Interesting article on book pricing and why it might rise

[Lemurion]

Originally Posted by DMcCunney

(And trying to figure out what those costs actually are and allocate them to a particular book will be an exercise comparable to rabbis splitting hairs over points in Talmud. I've been in occasional meetings where allocation of costs is discussed, and everyone has the same opinion: "It shouldn't hit my budget!" )
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Dennis

And I've seen that same stance here on the boards more than once - "those costs shouldn't hit the price of ebooks."

[DMcCunney]

Originally Posted by BearMountainBooks

Actually ever since agency pricing, I get taxed collected BY AMAZON for any publisher who has a base in my state (Texas). So with agency pricing, Amazon is responsible for collecting the tax. I know this because I get taxed on certain publisher's books and not others. And yes, out of spite, once I learn those publishers...if it comes down to two books...one by one publisher and the other by the other...

Fascinating. Thanks for the information. Was this the case before the Agency Model got imposed? If it wasn't, what did they do previously?

In the end, the Fed is going to go after Amazon and get some sort of tax. Those pols are salivating, whining and generally fit-to-be-tied that they haven't yet gotten their slimy paws on more of our money via the success of Amazon.

Forget the Feds. States and municipalities are the ones salivating. Whether an item is taxable at all, and what sort of tax is applied if it is, is a local decision, not a Federal one.

It gets comical. I'm in New York State. The state is the location of the Onandoga Indian Reservation. The Reservation is not subject to an assortment of State taxes.

It's a popular destination for shoppers, because tobacco products are one of the things that aren't taxed. With state and local taxes and surcharges, a package of cigarettes now costs up to $12 in NYC. On the reservation, a carton may cost $30. The smoke shop has a continual stream of people buying cigarettes at untaxed prices. The Reservation made enough money from it and the neighboring Firekeeper's Diner to build a snazzy new community center.

New York State has been trying to assert state taxes on the reservation, and getting nowhere. Technically, the reservation isn't part of New York State at all. It's a sovereign territory existing under treaty with the US government.

(I know people who do things like use anonymous proxies to hide their originating IP address when buying on line, to avoid taxes that might otherwise be levied based on their apparent location. They still have to provide a shipping address for physical goods, but there's no necessary connection between where something is bought and where it is actually delivered, and it's where it's bought that governs the tax.)
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Dennis

[DMcCunney]

Originally Posted by murraypaul

And they should be included in the proportion of costs that are attributable to producing a physical book.

I agree.

You are defining cost in such a way that excludes:
- Warehousing and distribution
- Retail cost and markup
- Cost of returns
And then saying that the costs attributable to the physical nature of books are only a small proportion. Of course they are, because you have excluded most of the components that go into those costs.

No. The costs I mentioned earlier are costs involved in acquiring, editing, and preparing a book for publication. All are incurred before the book is actually published in any form. They will be there regardless of whether the book is issued as a printed edition or as an ebook.

Let's factor print out of the equation. Let's assume the ebook is the only edition of the book. What costs do you believe apply?

If a producer sells their goods to a retailer, who then sells them to a customer, then you have two sales, one at a wholesale price, and one at a retail price. But as we keep being told, Amazon et al are just acting as agents for the producers, they never actually own the goods themselves, do they. So only a single sale has taken place.

The producers are directly setting the retail price for Agency eBooks and paying the retailers a commission for their services. Amazon does not pay a price to the publisher, they remit the money they have collected on their behalf.

If you want to look at it that way, fine. But Amazon pays the publisher a different price than the one it charges you. The price you are charged is the retail price. What do you call the price they pay the publisher?
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Dennis

[DMcCunney]

Originally Posted by murraypaul

So you were completely wrong in your original quote, where you said that the retailer could still offer a discount?

I'm losing track here. If I actually stated that the retailer could still offer a discount under the Agency Model, I was indeed wrong, and retract the statement.

But it doesn't affect everything else I've been saying, or make any other statements I made wrong.

(If you think it does, that's a logical fallacy called Ad Hominem Tu Quoque.)
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Dennis

[tompe]

Originally Posted by DMcCunney

Fascinating. Thanks for the information. Was this the case before the Agency Model got imposed? If it wasn't, what did they do previously?

Previously it was up to the customer to follow the rules and laws and pay the tax. So for people actually paying the tax they should pay there is no change other than it is more convenient that Amazon charges the tax.

[BearMountainBooks]

The taxing was done on a state by state basis. Some states, for example, have passed a law allowing them to tax any Amazon purchase (many states are trying to add this.) They used any Amazon associate as a "presence" in the state--to say, "You have someone doing business in the state so we can charge taxes on all business." Amz responded by canceling amazon associate businesses (putting some people out of business as it was their income).

