Interesting article on publisher's profits on eBooks

[chaznsc]

Publishers typically earn about $2.15 per digital book versus 26 cents for a print copy, according to Sanford C. Bernstein & Co. While publishers see digital books as the future, the market is dominated by the Kindle, leaving them vulnerable to Amazon.com’s bargaining power.

http://www.bloomberg.com/apps/news?p...d=aWhjmdVFcC2Q

[ilovejedd]

Interestingly enough, that's quite an argument in favor of selling non-DRMed ebooks. Amazon has the "iTunes" advantage right now. One way to wrestle market share from Amazon is to create an outlet for ebooks unencumbered by DRM. Fictionwise's MultiFormat is good because it covers pretty much the whole gamut of ebook readers. Sure, the Amazon MP3 store didn't quite compete with the iTunes store but I think it came too late in the game. If the publishers want to have some measure of control, they should really re-think getting rid of DRM now instead of when they're even more in the mercy of Amazon.

By the way, I only started buying digital tracks when Amazon launched their MP3 store. Prior to that, I bought CDs (only ones with a bunch of good tracks I'd be willing to listen to over and over) and ripped them myself.

[Kali Yuga]

Well, it makes sense that an e-book will send less revenue to the publishers, since the cost of productions is lower. I'm not sure it's nearly $2/book though, even for a hardcover.

Originally Posted by ilovejedd

Interestingly enough, that's quite an argument in favor of selling non-DRMed ebooks. Amazon has the "iTunes" advantage right now. One way to wrestle market share from Amazon is to create an outlet for ebooks unencumbered by DRM.

...except that most publishers would flatly refuse right now to release their books in a non-DRM format.

More competition is on its way, but unfortunately it will almost certainly have DRM and charge more than Amazon.

[Nate the great]

Originally Posted by chaznsc

Publishers typically earn about $2.15 per digital book versus 26 cents for a print copy, according to Sanford C. Bernstein & Co. While publishers see digital books as the future, the market is dominated by the Kindle, leaving them vulnerable to Amazon.com’s bargaining power.

http://www.bloomberg.com/apps/news?p...d=aWhjmdVFcC2Q

That's income, not profit.

[chaznsc]

Originally Posted by Kali Yuga

Well, it makes sense that an e-book will send less revenue to the publishers, since the cost of productions is lower. I'm not sure it's nearly $2/book though, even for a hardcover.




...except that most publishers would flatly refuse right now to release their books in a non-DRM format.

More competition is on its way, but unfortunately it will almost certainly have DRM and charge more than Amazon.

What other cost is there? Formatting is done whether its printed or digital.

[chaznsc]

Originally Posted by Nate the great

That's income, not profit.

Thats not really clear in the article. I'm betting that's profit. If it isnt, they should be giving Kindles away for free.

[Nate the great]

Originally Posted by chaznsc

Thats not really clear in the article. I'm betting that's profit. If it isnt, they should be giving Kindles away for free.

The article doesn't use the word profit, so I would say that it is pretty clear.

Also, you have to remember that that number was provided by a so called analyst. It probably has no connection with reality.

[Alisa]

Originally Posted by Nate the great

The article doesn't use the word profit, so I would say that it is pretty clear.

Also, you have to remember that that number was provided by a so called analyst. It probably has no connection with reality.

The article goes on to say:

Amazon.com, which cut the Kindle’s price yesterday, pays publishers $12 to $13 for Kindle editions of books on the New York Times best-seller list, and typically sells them for $9.99, said Paul Aiken, executive director of the Authors Guild, a New York-based group providing legal support to writers. Publishers are concerned that Amazon.com will start demanding lower prices from them so it can start making more money on digital books, he said.

[Kali Yuga]

Actually, something here doesn't add up. If publishers made $2.15 in profit on an e-book and only 29¢ profit on a paper book, they'd be over the moon about the e-books. That's probably why I misread it at first, assuming that paper books making more for the publishers.

It also seems very unlikely that Amazon will routinely boost e-book prices to $12.95 for all their books, especially if B&N's e-books wind up with that pricing (as they apparently plan). More likely is that they're hammering on the $9.99 price point, make a profit on most books at that price point anyway, and will use whatever means at their disposal to get the publishers to cut their wholesale e-book pricing.

[doreenjoy]

Originally Posted by Kali Yuga

Actually, something here doesn't add up. If publishers made $2.15 in profit on an e-book and only 29¢ profit on a paper book, they'd be over the moon about the e-books. That's probably why I misread it at first, assuming that paper books making more for the publishers.

It also seems very unlikely that Amazon will routinely boost e-book prices to $12.95 for all their books, especially if B&N's e-books wind up with that pricing (as they apparently plan). More likely is that they're hammering on the $9.99 price point, make a profit on most books at that price point anyway, and will use whatever means at their disposal to get the publishers to cut their wholesale e-book pricing.

Assuming they could sell as many copies of an E-book as they can of a P-book.

E-books are still a tiny tiny niche in the publishing world. Estimates are E-book sales are 2% to 4% of the P-book sales.

[tomsem]

Profit margins are one thing, but there is also pricing psychology.

I think the publishers don't want to see the price of 'books' go from $25 (retail) to $10. Even if a customer cannot actually buy an ebook for $10 (because they don't own an ebook reader), the existence of 'the same' book at a much lower price is going to play with their minds, and they will not feel that $25 is a good value, and they'll spend that money on something else.

So a good strategy for them is indeed to price the ebook closer to the street price of the print version. And they do, generally speaking. But Amazon (in pursuit of its interest to own the ebook market) undercuts them by setting the price lower for best sellers, and they are kinda stuck with that model since Kindle customers have come to expect it (at least I have, even though I haven't bought a best seller yet).

It just remains to be seen who wins this tug of war on the perceived value of a 'book'. I think Amazon's position is pretty strong right now, but it's far from clear where it will wind up in a few years.