The Wacky, Weird World of eBook Pricing

Last night, my wife was reading her new Kobo Arc 7 with a frown on her face.

“Something wrong with your Kobo?” I asked.

“The Kobo’s fine,” she said. “It’s just that there’s a book I want to read, and it’s thirteen bucks on the Kobo Store. I don’t get it. How can an eBook possibly cost that much? It makes me wonder why anyone would even bother owning an e-Reader!”

As an author publishing in the eBook domain, I am acutely familiar with the many facets of this problem. My first foray into publishing, the eBook edition of Winterwakers Part 1, was released into the world on October 28, 2014. I priced it at $2.99, and it will likely remain at that price for a while yet.

By pure coincidence, one of the other books released on October 28 was Yes Please by Amy Poehler. She is one of the most talented comedians in existence, and by all accounts a fantastic human being. I’m kind of proud that we both published our debut books on the same day. Plus, it means that if I ever meet her in person, we can have the following conversation:

ME: “Amy Poehler, hi … I’m Matt Perkins, and my first book came out on the same day as your first book! Isn’t that amazing?”

AMY POEHLER: (engulfs me in a cloud of pepper spray and runs away)

The eBook edition of Yes Please is currently priced at $17.28. For the price of Ms. Poehler’s book, you could buy five copies of my book and ride the Paris Metro. Or, interestingly, you could pay an extra $1.33 (not including shipping) to get the hardcover edition of her book.

Do these prices seem out of whack to you? You, and my wife, are not alone.

Why?!?

The idea of an eBook and a hardcover being even close to the same price doesn’t make intuitive sense. A hardcover book is a physical product. It costs money to print and bind. It takes up space in a warehouse, space in a delivery truck, and space on a bookstore’s shelves. A sizable percentage of a hardcover book’s retail price reflects all that. It’s incorrect to say that an eBook has no manufacturing, storage, or delivery costs, but when compared to the hardcover format, said costs are effectively nil.

So where’s all that money going? And why are some eBooks, like mine, priced far lower than a typical hardcover book?

Ye Olde Free Market

Let’s get real here: the demand for Yes Please is several orders of magnitude higher than for Winterwakers Part 1. Free market economics dictate that Amy Poehler’s book should cost much more than mine for that reason alone. And since the supply of an eBook is effectively unlimited (i.e. Amazon’s not going to run out of them), price is driven almost entirely by demand.

Basic demand does a good job of illustrating why Amy Poehler’s book should cost more than mine, but it doesn’t do much to explain the tiny price difference between the two editions of her book. We know that eBooks cost less to manufacture and distribute than hardcovers. We also know that if eBooks were priced lower, people would buy more of them–that’s basic free market economics again. Given this, why is Ms. Poehler’s eBook priced so high?

Someone who didn’t know much about the publishing industry might see these prices, and the production costs of each item, and assume that the demand for eBooks is so high that publishers and retailers can justify the price. This assumption is incorrect; at this moment in history, overall demand for print books still exceeds overall demand for eBooks. The gap is closing rapidly, and it’s narrower or wider depending on genre, but it’s still a substantial difference. Paper books are more popular than eBooks, especially in the celebrity autobiography genre.

So, if supply-and-demand economics can’t explain the price disparity, what can?

Short answer: publishing industry weirdness.

This is where things get complicated. Publishing, especially eBook publishing, is a strange industry, one that can seem like nonsense to people on the outside (and on the inside, for that matter).

Publishers Be Crazy

Yes Please is published by HarperCollins, a member of what is known in the industry as The Big Five, which also includes Penguin Random House, MacMillan, Simon & Schuster, and Hachette. Together, these five mega-publishers own the vast majority of the book industry, acquiring and publishing books under dozens of “imprints” (what most industries would call “brands”). They are the result of decades of mergers and acquisitions, and all of them are owned by even larger parent companies. They made their fortunes selling billions of paper books, and they intend to sell billions more.

As we’ve seen time and time again, the speed and convenience of digital commerce inevitably confuses and frightens the old guard (“the Internet is a series of tubes!”), leaving room for fast-moving new players to swoop in and grab the cash. We watched Apple swoop in and take over the music retail industry. We watched Netflix swoop in and take over the movie rental industry. We are currently watching Amazon swoop in and attempt to take over publishing. Many of the entrenched business concepts that the Big Five hold dear are simply irrelevant in the eBook world. There are no printing presses, no distributors, no warehouses, no inventory, no returns, just a digital file the publisher–or rather, anyone–sends to the retailer. eBooks burn away a large portion of a traditional publisher’s value proposition.

