The great ebook price swindle only scratches the surface

A year ago Dan Gilmor complained about greedy US publishers forcing ebook prices to climb by between 30 and 50%.

In the US electronic books are now priced at the same, sometimes higher, than the hardback version of the same book. As Gilmore points out, this is a terrible deal because unlike physical books, you can’t resell, trade or give away your finished ebook.

The same dumb thinking is at work in the music and movie industries where digital media costs as much as physical media.

I’ve made this argument before, I’ll make it again. Printers use raw materials and machines to make physical books, CDs or DVDs. They package and ship them to warehouses before shipping again to stores.

Factories, packaging companies, shipping firms, wholesalers and retailers all clip the ticket. These are input costs and they’re not cheap, they can account for over half the retail cost.

While we can understand publishers wanting to recoup some of the cost-cutting benefit from digital media, they can’t expect to have it all. Doing so has three direct consequences:

  • Consumers see high prices as a rip-off. This has the knock-on effect of undermining otherwise valid moral arguments against copyright piracy.
  • It slows migration from the old low margin physical model to the new higher margin model. Why would consumers choose what is still an inferior experience when the cost of hardware plus higher cost of media makes it more expensive?
  • Reduced sales mean set-up costs of a book, CD or DVD are spread over fewer purchases. Surely this is a time when publishers need to seed the market.

At the start of 2013 we’re at a point where the decline in printed book sales has stabilized while the hitherto triple-digit growth in ebook sales has fallen to a still impressive 34%. And sales of ebook readers plunged 36% in 2012.

So where do we go from here? Will publishers cut ebook prices sharing some of the extra margin with their customers or will they paint themselves into a corner?

19 thoughts on “The great ebook price swindle only scratches the surface

  1. I wonder; the printed word (book, magazine, newspaper etc) has lasted hundreds and hundreds of years in paper (for thousands on other materials) batting off or co-existing happily with the telegraph, radio, TV, film, DVD etc.
    So was / is the e-book and its siblings just another passing fad that will of course gain a market share, but over time will also simply co-exist with the printed word?

    • None of the mediums specified (re: telegraph, radio, TV, film, …) were meant to take over reading/books. I do believe books will go the way of vinyl, just give it time.

      • That’s true, they weren’t. But they were seen as substitutes I believe. People used to read books at night, then they listened to the radio instead, then the TV, then DVDs and now they natter and ‘net surf.

  2. Ebooks in general are almost certainly not a passing fad. School and university texts, many professional books and so on are now published only in digital formats. Low-brow literature is popular with ebook readers and some novels have sold more in digital format than in print.

    Having said that, ebook readers like the Kindle might well be a passing fad. Sales are falling fast and some players have dropped out of the market. Tablets are eating their lunch.

    Overall, I suspect print will be with us for a long time. The analogy I like to use is vinyl music – people still make, sell and play old fashioned records. On the other hand, the cassette and eight-track markets are dead and CDs are in big trouble.

    Vinyl survives because people prefer the experience – that’s likely to be true of printed books. Possibly more so that with vinyl.

  3. In a similar vein, I wonder when New Zealand retailers (I am looking at YOU Whitcoulls!) will realise charging $16.99 for an e-book isnt going to fly when Amazon sell the same download for NZ$10.80… cant claim it is transportation surely!

    • That’s a good point Aaron, although it’s possible Whitcoulls’ buy price is higher than Amazon’s selling price. My local dairy owner pays more for tins of baked beans than they sell for in New World.

    • Both are gouging – ebook publishers/ Amazon do it worldwide – and to add to that NZ retailers’ have greedy 50% margins.
      Forget transportation – why – example – China which manufactures everything, is closer to NZ than US, still every product I compare is cheaper in US – be it online or in store.

      • You’re right, but are those 50% retail margins greedy? At least I don’t see rich booksellers. Given sales volumes, retail wages and high retail rents, I suspect the gross margins are around 10 to 15%.

        On the other hand, I suspect some ebook sellers get even higher margins – without overheads.

      • Retail margins in NZ for printed books are not as high as 50% – at least not for locally published books. I know because I am a local book publisher. The margin is 40-42.5%. Book distributors take another 20+% though.

        I don’t know what the situation is for imported books.

  4. Sorry, I don’t agree that an ebook provides an inferior reading experience – at least not for books that are essentially text-only. Lots of people I know, including myself, would rather read a novel on their Kindle or other e-ink device than on paper.

    Last time I compared, the prices in New Zealand were much lower for e-books than for print versions. The difference is probably less in the USA, but here we get seriously ripped off for print books.

    I agree that e-books are more expensive than they should be, but they are still a much better bargain for Kiwis than printed books.

    But do your eyes a favour and read from e-ink rather than a backlit screen.

    • John

      You’re right about NZ book prices. We pay more. The comparisons were for US prices.

      I gave the Kindle another try over the summer break. Still don’t like it. In fact no-one in this house likes it. I guess it’s a question of taste as much as anything. We’ll just have to agree to differ on this.

  5. Agree Bill, there is something that satisfies the collector in us having the vinyl lined up in alphabetical order, CDs are not quite as evocative. In the same way for bibliophiles, first editions sit above the hardbacks, paperbacks are for reading on the plane and discarding on arrival. Whether it be MP3s or ebooks, neither satisfy the collector.

  6. Anecdotally, ebook reader sales may be declining. I suspect that’s true overall, although I’ve seen no numbers that are plausible to me since Amazon doesn’t release Kindle sales figures. Also, Amazon was smart enough to ensure the Kindle became more than a device; it’s a platform. The device matters less than the books, which can be read on diverse devices, mobile and otherwise. There are millions of titles available on that platform, and by no means all of them are hobbled by DRM. Those books, at the very least, are device-agnostic. Whether or not the Kindle device is a fad (it’s not the perfect e-reader but in my view it’s on the right track), the platform isn’t going anywhere in a hurry because there’s no reason why books published on the Kindle Store today can’t also be read on whatever electronic device replaces it tomorrow.

    • Like I said earlier, it’s not a passing fad. I see dedicated ebook readers like Kindle as a transition product like the Treo was a transitional step on route to the smartphone. The main ebook action appears to be moving to back-lit tablets with apps like the Kindle one on the iPad. That’s a shame. In my experience reading ebooks on a backlit iPad is far worse than reading on a non-backlit screen. Other people may have different views on this.

      • I much prefer the Kindle, but after 2 years mine screen died and went blotchy. Just havebn’t got around to replacing as yes. The HP Touchpad makes a fine ebook reader though using the Kindle software. I also use it for listening to WA radio (ABC)

  7. While eBook reader sales may be declining, as Bill said e-books are not a fad they are here to stay.I suspect eBook plats forms will level out and I really see 2 main contenders that will prosper.

  8. Amazon taking the route Apple did 20 years ago of limiting content to its’ reader, and controlling where you can purchase a Kindle may spell its demise. As a consumer, the other readers are better but the lack of e-books for them is holding them back. Just like Apple’s error back then, a tipping point will come when the market moves beyond the Kindle and they will struggle to re-invent themselves. I think open source everything is what people want. What’s your view Bill?

    • We’re probably already at that point. According to this report smartphones outstrip tablets 9:1 for ebook reading. That’s how I see things going. Readers like the Kindle are better tools for long-form written material than tablets or smartphones, but people are more likely to choose the devices they already have. If Amazon can’t adjust to this reality it will cede the ebook market to rivals.

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