Article on ebook profits

[Fbone]

Originally Posted by GA Russell

For example, you would consider the price which maximizes the publisher's profit to be just, even if it were too high for the general public, wouldn't you? As I've stated elsewhere (above, I think), we have in the US a public policy of encouraging everyone to read, and a price point which limits books to the well to do violates that public policy. I would consider such a price to be unjust. Particularly in the case of books which are "classics", which you say Catch-22 is.

I'm not Dennis, please forgive me for replying.

From my admittedly unscientific analysis in the "inflation thread" I made some time ago, it was determined that MMPB are too cheap. Their prices have not risen accounting for inflation for over 30 years. Do you think books were priced only for well-to-dos in 1980?

Books are cheap in relation to other things families consume. Cell phones, computers, gadgets, restaurants, movie theater tickets, Disney vacations, clothes, housing, cars, etc. And if money is tight due to unemployment and disability there are libraries and retailer discounts available.

[Barcey]

Originally Posted by Andrew H.

Then you should buy a paper book because it doesn't sound like e-books will meet your needs. It's not like publishers make any additional money because you can't lend, resell, or donate e-books. It's not like the authors, editors, proof-readers, etc. have to work any less on an e-book. The fact that you can't lend, sell, donate, etc. an e-book doesn't really affect the publisher's bottom line; it is merely your preference. If these things are important to you (they're not to me), buy a paper book.

You do run the risk of needing to change to a new e-book reader. That's a risk that everyone incurs when they buy an e-book reader; it's inherent in the technology. It's not like publishers or authors somehow benefit from this.

Buying an e-book isn't like renting a book. Rented books have to be returned. E-books don't have to be returned.

Publishers generally sell e-books at a discount (not a large one) to hardbacks. If, based on your personal needs, a hardback is a better fit, than you should buy a hardback and not complain that the e-book medium doesn't fit your needs.

But I don't see that the publishers are any more money grubbing than, say, you are.

Or just make your own copy for free. After all, the big publishers aren't price fixing and copyright violation isn't stealing. If the BPH's want to play that game they'll lose.

Highroller's reaction is very typical to the irrational e-book pricing. Pricing e-books higher then what a paper version is selling for will just continue to upset people. "Experimenting" to find out the maximum price that people will pay (before they get pissed of and stop buying) is not how you price virtual goods. That's what market research is for. You have to do it properly and you have to accept the results and then figure out how you can deliver to that price point, increase the product value or go out of business.

Consumers are not going to react the way you think they should. Virtual goods have different economic rules then physical goods. Pretending they don't doesn't make it so.

[Highroller]

Despite your obvious attempt to champion book publishers, when they charge as much for an ebook as for a hardback book despite all the things that an ebook can't do compared to a paper book they ARE money grubbing. Sorry when they can TAKE your ebook ie delete it off your reader, you didn't BUY the book. You at BEST rented access to it. By your logic if I go out and buy an automobile that goes 1/2 as fast and gets less miles per gallon than another car, its FINE if the car seller charges the same price for both cars. They also have an option to show up at any time and take the car back without consulting you.

I am ok with the limitations of ebooks as long as the price is adjusted accordingly. The publishers are hellbent on NOT making any adjustments in the price. They want to have their cake and eat it too.

[DMcCunney]

Originally Posted by Barcey

Highroller's reaction is very typical to the irrational e-book pricing. Pricing e-books higher then what a paper version is selling for will just continue to upset people. "Experimenting" to find out the maximum price that people will pay (before they get pissed of and stop buying) is not how you price virtual goods. That's what market research is for. You have to do it properly and you have to accept the results and then figure out how you can deliver to that price point, increase the product value or go out of business.

Ask the customer what the price should be, and of course you'll get a low answer. The problem is what occurs when that answer is lower than the minimum you must charge to make money on your product.

"figure out how you can deliver to that price point, increase the product value or go out of business" is easy to say but far more complicated in practice.

What would you recommend to add value to an ebook?

Consumers are not going to react the way you think they should. Virtual goods have different economic rules then physical goods. Pretending they don't doesn't make it so.

What different rules? Virtual or physical, the product has a cost, and the producer has an amount it has to make to stay in business. That fact doesn't change because something is virtual.

