Interesting article on book pricing and why it might rise

[DMcCunney]

Originally Posted by FF2

That's what I was going to say, so well said. If 20% of the cost no longer exists than why are the books not 20% cheaper.

Because pricing is always "what the market will bear". Manufacturers are always trying to cut costs, but they do that to improve their bottom line. They only cut prices if they think they have to, to be competitive and make sales.

And then as someone else mentioned I can go to Costco or elsewhere and get a discount - seems similar discounts should be available for ebooks.

Why should they? CostCo sells physical goods. They buy in huge volume, and get lower prices from producers for doing so. They sell in huge volume, and make up in volume what they lose on lower prices per unit.

Ebooks aren't physical goods, and the economies of scale model doesn't apply.
______
Dennis

[Elfwreck]

Originally Posted by DMcCunney

It varies by book. I know one editor for a major trade house who claims the costs are 10%. I consider 20% the top end, and suspect 15% is more likely.

Does that editor include returns in that cost? Those are, I suspect a major part of how the numbers seem skewed; claiming "print/distribution/etc costs are 10% of production"--and then trashing 1/3 of the production--is disingenuous. If there's a 33% return rate, then print etc. is 10% of 64% of the run, and 100% of 33% of the run, for a total of 42% of the production costs.

I know the 100% on those is skewed, because it includes editorial & author advance costs. But you get the idea... if 33% of a run isn't being sold for profit, the margins are drastically different.

Pretend I'm the publisher issuing the book. I see the chance of selling the ebook at the same price as the paper edition, with the 15%-20% savings of not issuing a print edition flowing to my bottom line. If I believe I can successfully charge the same price as the paper edition and see comparable sales, tell me why I ought to lower it? (The fact that you will then buy it will not sway me. You're one reader. I'm concerned with tens or hundreds of thousands of readers.)

Tens or thousands of readers might buy it if it cost what paperbacks cost. Especially if the competition is insisting on $14 for ebooks. If publishers are going to enter the direct marketplace, they'll need to realize that their competition is a lot more immediate than they've been dealing with.

Publishers who sell to distributors based on long-term contracts (who sell to stores, who sell to readers) are in a very different position from publishers who sell directly to readers with an intermediary who provides only the UI. They need to advertise to those individuals, not to other companies... and enticing individuals involves sorting out what each of them values.

(I have encountered folks who think that being in electronic form adds value to the book, and will pay more for an ebook edition than a mass market paperback.)

If ebooks had a used & giveaway market, I'd think this was true. With the current state of things and most publishers trying to push "one purchase = 1 reader," or at most "1 purchase = small handful of readers selected before purchasing, all of whom have access to all your reading material," I don't believe there's added value; it's a trade-off.

Baen's ebooks are more valuable to me than paperbacks; Smashwords' aren't.

[DuskyRose]

Originally Posted by DMcCunney

If the market for a book is 50,000, and I can sell 50,000 copies priced at $10.00 each, what happens if I cut the price to $7.50 or $5.00? Do I magically conjure new readers out of nothing because of a lower price?

Dennis

Actually, you just might.

There is a price I'll pay for an ebook from an author I know I love, and a price I'll pay to take a chance on a new author or a new series. If the price is really low, I'll take more of a chance. Freebies on the first book of a series will also get me mighty interested. And if it holds up, and is enjoyable, then I'll have a price in mind I'll pay to read the rest of the series. And that will vary compared to how hooked I get on it.

I belong to an online used book club where you can trade used books for the price of media mail. Because it's much cheaper than buying new books, and in a lot of cases buying used books from a used book store, many people build up credits and find they're trying new authors and new genres they wouldn't have though of trying before, because it's cost effective. They haven't lost much if they find the book they bought is only good for the trash can. Even then, they can trade it back into the site for another book, thus cutting their loss on it.

Everyone's price on taking a chance is different, but if it's low enough you might find a lot more people taking a chance on your low priced book.

