Answer as to why ebooks cost more than print books (1 publisher)

[wvcherrybomb]

Originally Posted by Sydney's Mom

And you like ebooks, so we can charge more.

I guess I've always known this but hearing a publisher say it makes me mad enough to consider abandoning my morals and going to the dark side.

[kindlekitten]

Originally Posted by wvcherrybomb

I guess I've always known this but hearing a publisher say it makes me mad enough to consider abandoning my morals and going to the dark side.

absolutely! I won't say that the ebooks need to be 50% of the pbooks, but certainly NOT more! there is still the 9.99 boycott at Amazon which I click every time I see an expensive book I am interested in, and then it goes on my wish list. these publishers need to be made aware of how many people are irritated and walking away from them

[GA Russell]

For the past few years, a company called Big Champagne has determined how many (and the identity of) music tracks/files are swapped among pirates. It sells this information to the record companies, who then use it to prove to disc jockeys, etc., that the song is popular.

Perhaps Big Champagne will one day provide the same service to the publishers, who can then better determine their most advantageous price points.

I suspect that many here who complain about price gouging believe that the publishers would make more money by selling more copies of eBooks at a lower price.

It appears to me that many of the publishers' statements that I have read here in the past year do not have the ring of truth. For example, the price of eBooks will come down when the hardcopy is available in paperback. Or what we have here, that the eBook costs three cents more because of the cost of conversion.

I believe that, over time, the more consumers think they are being lied to, the more there will be who will pirate.

[gmw]

Originally Posted by Sydney's Mom

... In other words, ebooks are an afterthought, so we add on the incremental cost to the pbook price. And you like ebooks, so we can charge more.

Oh well. What did I expect - actual logic?

I think you have drawn the wrong interpretation from their response. In marketing-speak their response means: "We charge what the market will bear." That's all, it's pretty much what every business does. Surely you didn't think that price was governed by the cost of manufacture? Cost to create only ever determines whether a business can be made viable, the actual end price tag is a constantly wavering line between what the purchaser is willing (and able) to pay, and what the competition is forcing you to do.

[Bindi]

Originally Posted by SeaBookGuy

Something I fail to understand --

Publishers are incredibly firm on NO DISCOUNTS for agency ebooks. Ever. Period. End of Story.

New (not used!) print copies of the exact same text can be had as much as 50% off with Borders coupons.

Please note that Harlequin isn't one of the Agency 5 Publishers. Retailers are allowed to discount their books. This doesn't explain the lame response from them, but I don't think it's fair to lump them into the same group as the Agency publishers.

Bindi

[Kali Yuga]

Originally Posted by wvcherrybomb

I guess I've always known this but hearing a publisher say it makes me mad enough to consider abandoning my morals and going to the dark side.

Uh.... Why?

(Aside, that is, from the fact that the company did not actually say what Sydney's Mom claims -- that was, at best, his interpretation.)

It's a for-profit company. Their job is to be profitable, whenever possible to maximize their profits, and they have plenty of competition.

Countless companies figure out how to lower their costs, and in turn do not lower their prices. Do you investigate other companies to detect such allegedly dastardly behavior?

If Harlequin managed to lower their costs by other means, would that be acceptable? What if it's by lowering author royalty rates and advances? Or more efficient inventory management? What if it's by buying cheaper paper? What if that cheaper paper is milled from virgin forests by low-wage, non-unionized Vietnamese laborers? What if it's from automating a particularly labor-intensive process? What if it's from firing 5% of their work force?

Is there a specific profit margin that is ethical, and another that is unethical? If Harlequin has a 15% margin before ebooks, and 16% after, is that wrong?

Prices are also in part determined by "consumer demand." When a video game first comes out, it can easily cost $50; a year later, it may fall to $25; 2 years later, it's $15; 3 years later it's $5 on a good day. The media or download didn't cost $40 when it first came out -- it's just the company setting prices based on demand. Demand curves are Macro Economics 101, and Harlequin is doing absolutely nothing that almost every other company does when they have a popular product


Naturally I cannot read your mind over the Internet. But I'm willing to guess that like many people, your position on these issues isn't likely to be all that consistent. In particular I doubt that most people have any plans to punish companies that lower their costs but maintain or raise prices anyway.

So, I really don't see why ebooks should be treated any differently, especially ebooks offered by a genre publisher that are low in cost to begin with.

[Ken Maltby]

Hmm... I guess I have some time for some useless pontificating.

