eBook Pricing, what's fair?

Once a reader has spent about close to $300 to invest in a Kindle or similar eReader, how much should she expect to pay for reading material?

Right now, the price point for a best seller in the e-format is generally $9.99. Is that too much or too little? In April, best-selling author David Baldacci’s book “First Family,” was released at a $15 e-Book price at Amazon, and the comments about the price were scathing. The book is now priced at $9.99 for the Kindle version. Purchasers aren’t the only ones vocal about the pricing structure; it has been a topic of heated debate in the publishing community.

Bob Miller of Harper Studio has argued “Whether a book is printed on paper and bound or formatted for download as an e-book, publishers still have all the costs leading up to that stage. We still pay for the author advance, the editing, the copyediting, the proofreading, the cover and interior design, the illustrations, the sales kit, the marketing efforts, the publicity, and the staff that needs to coordinate all of the details that make books possible in these stages. The costs are primarily in these previous stages; the difference between physical and electronic production is minimal. In fact, the paper/printing/binding of most books costs about $2.00…so if we were to follow the actual costs in establishing pricing, a $26.00 “physical” book would translate to a $24.00 e-book…and while I agree that e-books should be priced at a greater discount to hardcovers than $2.00, we need to move the conversation beyond the idea that e-books “don’t cost publishers anything to make.”
 

Some publishers are refusing to release their new books in the e-format for six months. Sourcebook iwill not be releasing Bran Hambric: The Farfield Curse by Kaleb Nation in the e-format for six months, so as not to cannibalize their hardcover market. John Grisham has so far refused to allow his books to be released in the e-format, although he is releasing a short story in that forum on November 3, 2009.

Readers seem to have drawn a line in the sand over the $9.99 pricing issue. Anything more and many refuse to pay. When one factors in the cost of the reading devices, it’s somewhat understandable. It is estimated that the cost to actually print/store/ship the average hardcover book is 12.5% of the average hardcover retail price. Since publishers are eliminating those costs, shouldn’t it be reflected in the pricing structure of the e-book? And since publishers don’t have to worry about returns, remainders and the like, they can more accurately account for their products.

What publisher’s seem most afraid of is that Amazon is now setting the price, and can decide to change the payment structure at any time. Right now, publishers are making the same for eBooks as for print copies because Amazon is paying the same discount for eBooks as for print (approximately 50% off the list price). Using the eBook as a loss leader has allowed Amazon to build the market for the Kindle. But what will happen if Amazon changes the rules on them? If the discount is altered, publishing profit goes down, and no publishing house wants to see that happen.

It seems that the real heart of the issue is the arcane formulas used by the publishing industry in both royalties and pricing. There are not many industries that expect a good number of shipped products to be returned and the price reimbursed to a purchaser, yet that happens regularly in the book market. The methods used to calculate royalties based on varying price points for books offset against advances should be examined and adjusted to reflect these changing times. Until then, the dispute will continue to simmer.
 

For more on eReaders, click here