The disagreement comes over what the costs of making the virtual product are. For publishing and ebooks, the fact that the product is virtual drops the print/bind/warehouse/distribute steps, but those don't account for anywhere near as much of the production costs as many folks like to assume.
______
Dennis

[Purple Lady]

Originally Posted by Andrew H.

The fact that you can't lend, sell, donate, etc. an e-book doesn't really affect the publisher's bottom line; it is merely your preference.

The fact that you can't lend, sell, donate, etc. an e-book does affect the publisher's bottom line because if you can't lend it to a friend and they want to read it and they go and buy a copy - the publisher gets more money from another sale.

Originally Posted by Andrew H.

You do run the risk of needing to change to a new e-book reader. That's a risk that everyone incurs when they buy an e-book reader; it's inherent in the technology. It's not like publishers or authors somehow benefit from this.

If you are not knowledgeable enough to strip the DRM and reformat then the publishers or authors benefit from this too. If you buy another copy of a book you already own the publisher gets more money from another sale.

[DMcCunney]

Originally Posted by Highroller

Despite your obvious attempt to champion book publishers, when they charge as much for an ebook as for a hardback book despite all the things that an ebook can't do compared to a paper book they ARE money grubbing. Sorry when they can TAKE your ebook ie delete it off your reader, you didn't BUY the book. You at BEST rented access to it. By your logic if I go out and buy an automobile that goes 1/2 as fast and gets less miles per gallon than another car, its FINE if the car seller charges the same price for both cars. They also have an option to show up at any time and take the car back without consulting you.

Whether anyone can take your ebook off your device depends on what device you have and what books you bought. If you have a connected device and get books via download from a retailer, the retailer might be able to do that. But this is the retailer doing it, not the publisher.
______
Dennis

[Sil_liS]

Originally Posted by Andrew H.

Then you should buy a paper book because it doesn't sound like e-books will meet your needs. It's not like publishers make any additional money because you can't lend, resell, or donate e-books. It's not like the authors, editors, proof-readers, etc. have to work any less on an e-book. The fact that you can't lend, sell, donate, etc. an e-book doesn't really affect the publisher's bottom line; it is merely your preference. If these things are important to you (they're not to me), buy a paper book.

I keep reading posts that state that the price of HC is all about paying more to get the book NOW, and therefore ebooks should have the same price. And as the perceived value of the book is increased by this and the publisher requests a higher price compared to PB, you should understand that the inability to lend, resell or donate the ebook will decrease that value and the price should be lower.

And the things that do affect the publisher's bottom line are: no costs of paper, printing, binding, transport, warehouses, risk of returns. The things that affect the distributor's bottom line are: no cost of transport, storage, no risk of being out of stock, unlimited virtual shelf space. The things that affect the buyer's bottom line are: the extra expense for an ereader, the inability to borrow books from friends(because they can't lend them), the inability to get some money back from reselling, the inability to get tax reductions by donating.

So you can either say that the price of books comes from the value or the costs, but the bottom line is that ebooks should have lower prices.

[Barcey]

Originally Posted by DMcCunney

Ask the customer what the price should be, and of course you'll get a low answer. The problem is what occurs when that answer is lower than the minimum you must charge to make money on your product.

The market research firms don't just ask the customers what the price should be. There is a science to it and they're very good at it.

"figure out how you can deliver to that price point, increase the product value or go out of business" is easy to say but far more complicated in practice.

No it's not easy but that's how business works. When Ford created their first automobile they built it to a price point that a teacher could afford. They didn't just build it and say too bad that's what it costs.

What would you recommend to add value to an ebook?

Change the term of sale so that the consumer maintains the right to read the book for the their own personal use for the remainder of their life. They can't resell it, but they own it.

Add a satisfaction guarantee. If you don't like it we'll refund your money.

Improve the quality.

What different rules? Virtual or physical, the product has a cost, and the producer has an amount it has to make to stay in business. That fact doesn't change because something is virtual.

Anyone can create copies, so you can't corner the market or hold a monopoly. You have to be much more careful about customer satisfaction. With a physical product the seller is negotiating from a stronger position.