[asjogren]

Pretend I'm the publisher issuing the book. I see the chance of selling the ebook at the same price as the paper edition, with the 15%-20% savings of not issuing a print edition flowing to my bottom line. If I believe I can successfully charge the same price as the paper edition and see comparable sales, tell me why I ought to lower it? (The fact that you will then buy it will not sway me. You're one reader. I'm concerned with tens or hundreds of thousands of readers.)

If this was a true competitive industry, then I would expect at least some of the "savings"to be used to gain market share.

However, after all the mergers, acquisitions, and collusion - I don't see a competitive industry. I see a cartel that can wield power - for a short period of time. And then be replaced.

Middlemen are vulnerable in the Internet Age. For example, Amazon could hire a few key employees away from the Big 6 and start a new wave of change.

[EricDP]

Originally Posted by DMcCunney

Lower prices boost sales, but there's always a "sweet spot" - cut prices too much, and you get less total revenue, because the existing audience is simply paying less for the book.

I think we fully agree here. What we apparently don't agree on is where that sweet spot is. In my opinion, it's lower than what a lot of eBooks are currently priced at. Especially when the eBook is advertised as (for example) 30% off, but they are comparing to hardcover price and the paperback is actually quite a bit cheaper than the eBook. That makes me crazy and I don't buy on principle.

Originally Posted by DMcCunney

If the market for a book is 50,000, and I can sell 50,000 copies priced at $10.00 each, what happens if I cut the price to $7.50 or $5.00? Do I magically conjure new readers out of nothing because of a lower price?

Yes, that's the theory. Until you hit the magic price point...

[Sil_liS]

The people on this forum are divided into different categories:
1. The publishers are right - the rest of you just don't understand the process of publishing
My guess is that these people work in the industry. They never give a quote for what they just know makes the cost of books and they always relate to the cost of hardcovers.

2. It's not about the costs, it's about the value - the rest of you weren't going to buy hardcovers anyway
The general idea seems to be that if it is worth the price, you should just buy it and stop complaining. And always keep in mind that buying used books means no money to the author.

3. Ebooks are worth more than pbooks - the rest of you can just stick to paperbacks if you don't like it
They like to list the advantages of going digital, and think that it is normal to pay more even if you already paid for those advantages by buying an ereader. There are different sub-groups depending on their opinion on DRM.

4. Ebooks are worth less than pbooks - the rest of you should stop encouraging the publishers
This is where I am. I expect that any shop that sells both pbook and ebook should have a 10-20% lower price for the ebook. If there is DRM the price should be even lower.

5. The prices of ebooks will go down in time - the rest of you can pay as much as you want, but I can wait for the price to drop
They have long lists of unread books, a library pass, and the addresses of several used books stores. They can wait.

6. We should only give money to the author - ebooks mean that we don't need publishers anymore
They consider that self-publishing is the way of the future and that the publishing industry is going to go down anyway.

7. Ebooks should cost as much as I am willing to pay
There are a couple of people around here who think that the cost of ebooks should be much lower, and essentially want to pay as much as I usually give a street performer.

8. Change the system or I will pirate
Geo restrictions, DRM or high prices can be circumvented by pirating.

9. Will pirate anyway
Look: free ebooks as far as the eye can see!

[Elfwreck]

Originally Posted by Sil_liS

The people on this forum are divided into different categories:

I don't think we all neatly fit into those categories, nor that those cover everyone. (But they're a good starting point for discussion.)

1. The publishers are right - the rest of you just don't understand the process of publishing
My guess is that these people work in the industry. They never give a quote for what they just know makes the cost of books and they always relate to the cost of hardcovers.

I don't think they all work in the industry, although I believe several of them have done so at some point. Watching them dodge around Baen's success is always fascinating.

5. The prices of ebooks will go down in time - the rest of you can pay as much as you want, but I can wait for the price to drop
They have long lists of unread books, a library pass, and the addresses of several used books stores. They can wait.

