Ebook Costs and Pricing, Part I: The Costs

People need to understand the value of what they’re getting.

Kindle

Nook

iBooks on iPad

Today’s most popular ebook readers, in order of release: Kindle, Nook, iPad (displaying iBooks)

I have been long awaiting the ebook revolution. The idea of being able to store dozens or hundreds or perhaps even thousands of books on a device has always intrigued and excited me. If done properly, I could search book contents to find information quickly and easily. I could view full-color images that are part of the book’s content. I could annotate my copy to highlight or make notations about blocks of text. I could synchronize my digital library to access my books on any of my computers or reading devices. I could loan a book out to a friend — and be sure to get it back.

While people have been talking about and experimenting with ebooks for a long time, it’s only recently, through the introduction of modern ebook reading devices such as the Kindle, Nook, and iPad that the things I want in my ebook experience are becoming reality. That each platform supports a different collection of features is somewhat disturbing — for example, only Nook currently supports the [limited] lending of books, only Kindle currently supports a complete range of devices, and only iPad supports full color. But we’re getting there, slowly but surely. High quality, functional ebooks are no longer over the horizon. They’ve almost arrived. It’ll just take demands from serious ebook consumers to get everyone on the same page (pun intended) as far as features are concerned.

But there’s still a serious barrier to full-blown ebook acceptance by folk like me who want to be serious ebook consumers: pricing.

An Ebook is Not a Physical Product

The reality is that an ebook is not a physical product. It’s digital; it has no substance. Suppose you’re a Kindle user and buy books for your device in the Kindle format. What happens when that format changes and evolves? When the Kindle reader is improved to the point where the old format simply can’t be read on it? Or if the Kindle format dies completely? Think of all your VHS tapes and floppy disks. When was the last time you enjoyed using one of them?

Traditional printed books, however, have been around for over a thousand years, in one form or another. They have substance. They can line shelves or live in stacks on the floor. You can pick one up and hand it to someone else, who can then take it home with them and enjoy it. They can be sold as well as bought. They continue to have value after they have reached the consumer and the consumer has read them.

There’s also an undeniable cost associated with a traditionally printed book that is simply not part of an ebook. Paper is the obvious one — printed books are printed on paper. Paper costs money to buy. Printing costs money to complete — after all, it involves supplies such as ink and machinery such as printing presses, binding machines, cutting machines, etc. Other costs of printed books include the cartons they’re packed into (as well as the labor or machinery to do the packing), the buildings they’re stored or sold in, the transportation to move them from manufacturer to warehouse to retailer to customer.

Costs of Publishing

It’s important to note here that there are publishing costs that are shared by both printed books and ebooks. I need to review these, because in the arguments surrounding ebook pricing, many of these costs are overlooked.

Author
At the top of my list is the author, who needs to get compensated for her work. If the author can’t make a living as an author, she’ll stop writing. If all authors do this, there simply won’t be any new books — or at least none of any quality. Writing is a profession, like being a doctor or a carpenter or a baseball player. Who do you think does better work, the professional doctor, carpenter, or baseball player or the amateur? Professionals need to be paid for their work so they can afford to keep doing it. This makes it possible for them to hone their skills and be even better at what they do.

Editor
Although I may criticize the work of some editors — I am, after all, a writer, and that’s what we do — editors are critical to the production of a quality book. I’m talking here about all kinds of editors, from acquisition editors, who analyze markets and acquire authors and titles, to copyeditors, who make sure that the manuscript text is correct and easy to read. These people are also professionals who need to make a living. They need to be paid.

Designer
The need for design varies depending on the book’s format. At the very least, it needs a cover which must be designed. Ebooks have covers, too. If the book is formatted in such a way that it looks the same in print as it does as an ebook — for example, if it’s distributed as an ebook PDF — then it also needs a designer to determine what it should look like as far as fonts and white space and image layout goes. Then it also needs a production editor and layout staff to create the finished pages. Again, this isn’t always the case of ebooks — especially ones that are primarily text — but some amount of design will always be required. And that costs money.

Marketing
How do you learn about books? That’s what marketing is all about. It helps spread the word about new books. Without marketing, you wouldn’t know anything about the books out there. Now you might say that you heard about a book on television or on the radio or in a magazine in something other than an ad. But how do you think that particular form of communication learned about the book? Through press releases, review copies, release lists. Marketing. And it costs money.

