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 percent.

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.

Physical books simply should not be cheaper than digital books

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 percent. And sales of ebook readers plunged 36 percent 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?