I'm mostly here. (You missed fanfic. I may never run out of Sherlock Holmes slash to read. Certainly, any new book that wants my money is going to have to convince me it's likely to be at least as entertaining as what I can get for free at the Archive of Our Own.)

7. Ebooks should cost as much as I am willing to pay
There are a couple of people around here who think that the cost of ebooks should be much lower, and essentially want to pay as much as I usually give a street performer.

I'm partially here, too. Most of my paper reading was used or borrowed books, and that's the prices I'm able to afford. I can, of course, just buy half or a third as many books, now that I've switched to ebooks... and I do. And make up the rest of my reading time with free books.

I am intrigued by the number of publishers and authors who would rather risk getting none of my money than sell me a book for mmpb-or-less prices. And amused by the number who would rather sell me nothing than risk my giving a copy to a friend.

I have, in the past, gotten books from torrents & other non-legit sources. I've stopped, because many authors insist that they are very, very hurt by this.

I'm really not sure how they're *more* hurt by that, than by not being read at all, but shrug, it's their choice. Since their books aren't in my budget, I don't buy them, don't read them, don't recommend them, don't buy the paperback for a friend because I don't know if I'd like the author.

With no ebook equivalent of the "$5/bag bargain book sale," authors have no way of reaching new audiences that aren't specifically seeking them. Right now, with the ebook market being all new and weird, this doesn't seem to matter; nobody knows how much word-of-mouth and booksharing has ever affected pbook sales nor how to translate that to digital sales. But I firmly believe that eventually, the digital marketplace will be dominated by authors who have figured out how to get at least some of their work to go viral.

Which can't happen if they hold to the strict "1 purchase = 1 reader" economic model.

(No, I don't know how to make sales work if they're giving away free copies. Works for Konrath; doesn't mean it'll work for everyone. But solving that problem, not making tighter DRM lockdowns, should be their top priority; none of us learned to love books by reading only newly purchased books, and authors didn't get to be bestsellers by keeping their books in the hands of the original buyers only.)

[Sil_liS]

Originally Posted by Elfwreck

I don't think we all neatly fit into those categories, nor that those cover everyone. (But they're a good starting point for discussion.)

Yes, I know. And some of us migrate. Before I came to the forum I was in the 2nd category, moving towards the 3rd. But then I started to read how the publishers are going to increase ebook prices, and complain about everything, and I went to the 4th. Plus there are many public domain books that I want to read, so I'm partially in the 5th as well.

Originally Posted by Elfwreck

I don't think they all work in the industry, although I believe several of them have done so at some point. Watching them dodge around Baen's success is always fascinating.

Originally Posted by Elfwreck

I'm mostly here. (You missed fanfic. I may never run out of Sherlock Holmes slash to read. Certainly, any new book that wants my money is going to have to convince me it's likely to be at least as entertaining as what I can get for free at the Archive of Our Own.)

I never read fanfic so I didn't think about it. The number of works in the Archive is impressive. Could you recommend some? I have the very unhealthy habit of going the methodical way when I read webcomics and blogs and I don't think that I can go that way here.

Originally Posted by Elfwreck

With no ebook equivalent of the "$5/bag bargain book sale," authors have no way of reaching new audiences that aren't specifically seeking them. Right now, with the ebook market being all new and weird, this doesn't seem to matter; nobody knows how much word-of-mouth and booksharing has ever affected pbook sales nor how to translate that to digital sales. But I firmly believe that eventually, the digital marketplace will be dominated by authors who have figured out how to get at least some of their work to go viral.

The publishers focus too much on the fact that ebook sales can cut into the pbook sales. They treat the two as separate, so they want to increase both prices in order to make the same profit from each as they would have had if there were only pbooks. They seem horrified by the thought of any bargain sale for ebooks, and they are spending too much on the wrong type of marketing because they don't understand how the internet works.

[Fbone]

Originally Posted by Elfwreck

I'm really not sure how they're *more* hurt by that, than by not being read at all, but shrug, it's their choice. Since their books aren't in my budget, I don't buy them, don't read them, don't recommend them, don't buy the paperback for a friend because I don't know if I'd like the author.