The disagreement comes over what the costs of making the virtual product are. For publishing and ebooks, the fact that the product is virtual drops the print/bind/warehouse/distribute steps, but those don't account for anywhere near as much of the production costs as many folks like to assume.
______
Dennis

I believe the disagreement comes from much more then this. Electronically distributing a 1MB file is much cheaper then selling through brick and mortar stores so 50% of the list price disappears in most consumers view. The print/bind/warehouse/distribution/return costs come out of the wholesale price. The publishers are trying to take a couple bucks of the list price and consumers aren't buying that story.

The other point of view is the customer's perceived value of the product. They're being told they don't own it, they can't sell it, it could go away tomorrow and there's nothing they can do. The value relative to a paper copy is less but they're being asked to pay more. Either way they looks at it they get pissed.

[Elfwreck]

Originally Posted by DMcCunney

Ask the customer what the price should be, and of course you'll get a low answer. The problem is what occurs when that answer is lower than the minimum you must charge to make money on your product.

Baen's history says that minimum is considerably lower than $14.99 for entertainment-oriented fiction. If other publishers aren't as efficient and profitable as Baen, that's a sign of their bad business planning, not consumer greed.

"figure out how you can deliver to that price point, increase the product value or go out of business" is easy to say but far more complicated in practice.

What would you recommend to add value to an ebook?

• Ability to re-download from different locations. (Most ebook stores don't promise this indefinitely.)
• Author's notes not included in print editions for lack of space.
• Personalized cover page: "this book originally purchased by [name] on [date] for [purpose]," details selected at time of purchase.
• Multiple formats--some stores provide this; some don't.
• Previews of other books by the publisher, not just blurbs but first chapters of a few books in the same genre.
• Login code to a discussion site only available to paid club members & people who bought the book.
• "Suggested reading" list--collection of websites related to various topics in the books.

A creative publishers can think of plenty of ways to add value to an ebook, even without getting into multimedia options.

What different rules? Virtual or physical, the product has a cost, and the producer has an amount it has to make to stay in business. That fact doesn't change because something is virtual.

There's been no evidence that filesharing reduces profits. No evidence that the Agency prices have increased publisher & author profits.

The disagreement comes over what the costs of making the virtual product are. For publishing and ebooks, the fact that the product is virtual drops the print/bind/warehouse/distribute steps, but those don't account for anywhere near as much of the production costs as many folks like to assume.

They cost *something,* which means pricing the ebook higher than the pbook is gouging--charging more just because they can, not because the customer gets more, and not because it costs more to produce.

Pricing the ebook higher on first release of the hardcover, and dropping that price to match the pbook later, is not gouging--the customer is getting a bonus: early access. But keeping that price higher than the paperback is no longer providing the customer with anything, and it's not necessary for profit, or the paperback wouldn't be worth printing.

Plenty of businesses have price gouging. It's not always considered unethical; limited-appeal items generally charge all the market will bear. Books, however, in any format other than special collectors' editions, are not considered limited-appeal items; people object to being informed "we've decided to make 15% more profit on this version because we think you'll pay for that." And they *especially* despise being lied to about it, which is what a lot of publishers are doing when they release their "how much it costs to make an ebook" statements to the press.

People don't mind paying Baen $15 for e-arcs and also buying the book later--and Baen flat-out says: we're selling these because we can, because we think you'll fork over this much money. Think it's too much? Wait, and get get the improved version for less than half of that. E-arcs are *entirely* price gouging; the *only* reason to charge more for them than for the final ebook is "because we think you'll pay." And people do, and are happy with it--because Baen is transparent about their reasons, and doesn't treat its customers like thieves, not even if they got an unauthorized copy from somewhere else.

Some people don't think the $15 Amazon ebooks are overpriced. If there's enough of them, that'll be the eventual price-point for ebooks.

I suspect there aren't actually enough of them, just as I suspect Baen couldn't support a substantial part of its company selling e-arcs.

[tompe]

Originally Posted by Sil_liS

The things that affect the buyer's bottom line are: the extra expense for an ereader, the inability to borrow books from friends(because they can't lend them), the inability to get some money back from reselling, the inability to get tax reductions by donating.