That particular rule is being argued in most of the states now as every state is going after some "past" revenue and future.

So the answer to your question is complicated, but it basically had NOTHING to do with the publishers--because Amazon was considered the retailer so the only thing the states looked at was whether Amz had a "presence" in the state. The agency model, however, changed Amz status--they were no longer the seller so it only mattered if the publisher had a presence.

I didn't have to pay taxes on ANY book from Amz before the agency model. Now I get hit with 8.25 percent on some books. This really annoys me when I'm considering buying a "full priced" book - which for me is in the 8 dollar range. I can buy from Amz in mass market at 4 for 3 books and free shipping and get a better deal if I'm looking at new books. So if I know about the tax, I stick that particular book into the "maybe" pile for buying as a print version with the 4 for 3 -- or I look for it used. For an 8 dollar book, I can usually find it used for 4 dollars. I just have to give up the instant gratification of downloading it to Kindle and reading right away.

[JSWolf]

One other cost difference... Since a great number of eBook use generic covers and not the actual cover, there's even more of a price difference right there.

[JSWolf]

Originally Posted by Blue Tyson

You mean they will stop publishing stuff by great writers like Paris Hilton and Sarah Palin?

And don't forget the ever popular George W. Bush.

[Sil_liS]

Originally Posted by DMcCunney

For instance, we order occasional books from Amazon UK - hardcover editions of British publications of Terry Pratchett, J. K. Rowling, and Tom Holt (who doesn't seem to have a US publisher these days.) We can place the order with Amazon UK and have them ship to us. We cannot order them from Amazon US. They don't have the rights to sell the British editions.

But since you *can* buy the books, they aren't georestricted to you.

Originally Posted by DMcCunney

It's a symptom of much larger problem, which is that the Internet is making things like national boundaries increasingly irrelevant in many cases.

But for the georestriction problem it means: look, but don't touch, or to be more precise: we sell the ebook, but not to you.

Originally Posted by DMcCunney

Nope. I never said costs are double counted. There are costs common to all three editions, incurred in acquiring and preparing the book for publication in the first place, which will be allocated across all three editions.

Can you please read what you quote? I didn't say that you said that costs are double counted, but that "the publishers effectively count everything twice".

Originally Posted by DMcCunney

If I find one, I will. How do you think they get applied?

I don't think that they get applied at all since the price is set based on guess work. And my point is that you won't find an article on that since publishers like to pretend that hardcovers are the only ones out there.

Originally Posted by DMcCunney

Meanwhile, you seem to be saying you simply don't believe me, because my posts don't agree with what you want to be true.

You're imagining things
I like to argue in general, and it is very easy to argue with vague statements (I am a physicist, so for me anything that doesn't involve exact values and doesn't go by formulas is vague).

If I would truly take a guess at how the pricing is done I would say that some of the costs like marketing and the cover art for example are only attributed to the HC and the price is set accordingly. So the price that we get for a PB is lower because some of the costs have been covered already. If I'm right, the reason why the publishers can't say this out-loud is because they would be saying that whoever buys a HC is covering some of the costs for those who buy PB, essentially paying more because some people are cheap.

Then the reason that the price of the ebooks can't be lower is because while in themselves they represent a lower risk (no returns), they increase the uncertainty for the paper version. While if you see a popular HC you will want to buy it before the store runs out, the ebook can be there forever, which means that there is no worry, and who knows, maybe tomorrow it will be cheaper, or if you don't find the HC anymore, you can just get the ebook.

Since they are accustomed to working only with paper, such an event wouldn't fit their predictions, especially since the number of people with ereaders is continually increasing and will spread differently among readers with different book preferences. As many who buy their first reader will buy more books in the beginning, it is even more difficult to interpret the trend. A higher price for ebooks limits these erratic behaviors in buyer mentality and also means that some of the extra profit of ebooks will cover some of the extra losses of HC.

The situation is different in the case of a new self published author who gives only the ebook version as some of the costs are just not there (the author does the editing and proofreading and cover art). Also, the perspective is different: since the author is also the publisher, the royalties also go to paying for the things that are outsourced, making the profits smaller than they seem. To an individual, doing something in the evening means no cost; to a company it means overtime.

But this is all guess work on my part.

Originally Posted by DMcCunney

You're quite right. They do imply costs. The question is how great the costs are, and whether removing them will materially affect the price charged to you.

My feeling is that they are a relatively small component of the total cost, and dropping them won't reduce the publisher's costs enough to allow a reduction in the book's price.

Removing costs would always mean that the price can be lower, but I agree that there is the matter of how much. I didn't assume that the .99 prices were a matter of great coincidence

[Lemurion]

Originally Posted by JSWolf

One other cost difference... Since a great number of eBook use generic covers and not the actual cover, there's even more of a price difference right there.