Publisher
Publishers are also in the business of making money. So after a publisher has paid the author, editor, designer, and marketing staff — and handled all the other tasks of publishing, such as getting ISBNs, listing books in published book databases, registering copyright, and learning about publishing trends — there must be money left over to add to that bottom line. In the world of ebook publishing, the publisher is the one that stands the greatest possibility of being eliminated. But think of a publisher as a packager — they’ve got the resources to create the book and get it into the hands of readers, no matter what format they’re reading it in. There’s value there and it would be a shame to see it lost.

Retail Distribution
Transportation costs aside, there’s always a cost of distributing a book. Retailers are in business to make money — they’ll get a cut of every book sold. That’ll likely range from 10% to 60% of the book’s retail price. This compensates them for their “brick and mortar” building (think traditional bookstore) or Web-based shopping service (think Amazon.com’s programmers and servers, and don’t forget their warehouses for print books).

These are just some of the costs of publishing that must apply to both printed and electronic books. So when you look at the price of the book, remember that that’s where the money you pay is going.

Don’t fall into the common trap of thinking that because an ebook isn’t printed on paper it has no cost. That is simply not true.

More to Come

Ebook Costs and Pricing
Part I: The Costs
Part II: The Pricing

In Part II, I’ll continue this discussion with a review of current pricing realities and offer my thoughts on some pricing strategies for publishers that can satisfy consumers and remain profitable.

Until then, I’d really like to get some feedback from readers, especially those in the publishing industry. What costs have I omitted that apply to both printed books and ebooks? How about costs that are ebook only? Enlighten us.

3 thoughts on “Ebook Costs and Pricing, Part I: The Costs

  1. Thank you. While I hadn’t quite fallen into the trap of thinking ebooks must be free, you mentioned a lot of costs that I just hadn’t thought of.

    It’s easy to see that paper, ink and shipping aren’t required for an ebook, but I’d overlooked the marketing and acquisitions aspect entirely.

    I’m looking forward to Part 2.

  2. I’m sorry, but I don’t buy your arguments. None of the costs of marketing etc. are needed for ebooks. I think the price should be in the 99 cent range. I’ve already spent 200 dollars for a reader, why should I spend almost retail for paper book price?
    If the price were kept low, sales would sky rocket. You are pushing many of the arguments for music and movies, but how many of these books will I read again and again? Very few. There is no residual benefit to e-books like there is for music.
    Get a grip on pricing and maybe I’ll think about buying retail. For now I am happy to get mine for free where I can.

  3. @Miles O’Brien
    I’m sorry, but I cannot agree with you. Ebooks still have substantial costs for production, from authoring/editing to book formatting. While I’d like to see all ebooks under $10, I would NOT like to see new books — those less than 5 or 10 years — sell for 99¢. The author MUST be compensated to keep writing and the publisher MUST make some kind of profit to stay in business. I don’t think sales would “skyrocket” as you suggest since ebook adoption is still quite low. In the future — maybe yes. But not now.

    I’m seeing your 99¢ suggestion this way. A publisher gets 70% of the sale price (Apple and Amazon model). That’s about 70¢. The author MIGHT get 10% of that. That’s 7¢. What kind of living do you think an author could make on 7¢ per book sold?

    To put this in perspective, one of my bestsellers sold about 30,000 copies. That’s pretty good for a computer book. But if I only made 7¢ per copy, that’s $2,100. Clearly, I’d starve if I continued trying to make a living as a writer.

    And do you honestly think a work could sell 100,000 or more copies — netting the author a measly $7K if the price dropped down to 99¢? I’m sorry, but I sincerely hope your dreams of 99¢ books don’t come true. Once a book is 20 years old, fine. But while it’s still fresh and the author is still depending on it for royalty income, no.

    Also, please don’t confuse the device maker with the publisher and author. Authors and publishers don’t make a penny on any of the device; why should we subsidize readers who use them by giving up hard-earned money?

    This, by the way, is the Walmart argument. Make it cheap enough and everyone will buy it. Trouble is, quality costs money. The less money the maker gets, the less quality the item can have. The result at Walmart: cheap crap from China.

    You might be willing to read any crap you can buy for 99¢. I’d like to read quality work written and published by professionals.

What do you think?