I do not use any of these these things (I lend books but that is not why I buy books). But I like the extra portability of ebooks and the search and annotation facilities. So I am willing to pay extra to be able to search and annotate because of the electronic format.

So I do not see why an ebook should be cheaper from my point of view.

I really do not understand arguments about what the price should be. Electronics and books are more expensive in Europe than in the USA but I do not see any arguments that this is in any kind morally wrong or wrong in any other way.

[DMcCunney]

Originally Posted by Sil_liS

I keep reading posts that state that the price of HC is all about paying more to get the book NOW, and therefore ebooks should have the same price. And as the perceived value of the book is increased by this and the publisher requests a higher price compared to PB, you should understand that the inability to lend, resell or donate the ebook will decrease that value and the price should be lower.

It's a little more complicated than that. There are two reasons for purchasing hardcovers. One is a durable long term reading copy. The other is fast access.

The primary market for hardcovers is libraries and collectors. Some hardcovers sell well beyond that, and those are the ones where "read it NOW" comes into play.

And the things that do affect the publisher's bottom line are: no costs of paper, printing, binding, transport, warehouses, risk of returns. The things that affect the distributor's bottom line are: no cost of transport, storage, no risk of being out of stock, unlimited virtual shelf space.

Correct, though print/bind/warehouse/distribute amount to perhaps 20% of the cost of a title. Reserve against returns goes away, too, but that will vary by title: the more copies you produce, the more can be potentially returned, so reserves for a title you have high hopes for and order a large initial printing will be rather more than reserves for a title you expect average sales from.

The things that affect the buyer's bottom line are: the extra expense for an ereader,

Increasingly less of a factor as prices drop.

the inability to borrow books from friends(because they can't lend them),

Depending upon which reader you use, you can lend an ebook: the B&N nook has a lending feature where you may load an ebook on your device to a friend with another nook for a two week period. Like a physical book, if you loan it in this manner, you don't have it while it's on loan. The mechanism that supports the loan feature disables your access to the book while it's loaned out.

the inability to get some money back from reselling, the inability to get tax reductions by donating.

I question how large a percentage of the readership resells or takes deductions on lending. I don't, for the most part, see those factors as part of the decision to buy a particular title in the first place. We buy the books we want to read. Resale and/or tax deduction come later, if at all.

So you can either say that the price of books comes from the value or the costs, but the bottom line is that ebooks should have lower prices.

I don't think anyone here thinks they shouldn't. The questions are "How much lower?" and "When?"
______
Dennis

[Highroller]

I did mis-speak concerning the deletion off the readers. That in fact wasn't the publishers it was Amazon but from this consumers viewpoint there is little difference. I don't remember for sure but expect a publisher was the driving force behind Amazon deleting e-books people had "bought", To give them credit Amazon tried to set a price point for new e-books at 9.99 but the publishers just couldn't have that despite the fact they were making MORE as I remember selling to Amazon than with Agency pricing. All such tactics will do in the long run is drive people more and more to downloading e-books from torrents. All that has limited it so far is people's basic honesty but if they keep gouging their customers they WILL lose them.

[DMcCunney]

Originally Posted by Elfwreck

Baen's history says that minimum is considerably lower than $14.99 for entertainment-oriented fiction. If other publishers aren't as efficient and profitable as Baen, that's a sign of their bad business planning, not consumer greed.

Greed, among other things, defines as "inappropriate expectations". The producer wanting to charge an exorbitant price for a product or service is greedy. The consumer who wants something for nothing is too.

I've talked elsewhere about what sets Baen apart, and how Baen's model isn't necessarily applicable elsewhere.

[*]Ability to re-download from different locations. (Most ebook stores don't promise this indefinitely.)

That's a retailer issue for the most part. How would you suggest a publisher address it? (The obvious answer is "sell direct", but this is something the large publishers will approach carefully. When you sell products through retailers, you can expect your retail partners to be unhappy if you sell direct, as you might be in competition with them. Since the retailers are your partners, and you need them, you'll think hard about just how you'll sell direct.)

[*]Author's notes not included in print editions for lack of space.

