A Stalker’s Notebook: eBook Pricing – The Chicken or the Egg Dilemma
Books, Column | Charles Tan | October 27, 2009 at 7:07 amThe price of an eBook is a contentious subject. I can probably fill up two months of BSC Review essays tackling the various perspectives. Each side have reasons to be invested on the subject. For example, readers are consumers, so they want to know why they’re paying ridiculous amounts for it (not to mention the expensive buy-in for eReaders). And as critical as we might want to be of would-be monopolizers such as Amazon or Sony (and recently, Barnes & Noble), they are investing a lot of money in developing the eBook infrastructure (devices, software, market, etc.). But for the purposes of this essay, I’ll tackle the plight of major publishers (this distinction is important).
There are actually several essays and blog entries up on the Internet that explain the side of publishers:
- The Price of eBooks by Lee Harris.
- A Brief Drunken Comment on the Cost of Making Ebooks by Arachne Jericho.
- E-book Pricing by Marion Gropen.
- The Difficulty of Pricing eBooks Part I by this author.
Unfortunately, because some of the articles can be lengthy, some readers might simply gloss over them. If you want my abridged explanation for why eBooks are “expensive” (i.e., above $10.00), then it can be summed up as (a) production costs and (b) supply and demand.
Production Costs Let me quote Arachne Jericho on this: “The main cost of creating an ebook in fact remains the main costs of creating a book, period. The writing. The editing. The fact-checking and cross-checking. The images. The index building, oh gods, the index building. The cover. The marketing. The accounting. Making deals with the distributors.” A lot of the arguments why eBooks should be cheaper stems from ignorance of these production costs. For example, some common arguments I hear are:
(1) eBooks should be cheaper because the publisher didn’t have to pay for printing them. This is true but a lot of people have misconceptions on how much not printing actually saves the publisher. If you’re paying the Suggested Retail Price (SRP) for a book, probably only 10% of the cover price accounts for printing costs.
(2) eBooks should be cheaper because there are no storage and transportation costs. While little storage is actually involved (though you still need space for the servers) and no physical transportation takes place, the costs are still there. The traditional model of most businesses is that distributors and retailers each get 30% of the SRP (and storage/transportation costs are usually shouldered by the distributor). Unfortunately, the way the current eBook industry evolved, the publisher isn’t saving 60% of the SRP. 50% of the SRP goes to the virtual retailers like Amazon and Sony and Barnes & Noble, so, sorry, no dice.
(3) eBooks should be cheaper because they’re not books. For me, this is a perception problem. The previous reading generation values tactile commodities, something we can touch and feel for reassurance when we doubt its existence. It’s really no surprise why physical theft (someone stole my stereo!) is easier to prove in court, as opposed to to intangible concepts such as intellectual property (someone stole the plot to my book!). Some readers treat books as the former when it’s more the realm of the latter (and to be fair, publishers make the same mistake, hence these brazen practices of DRM or remotely deleting books from the Kindle). Other media have trained their consumers to perceive their products as the latter, such as music (although this was honestly taken out of the recording industry’s hands with the proliferation of piracy) and software (some people still complain that “I don’t have my discs!” but many gamers are content purchasing/downloading World of Warcraft directly from Blizzard or Plants vs. Zombies from PopCap Games without a CD backup).
Supply and Demand If you want an ever shorter explanation of why eBooks are expensive, it boils down to supply and demand. Or rather, demand, since supply of eBooks is theoretically infinite. Currently, there’s not demand for them to price them at a rate that consumers want. We have to bear in mind that the keyword in mass market paperbacks is mass market. For the most part, they’re priced cheaply not because they’re cheaper to print (although that is a factor), but because the publisher can sell them in huge quantities. (Related to this is that the more books you print, the cheaper your printing expenses become, and the worst-case scenario is that you can always pulp them. eBooks, on the other hand, work on an inverse principle – the more books you sell, the more storage space and bandwidth you consume - although this is mostly shouldered by the retailer.)
Unfortunately, publishers believe that right now, there’s not enough people who’ll buy eBooks to justify selling them at a price point that’s lower than their print books. Of course the counter-argument for that is that people will start buying eBooks if they’re priced cheaply, hence the Chicken-or-the-Egg dilemma in the title of my post.
Compounding this problem are the retailers like Amazon, which dictate the price of eBooks to publishers. Whether their interference is a good thing or a bad thing depends on your economic belief. There are people, for example, who advocate for free markets and a laissez-faire approach. And yet when you look at the modern world, a lot of industries are regulated (and/or subsidized) by some institution, such as government. Publishers, however, are free to dispute that this kind of retailer intervention is detrimental to their business, and that perhaps a different kind of regulation would be welcome.
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