1. The publishers have a point that it costs about as much to make ONE ebook as it
does to make ONE pbook. The thing is though, it costs next to nothing to provide all
the additional ebooks needed to meet any demand.

2. Cost is a factor that relates to how low you can price a product, so that you can
out sell your competition and obtain a favorable market share.

3. Most goods and services are priced "to what the market will bare" or to what the
consumer is willing to pay, and NOT in a manner directly tied to costs.

4. "The Rule of Supply and Demand" effects pricing as scarcity relates to demand. Scarcity comes from an inability to meet demand. Demand for a product can be more
than the production capability, this is often a temporary situation or production can be
deliberately limited to effect the supply side of the equation. ( This only works if you
have no competition or if you all agree to limit the supply.)

5. There are obvious constraints on production for most products. It takes time and
resources to create each individual item sold. You can only have the supply of corn
that the amount of farms growing corn can produce in the time available, no more.
Distribution and marketing of a physical product can effect the supply side as well, too
many available in a location can mean that everyone who wanted it has it and the supply
will exceed demand in that location, the opposite as well. ( This can also be artificially created, "Georestrictions" come to mind.)

6. A digital file can be reproduced as needed, in any quantity, and delivered to
anywhere, at next to no production cost. It costs next to nothing to have a virtually
unlimited supply on hand for instant delivery. So there is no scarcity, no supply side
issues.

7. The only scarcity/supply side issue comes from the ability to produce that first initial
file. The production of the author editor team. That seems to me to be a natural and
obvious factor that should effect the pricing of ebooks. It would be most like the effect
of an initial limited production capability for a high demand physical product. ( I know I
would pay more to have an ebook of one of Jim Butcher's series, on or near its release
date.)

8. The huge volume of in copyright books could represent a very lucrative market for an
ebook publishing operation, once they come to grips with the wasted potential of all the
"out of print" literature. Making a few dollars on books that are not the current high
demand books, and making a higher amount on the few new books out, would make for higher profits and happier customers, as well as more "in distribution" ebooks for all.

Just my 2 cents worth.

Luck;
Ken

[vulcan_girl]

Originally Posted by Sydney's Mom

I sent an email to Harlequin, asking why their ebooks ($8.02) cost more than the same title in paper format ($7.99). This is their reply:

Thank you for your inquiry and thank youfor your interest in our books and eBooks There are many reasons why eBooks can sometimes cost more than print, such as the cost of converting text files into eBook formats, or the simple fact that some sites are able to offer a deeper discount on certain titles. Most of our customers find that there are more benefits to buying eBooks than price alone, such as convenience, immediacy, and portability.

In other words, ebooks are an afterthought, so we add on the incremental cost to the pbook price. And you like ebooks, so we can charge more.

Oh well. What did I expect - actual logic?

Were you buying direct from Harlequin? I buy a mix of paper and ebook from them all the time and have never paid an odd number like that for any book. They sell their ebooks at 10% off cover, with the occasional sale.

[kindlekitten]

Originally Posted by GA Russell

For the past few years, a company called Big Champagne has determined how many (and the identity of) music tracks/files are swapped among pirates. It sells this information to the record companies, who then use it to prove to disc jockeys, etc., that the song is popular.

Perhaps Big Champagne will one day provide the same service to the publishers, who can then better determine their most advantageous price points.

I suspect that many here who complain about price gouging believe that the publishers would make more money by selling more copies of eBooks at a lower price.

It appears to me that many of the publishers' statements that I have read here in the past year do not have the ring of truth. For example, the price of eBooks will come down when the hardcopy is available in paperback. Or what we have here, that the eBook costs three cents more because of the cost of conversion.

I believe that, over time, the more consumers think they are being lied to, the more there will be who will pirate.

that would be very interesting to watch if there were an ebook counterpart

[neilmarr]

Something to bear in mind is that the bigger the publisher, the more likely it is to opt for the Agency 5 Model. This does not allow discounting of ebooks.

It's most unpopular with online stores, who still, of course, can still discount treebooks as they like. I can't help but wonder if the oft-resulting ebook-treebook pricing anomaly (especially on new releases and potential blockbuster sales) is a way of hitting back against Agency 5. Whatever discount is offered, you see, the stores must still pay the publisher full wholesale price on these high-potential treebooks, so these discounts mean books are sold at a loss to the store ... the publisher's profits are only hit by reduced ebook sales because of the artificially created higher-than-treebook cover price.