The Big Five are currently in the “kicking and screaming” phase of the digital revolution. They are afraid eBooks will eventually out-sell print books (they’re probably right about that), rendering them mostly obsolete in the process (barring a miracle, they’re probably right about that too). As such, they’re doing their best to slow the eBook revolution down, while Amazon is fighting hard to speed it up. This tension has resulted in a number of clashes between Amazon and the publishers.

You might have noticed this line near the top of the Kindle edition listing of Yes Please:

This price was set by the publisher

 

Shitty highlighting emphasis is mine. This is Amazon’s way of saying “yeah, we know this eBook costs way too much, but it’s not our fault. Blame that stodgy, old-money, east-coast publisher.”

HarperCollins, and the other Big Fivers, believe that cheap eBooks devalue their print products (the area in which they are dominant). Amazon believes that expensive eBooks hurt the eBook industry as a whole (the area in which they are dominant). Eventually, one of them will win, or maybe someone else will swoop in and fix and/or fuck up everything. Until then, we’re stuck with artificially inflated eBooks from the mainstream publishing industry.

Little Ol’ Me

As of this writing, I’m an independent, self-published author. I don’t have a contract with the Big Five, or with any publisher. There are many reasons why I chose this path, but they’re probably the subject for another post.

What does this mean for my eBook pricing? Several things. Most notably, I don’t have a dog in the fight between Amazon and the Big Five. I sell books on Amazon via their Kindle Direct Publishing program, but they’re not my publisher, and they let me set prices anywhere from 99 cents to $200. Since I’m a first-time author, and not a huge celebrity like Amy Poehler, I need to price my work accordingly.

Fortunately for me, I also lack the overhead that a big publishing house has to deal with. I don’t have a Manhattan office, full-time employees, or any of the other expenses of a traditional publisher. I do have expenses, such as hiring a good freelance editor and a talented cover designer, but my costs are substantially less than what a major publisher would burn on a shot-in-the-dark debut novel. For a big book like Yes Please, the expenditures are even higher. HarperCollins has to sell a ton of those things to break even. As such, my margins on Winterwakers are waaaaaaaaay fatter than what a big publisher sees on pretty much any of their titles. Low overhead and high margin means I can be aggressive on price to help generate sales.

It’s this strategy in part that has lead to indies like me gobbling up a substantial slice of the eBook pie. According to the data collected by Author Earnings (a side project of self-pub legend Hugh Howey), indie authors are, as a whole, earning more from eBooks than their Big-Five-published counter-parts. If you look at top-selling indies versus top-selling Big-Five books, the price difference is immediately apparent. We don’t have an ancient business model to defend; we just want to sell a crap-ton of good books.

Conclusion

High eBook prices hurt online retailers, publishers, authors, and most importantly, readers. I sincerely hope the traditional publishers figure this out quickly. If they continue to treat the eBook format as a parasite instead of a fast-growing sales channel, they will be left in the dust. For now, they seem intent on riding these hardcover-matching eBook prices into the ground.

Amazon, meanwhile, has their own ideas about how eBooks should be priced. During their dispute with Hachette earlier this year, a bizarrely earnest email went out to KDP authors (i.e. preaching to the choir) proclaiming that the eBook price sweet spot is right around ten dollars, and we should all shout this revelation from the rooftops. As much as I appreciate Amazon for providing a decent platform from which I can sell books, I’m not going to do their PR for them. Their desire for cheaper eBooks is self-motivated–as the world’s biggest eBook distributor, they have the most to gain, and almost nothing to lose.

Ultimately, it’s the readers who will decide with their dollars how much an eBook should cost. Every time my wife balks at paying $13.99 for a five-year-old novel, or $17.23 for what I’m sure is an excellent debut by Amy Poehler, that’s another chip knocked off the legacy pricing wall. Eventually, that wall will crumble; until it does, she will keep searching the used bookstores for a decent paperback.


1 Comment

Earnest B DeMille says:

Once again, the myth of the invisible hand is laid bare. Its rotting corpse corrupting what should be a sacred space – the place of creativity.

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