get them at a certain price which for big box stores is 40% off the list. From there they determine what discount they want to give. Let's say that they recognize that they make more money selling hardware devices (as is true with the IPOD/ITUNES business model), then they sell the books at a slight increase over their costs. Kind of a loss leader sort of deal. I.e., sell something at a loss to get people into the store to buy more. So books would be the loss leader and the "more" would be the Sony Reader.

If they want to make a profit off the bookstore in addition to the hardware devices, they sell at the same price that is generally available in the ebook market or greater, depending on the demand for their proprietary ebooks over some other ebook format.
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Old 11-13-2006, 09:26 PM   #9
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I wonder how Simon & Shuster's prices differ between connect and their own site, simonsays.com? Anyone compare?
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Old 11-13-2006, 10:05 PM   #10
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Simon & Schuster sells its ebooks at 40% off the cover price of their books.
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Old 11-13-2006, 10:15 PM   #11
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Act of Treason
Simon & Shuster simonsays.com Your Price: $11.04
connect; your price: $13.59
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Old 11-14-2006, 12:30 AM   #12
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But can you get it for the Reader? Just wondering.
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Old 11-14-2006, 12:49 AM   #13
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Yup: Act of Treason (it's currently featured on the front page of Connect, actually )
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Old 11-14-2006, 01:05 AM   #14
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Quote:
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Yup: Act of Treason (it's currently featured on the front page of Connect, actually )

Sorry... Was not clear. Was think of Simon & Shuster's site.. Sorry.
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Old 11-14-2006, 08:54 AM   #15
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A quick check shows the Simon and Schuster site charges about $2 less for the same books, but they do not sell the sony reader format...just the usual lit and others. Verrry annoying.
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