My own indipendent house, by the way, didn't opt for Agency 5 and all our ebooks are DRM-free. Whereas we often see our paperbacks discounted, it's never yet been anywhere close to a level that ever makes our ebook editions as expensive or more so than paper editions. Even with discounted paperbacks, ebook versions are at least half the cover price.

Our ebooks are also sometimes discounted by an individual retailer, but that doesn't hit us or them. Their very high sales commission covers them, and our contract with each store stipulate that we cannot offer ebooks to any other store any anything less than our ($5.95 across-the-board) Recommended Retail Price, so we are still paid on RRP minus those huge commissions.

Best wishes. Neil

[jbjb]

Originally Posted by Steven Lake

I hate when people price stuff based on "value" to the end user rather than realistic cost/profit margin schemes like everyone else.

Businesses don't, in general, price based on cost + margin. They will charge whatever maximises their profit, using what they know about their margins and their PED ("Price Elasticity of Demand").

I suspect where ebook publishers are going wrong is that I'd guess their product is much more elastic than they think - a drop in price will dramatically increase sales which, given the very low Cost of Goods for an ebook sale will lead to increased profits.

/JB

[jbcohen]

Theres a sucker borne every minute as PT Barnum used to say and I guess Harlequine wants us to be suckers. I will not buy any book dead wood book or ebook if it costs more than $8.

[Ken Maltby]

Originally Posted by jbjb

Businesses don't, in general, price based on cost + margin. They will charge whatever maximises their profit, using what they know about their margins and their PED ("Price Elasticity of Demand").

I suspect where ebook publishers are going wrong is that I'd guess their product is much more elastic than they think - a drop in price will dramatically increase sales which, given the very low Cost of Goods for an ebook sale will lead to increased profits.

/JB

Oddly I think with ebooks the limiting factor is on the demand side not the
cost of production or your PED. For most books, there are only so many
that are interested in purchasing the book, at any price. Generally people
who read have demands on their time and where they have a choice of
reading material they are often looking for something that they know they
will enjoy. They have a limited number of authors or genre that they will
even consider reading. Without some mass appeal, generated outside the
circle of the normal reading addicts, by TV personalities or a Movie, there
is a real limited demand.

Luck;
Ken

[jbjb]

Originally Posted by Ken Maltby

Oddly I think with ebooks the limiting factor is on the demand side not the
cost of production or your PED. For most books, there are only so many
that are interested in purchasing the book, at any price. Generally people
who read have demands on their time and where they have a choice of
reading material they are often looking for something that they know they
will enjoy. They have a limited number of authors or genre that they will
even consider reading. Without some mass appeal, generated outside the
circle of the normal reading addicts, by TV personalities or a Movie, there
is a real limited demand.

Luck;
Ken

That's an interesting point Ken. If I read you correctly you're saying that ebooks are pretty *inelastic* (the PED is low). My feeling (as I said in my post) has always been that it's high, but your argument makes sense and I may well be wrong.

I see your point about a limited total number of potential readers of a book, but I do wonder if the price would still affect sales by changing the distribution of those readers between purchases, illegal copies and library borrowings.

Also, of course, books are competing with each other for readers' attention, so while the elasticity of the market as a whole may be low, it may be high for a given book or publisher (people will buy it instead of the more expensive competing title or publisher).

If you are right, of course, the publishers are doing exactly the right thing (in business terms) by keeping the price high.

/JB

[Kali Yuga]

Originally Posted by neilmarr

Something to bear in mind is that the bigger the publisher, the more likely it is to opt for the Agency 5 Model....

Not exactly. It's more that the larger publishers have the clout to pull it off; smaller publishers can't get away with it. Also, many larger publishers have consciously opted not to use agency pricing so far.

Harlequin for one doesn't currently use agency pricing. You're not going to suggest that Harlequin does not have the right to set prices for its own books when selling them through their own store, are you?

Originally Posted by neilmarr

I can't help but wonder if the oft-resulting ebook-treebook pricing anomaly (especially on new releases and potential blockbuster sales) is a way of hitting back against Agency 5.

It isn't.

Steep discounting, especially on best sellers, was going on years before agency pricing went into effect.

Your interpretation is essentially backwards; the discounts were a reason for, not a reaction to, agency pricing. Although the publisher received a full payment from the retailer, they believed the steep discounts on new hardcovers, especially best sellers, was decimating the perceived value of their product.

They were also unhappy with the $10 price point that Amazon was pushing, and the prevailing wisdom was that eventually Amazon would lock up the market and demand that the publishers lower the wholesale price.