Please don't take offense but it isn't really the author's or publisher's fault if your budget is "$5/bag" or similar. You can't expect a publisher to sell you a hot-off-the-press bestseller through Borders for a $1. Even most DRM-free ebooks from an Indie will set you back a few bucks. To be honest even indie prices vary from $0.99 - $8.99 and rising.

The issue is your reading budget rather than the publishing industry as a whole. Everyone's financial position is different and tough choices have to be made. It's great to see you are able to find so much reading material and stay in budget.

[doreenjoy]

I'm amazed that some think the costs of ebook production are 10% or even 20%. That would give the publishing company an 80% or 90% net profit margin!

Originally Posted by DMcCunney

The Internet is now the world's largest slush pile. There may be hidden gems, but frankly, I have neither the time, energy, nor desire to go plowing through it looking for them. They books may be cheap, but as with all else, you get what you pay for.

So true. I can't read anything more that's free from Smashwords. I've been beaten down by some awful stuff masquerading as books.

[pete_1967]

Few things publishers' conveniently ignore and no article about ebooks I have read so far has brought up are:
* Although you can order books from online retailers, their ability to deliver to your location, and delivery cost of physical item is restrictive factor to convert interest to sales, with ebooks there is no additional delivery cost thus making them immediately available for everyone who can afford the cost of the book, but delivery charges making them unaffordable.
* Especially if an author is unknown, I can still sell unlimited numbers of ebooks at $1, and am more likely to sell those, than 1000 printed ones at $10. And if the book proves popular, there is no additional cost of selling another 1000 ebooks, but there is to sell printed ones.
* My distributors are more likely to take on for sale every book I publish because additional storage costs are practically nill as opposed to physically store copies of books that are unlikely to sell. While back office costs are (basically) the same for both products, my losses for failed release are less. In addition to that, I rather sell 1001 ebooks at $1 than 100 printed ones at $10.
* Once I publish an ebook, I never lose a sale, whereas with printed products I can lose a sale in many ways, one being out of stock and customer not that desperate to have a copy that they would wait for the order - I rather sell that copy for a $1 than not sell one at all.
* Better availability, lower price ==> increased readers ==> more sales now and in future. If I read a great book, I recommend it to my friends, they may want to buy a copy too, if it's unavailable, I probably loan mine to (one at a time) them <== no revenue to the publisher but if it is available as an ebook at reasonable cost ==> extra revenue to the publisher ==> more people recommending the book ==> more ebook sales ==> rinse and repeat.

Of course, it is better for publishers to be quiet about above, because they wouldn't be able to justify their ebook pricing if they did.

I think the biggest barrier for lower ebook prices are the local publishing rights that are fair and valid with printed books, but it's only a question of time when the first global ebook publishing house becomes reality leaving local publishers to deal with only printed copies, specialising books that are not viable for ebook publishing (e.g. photography books) or killing them off completely. What will be interesting is to see whether that will be one completely new, or whether one of the current houses starts to buy global digital publishing rights for all their books and removes geographical restrictions from digital versions once and for all. My bet is former - just like Amazon came outside of old establishments and became the biggest in the market.

[nwhitfield]

Originally Posted by Sil_liS

I know that I just read 4 pages of text, but it doesn't really feel like it said anything other than that the prices will increase. I'm not even sure of the point that the author of the article is trying to make? Does he agree with the pricing or not?

Personally (yes, I wrote the piece) I don't agree with current pricing policies.

But the article wasn't intended to push a particular viewpoint, more to explain what is happening, show the direction things are going in, to spark a debate amongst the readers, and gain slightly wider attention for issues like agency pricing.

I also wanted to make sure that we weren't totally one-sided, and remind people that there are a lot more steps to getting a book on the shelves than just an author with a typewriter.