I haven't seen a book that omitted such things for space reasons in some years. It was possible back when when publishers were struggling to hold MMPB prices to under a dollar, and restricted page count and even had authors make cuts to fit to hold down costs, but I can't think of any instances recently.

Of course, you must have author's notes to include. Some authors create such things, and some don't. If the author does, do you suggest withholding them from the print edition but putting them in the ebook as a value add?

[*]Personalized cover page: "this book originally purchased by [name] on [date] for [purpose]," details selected at time of purchase.

Neat thought, but fun to implement, If you are selling direct, it's one thing. If you are selling through retailers, it's another, as they must implement the mechanism. It requires being able to patch the copy being sold at time of purchase, with the patch mechanism dependent in part on the ebook format.

[*]Multiple formats--some stores provide this; some don't.

Another retailer issue, I think. Though I think the publisher should provide ebooks in common formats (which at this point, for practical purposes, is Mobi, ePub, and PDF.)

[*]Previews of other books by the publisher, not just blurbs but first chapters of a few books in the same genre.

We see that now in some PBs, so I would expect to start seeing it in ebooks.

[*]Login code to a discussion site only available to paid club members & people who bought the book.

We're starting to see stuff like this, though not restricted in quite that fashion. Publishers are increasingly concerned about branding, and establishing connection with their readers and building communities. Baen's forums are an example, as is Tor.com, and Harlequin has active forums. Others are dipping their toes into those waters.

[*]"Suggested reading" list--collection of websites related to various topics in the books.[/LIST]

For non-fiction, that sort of thing tends to exist as a bibliography of the sources the authors used for the information they present.

For fiction, it's trickier. Who compiles the list?

A creative publishers can think of plenty of ways to add value to an ebook, even without getting into multimedia options.

I see multimedia as having limited application. An awful lot of what will be issued as "enhanced" ebooks will be failed experiments, as it will be grafting multimedia on to things where it doesn't add any real value.

There's been no evidence that filesharing reduces profits.

The folks selling music and movies might disagree. For books, I largely concur.

No evidence that the Agency prices have increased publisher & author profits.

Agency Pricing was intended to stem losses. It was designed to protect the hardcover bestseller, whose sales were being impacted by competing ebooks.

They cost *something,* which means pricing the ebook higher than the pbook is gouging--charging more just because they can, not because the customer gets more, and not because it costs more to produce.

Whether the customer gets more is a matter of perception. I've encountered a poster on MR who feels that having the book in electronic format adds value due to convenience and the ability to carry and read anywhere, and is willing to pay a premium for it. I might not, but I'm not going to say he's wrong in his perception.

Pricing the ebook higher on first release of the hardcover, and dropping that price to match the pbook later, is not gouging--the customer is getting a bonus: early access. But keeping that price higher than the paperback is no longer providing the customer with anything, and it's not necessary for profit, or the paperback wouldn't be worth printing.

That's what I expect pricing to eventually work out to: a higher price for the electronic edition sold at the same time as the hardcover, and a lower price once the MMPB comes out.

Plenty of businesses have price gouging. It's not always considered unethical; limited-appeal items generally charge all the market will bear.

So does any other business. Competition puts a limit on prices, but how much of a limit depends upon the product. Some products are "commodities", available from many vendors, with the only significant difference being the price charged, so prices will be lower. Producers of such products look for size and market share - if you are selling products with heavy pressure on margins and pennies per dollar in profit, you look to sell a lot of product to increase the number of dollars you make pennies on, and you look for economies of scale to lower your costs.

Competition for market share underlies a lot of the argument between Amazon and the publishers whose books it resells. Amazon uses price, selection, and service to get retail market share, and had been pressing the publishers for even higher discounts before the whole Agency Model thing came about.

Books, however, in any format other than special collectors' editions, are not considered limited-appeal items; people object to being informed "we've decided to make 15% more profit on this version because we think you'll pay for that." And they *especially* despise being lied to about it, which is what a lot of publishers are doing when they release their "how much it costs to make an ebook" statements to the press.

Books overall may not be limited appeal. Any individual title is a limited appeal item. Nobody reads everything, and each title will have a maximum number of readers it will appeal to.