Some do, but that's rarely the case with the major publishers. You may not see the cover in the file, but it's always there on the website when you buy the book.

Since the cover's used to sell the ebook as much as the dead tree edition, it should share in the cost. After all, the main function of any cover is to sell the book - whether it's on the book, on a dust-jacket or on a poster.

[tompe]

Originally Posted by Sil_liS

But since you *can* buy the books, they aren't georestricted to you.

There is some restriction in the sense that you have to pay postage and custom when buying the book. So if the book is sold locally it is nearly always better to buy it locally.

This is not the case for ebooks and is probably the main reason that the point of sale is at the customer.

[DMcCunney]

Originally Posted by BearMountainBooks

I didn't have to pay taxes on ANY book from Amz before the agency model. Now I get hit with 8.25 percent on some books. This really annoys me when I'm considering buying a "full priced" book - which for me is in the 8 dollar range. I can buy from Amz in mass market at 4 for 3 books and free shipping and get a better deal if I'm looking at new books. So if I know about the tax, I stick that particular book into the "maybe" pile for buying as a print version with the 4 for 3 -- or I look for it used. For an 8 dollar book, I can usually find it used for 4 dollars. I just have to give up the instant gratification of downloading it to Kindle and reading right away.

Okay, thanks again. Added to my information for future reference.

But in terms of paying taxes, I'm curious: how much is financial and how much is principle for you?

For example, I corresponded with a guy who lives in New York State, in an area where there are several different tax jurisdictions around him with different taxes on various items. When shopping, he'll drive here rather then there to get items, because they charge a lower tax here than there. I pointed out that when you add up gas, mileage on the car, and your own time traveling the extra distance, you might just be paying more overall for the purchases. He freely admitted that, but accepts the higher overall costs to avoid paying the taxes.

On a similar line, I mentioned the Onandoga reservation earlier. A friend has been making noises to my SO and I about a road trip "to the land of cheap cigarettes". I enjoy road trips with her, but this means renting a car, paying for gas, stops for things like food and bathroom visits, and at least a full day spent doing it. I'm strongly suggesting she have more reasons than just wanting to buy cheap cigarettes to make that sort of trip. I don't want to think about how many cartons she'd have to buy to make it cost effective otherwise. (Enough, I think, that the State Police would have probable cause to bust her for attempted smuggling as soon as she left the reservation, assuming she just had to be buying that volume for attempted resale. )
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Dennis

[DMcCunney]

Originally Posted by JSWolf

One other cost difference... Since a great number of eBook use generic covers and not the actual cover, there's even more of a price difference right there.

If what you're talking about is a repackaged public domain edition, or a self published indie work, perhaps. If what you're talking about is a trade book from a major publisher, not so. (All of my Baen editions include a cover, for example)

I've seen folks elsewhere advocating dropping the cover art to save money and price the ebook cheaper. Aside from the fact that I know a number of the artists who get commissioned to produce the cover art and are trying to make a living, covers are features for me. An ebook that dropped them to save costs would simply be worth less to me, and I might not buy it at all.
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Dennis

[DMcCunney]

Originally Posted by Lemurion

Since the cover's used to sell the ebook as much as the dead tree edition, it should share in the cost. After all, the main function of any cover is to sell the book - whether it's on the book, on a dust-jacket or on a poster.

Exactly.

I arranged a talk by an artist years back at a local SF group. He did covers for SF/fantasy titles, and was happy to get feedback from readers about the effectiveness. As far as he was concerned, his task was to create a compelling image that would make the reader pull the book down off the shelf for a closer look. That was the first step in making the sale, and that first step was his job.

Even if it's an ebook, you need that compelling image to draw the customer's eye. If there's no cover image, what do you put on Amazon or similar site to catch the customer's eye and make them take a closer look?
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Dennis

[Fbone]

Originally Posted by DMcCunney

On a similar line, I mentioned the Onandoga reservation earlier. A friend has been making noises to my SO and I about a road trip "to the land of cheap cigarettes". I enjoy road trips with her, but this means renting a car, paying for gas, stops for things like food and bathroom visits, and at least a full day spent doing it. I'm strongly suggesting she have more reasons than just wanting to buy cheap cigarettes to make that sort of trip. I don't want to think about how many cartons she'd have to buy to make it cost effective otherwise. (Enough, I think, that the State Police would have probable cause to bust her for attempted smuggling as soon as she left the reservation, assuming she just had to be buying that volume for attempted resale. )
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Dennis

Aren't cigarettes less expensive in New Jersey? I don't smoke but I see ads at gas stations and 7-11s for less than $8 +tax.