In fact, it started out as a slightly different article, looking at general aspects of lunacy amongst publishers, including both book pricing and proposed rules for lending of eBooks, but we didn't have space for that, and so I published that independently on my own blog (GoneDigital.net)

Nigel

[pete_1967]

Originally Posted by DMcCunney

I think you're making an unwarranted assumption about elasticity of demand. Every book has a market: the total number of readers out there that might want to read that book. If you're Stephen King, Tom Clancy, or the like, that total market will be hundreds of thousands to millions. If you're most other authors, the total market will be tens of thousands.

If the market for a book is 50,000, and I can sell 50,000 copies priced at $10.00 each, what happens if I cut the price to $7.50 or $5.00? Do I magically conjure new readers out of nothing because of a lower price?

Lower prices boost sales, but there's always a "sweet spot" - cut prices too much, and you get less total revenue, because the existing audience is simply paying less for the book.

There are limits to how much lower pricing will help sales, because there are only so many readers who want to read any particular title. The trick is pricing at a point that will generate the maximum revenue and profit, not the maximum unit sales.
______
Dennis

Sorry, but the market for each and every book is 6.8 billion and increasing. There is no other limit to the market. By lowering prices and increasing availability, you are more likely to reach that potential market of 6.8 billion.

What comes to the "sweet spot", once you have covered your production costs and price of each consequent product is cost + something, you make profit, but even at cost, it's better to sell than not because you still have capital costs to cover. Besides, higher revenues do not equal higher profits. I can have high revenue and still make loss or I can have relatively low revenue but make high profit. The world is full of examples of both cases so I wont give you any here.

Only factor that has any effect on pricing and availability is the producers strategy: do you want to concentrate only on short term high profit (stars and question marks) products or long term revenue generators (cash cows and dogs). For a publishing house, I'd say it would be foolish to only concentrate on stars as that is very risky strategy in already risky business.

[nwhitfield]

Originally Posted by murraypaul

I though the most interesting bit was this:

Anyone have more information about this?

Yes; Council of Europe Directive 2009/47/EC is the one you're after. It amends point 6 of Annex III to Directive 2006/112/EC.

2006/112/EC specifies a minimum EU-wide VAT rate (15%) for most things, but allows countries to have up to two reduced rates. Annex III lists items to which those reduced rates can be applied.

In the UK, our reduced rate is 5% (used for things like heating fuel, for instance).

2009/47/EC is "a directive allowing – on a permanent basis – the optional use of reduced rates of value-added tax" for certain things.

One of the items that is included in that category is "books, on all physical means of support." And subsequent clarification has made it clear that that does include eBooks (though that seems somewhat counterintuitive to me; apparently they have a computer or eReader to support them).

So, this would allow the UK government to reduce VAT on eBooks and audiobooks to 5%, if they wished. But it's not compulsory.

(You can't zero rate anything; as far as I understand it, things that were zero rated can remain so, but to add other things, you would need community wide agreement.)

If you enjoy reading through EU documents (actually, it can be much more enlightening than reading what the British papers claim they say), then a good place to start with regard to this is here

[mr ploppy]

Originally Posted by DMcCunney

Pretend I'm the publisher issuing the book. I see the chance of selling the ebook at the same price as the paper edition, with the 15%-20% savings of not issuing a print edition flowing to my bottom line. If I believe I can successfully charge the same price as the paper edition and see comparable sales, tell me why I ought to lower it? (The fact that you will then buy it will not sway me. You're one reader. I'm concerned with tens or hundreds of thousands of readers.)

Dennis

Working in retail I can understand that. If there are any savings to be made, the money would be better off in my pocket than scattered among the pockets of my customers.

But with no secondary market for ebooks, there is a vast source of buyers ready to pay for books that the publishers are not currently getting any income from. I don't have any figures, but I would guess that there is a lot more people who buy second hand books than there is people who buy new ones.

Those people aren't going to rush out and buy £100+ ebook readers if all your ebooks are priced at new book levels. But those are the people that the publishers really need to be buying them now if they want to have any chance of surviving long term.