People don't mind paying Baen $15 for e-arcs and also buying the book later--and Baen flat-out says: we're selling these because we can, because we think you'll fork over this much money. Think it's too much? Wait, and get get the improved version for less than half of that. E-arcs are *entirely* price gouging; the *only* reason to charge more for them than for the final ebook is "because we think you'll pay." And people do, and are happy with it--because Baen is transparent about their reasons, and doesn't treat its customers like thieves, not even if they got an unauthorized copy from somewhere else.

Baen is charging a premium for early access. An e-Arc is an electronic Advance Review Copy, created from uncorrected galleys. There are people who will happily read galleys to get the book sooner.

Some people don't think the $15 Amazon ebooks are overpriced. If there's enough of them, that'll be the eventual price-point for ebooks.

I think we'll see a two tier price structure: The more expensive volume available when the hardcover is on sale, and the cheaper version when the MMPB is released.

There will be publishers who will try to maintain the higher price of an ebook even after the MMPB is released, but I don't expect them to do very well.

I suspect there aren't actually enough of them, just as I suspect Baen couldn't support a substantial part of its company selling e-arcs.

I'm certain Baen couldn't support itself selling e-Arcs. Right now, Baen is still mixed mode, selling print and electronic editions, and the bulk of its revenue and profit are from print editions. If Baen only sold ebooks, and the electronic edition had to bear all costs instead of an allocated share, you can assume ebook prices would be higher.
______
Dennis

[Sil_liS]

Originally Posted by tompe

I do not use any of these these things (I lend books but that is not why I buy books). But I like the extra portability of ebooks and the search and annotation facilities. So I am willing to pay extra to be able to search and annotate because of the electronic format.

So I do not see why an ebook should be cheaper from my point of view.

I really do not understand arguments about what the price should be. Electronics and books are more expensive in Europe than in the USA but I do not see any arguments that this is in any kind morally wrong or wrong in any other way.

I was talking about the bottom line from a purely economical point of view. If you decide that you don't like a pbook that you bought/received as a gift you have the option to resell or donate. You don't have that option with ebooks, so the economical value is lower. Add to that the fact that it costs less to make and distribute and the price should be lower.

[Sil_liS]

Originally Posted by DMcCunney

It's a little more complicated than that. There are two reasons for purchasing hardcovers. One is a durable long term reading copy. The other is fast access.

The PBs that I bought so far are holding up as much as the HCs. My grandparents have PBs bought in their youth and they are still in good condition after being read by three generations. I don't know what you do with your books that you consider hardcover binding to be essential to durability.

Originally Posted by DMcCunney

The primary market for hardcovers is libraries and collectors. Some hardcovers sell well beyond that, and those are the ones where "read it NOW" comes into play.

And how does this affect my point?

Originally Posted by DMcCunney

Correct, though print/bind/warehouse/distribute amount to perhaps 20% of the cost of a title. Reserve against returns goes away, too, but that will vary by title: the more copies you produce, the more can be potentially returned, so reserves for a title you have high hopes for and order a large initial printing will be rather more than reserves for a title you expect average sales from.

That is 20% less on the publisher's side. There should also be a smaller cost on the distributor's side.

Originally Posted by DMcCunney

Increasingly less of a factor as prices drop.

But unless you will be able to get an ereader for free, they will still imply an expense.

Originally Posted by DMcCunney

Depending upon which reader you use, you can lend an ebook: the B&N nook has a lending feature where you may load an ebook on your device to a friend with another nook for a two week period. Like a physical book, if you loan it in this manner, you don't have it while it's on loan. The mechanism that supports the loan feature disables your access to the book while it's loaned out.

Depending on which reader you use you will need more than one or risk being limited to only one store.

Originally Posted by DMcCunney

I question how large a percentage of the readership resells or takes deductions on lending. I don't, for the most part, see those factors as part of the decision to buy a particular title in the first place. We buy the books we want to read. Resale and/or tax deduction come later, if at all.

So what if it comes later? The option is there, and it is part of the value of the book.

Originally Posted by DMcCunney

I don't think anyone here thinks they shouldn't. The questions are "How much lower?" and "When?"

Actually the question would be how they can add to the value of the book to justify a higher price. What we need is a wider price range for a title, and everyone will be happy.