

EBook Pricing Goes Outright Insane - mikecane
http://mikecanex.wordpress.com/2010/10/16/ebook-pricing-goes-outright-insane/

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tptacek
I'm not one of the (clearly many) people who automatically believes e-books
_should_ cost less than paperbacks. E-books are _more useful_ to me than paper
books, not less. Pricing and cost are unrelated except for sorghum and gypsum.

~~~
DougWebb
The manufacturing cost for an ebook clearly should be much less and near-zero
per book. Bits are cheaper than paper. However that's just a portion of the
cost; there are still distribution and royalty costs and I'd bet those make up
the bulk of the price.

~~~
cstross
The manufacturing cost for a paper book _is_ near-zero; a mass market
paperback costs on the order of 50 cents to print.

On the other hand, as long as publishers insist on DRM, the cost of setup for
the encryption software and serialization of a new encrypted file for download
-- including payments to the company that produced the DRM server -- may
_exceed_ the cost of that paperback.

For contractual reasons book pricing is set on the basis of the current
edition in print (royalty percentages aren't static but vary with the paper
edition's binding, the number sold, the discount channel, and so on), and
publishers are required to provide transparent accounting to authors if
challenged. So their accounting workflow for shipping ebook units has to
shadow the workflow for shipping SKUs. Hachette spent roughly 20M euros
building a "digital warehouse" for ebook serialization and accounting a few
years ago; I'm sure the other big six did likewise. They can't do anything
else, unless they renegotiate their contract boilerplate with the authors.

Meanwhile, fixed costs for editing, typesetting, design, proofreading, and
marketing are identical for paper books and ebooks.

~~~
tptacek
The fixed costs for creating a software title are identical whether you sell
the product as a CD or as a download, but in _neither_ case do those costs
have anything to do with the price of the title. The title is priced based on
perceived value (usually, as perceived by the most lucrative segment of the
market it addresses).

This is the second comment here that brought up editing, typesetting, &c. Is
it the view of people in the publishing industry that books should be priced
at a % markup over total costs? Because that seems crazy.

~~~
cstross
The actual model for book prices is a reverse-auction: prices start high, then
drop over time.

However, thanks to the evolution of printing technology, the auction only hits
a few (typically 2-3) price points, and they're geared against physical format
-- hardcover, A format paperback, C format, and so on. So consumers confuse
the reverse auction process with the cost of a physical product.

To make matters worse, between 45% and 75% of the cover price of a physical
book in a bookstore goes to the distribution chain -- bookshops and
wholesalers ( _not_ the publisher or author). The chains do deep discounting
for commercial reasons of their own, e.g. price wars with each other, special
promotions, need to get rid of old stock to make room for new, and so on.

Thus, the actual price the publisher and author get for a book may bear little
or no relationship to the price the consumers are charged for it in the shops
or from Amazon.

(EDIT) People in this thread are making the common mistake of assuming the
publishing industry is structured this way for some reason. It isn't. Things
just happen this way because they're the sum intersecting set of business
practices that didn't result in someone going bust at some point in the past
200 years. And they're locked in by contracts, established processes, and
custom. This isn't a modern industry like software development: it's an
ancient set of practices that have evolved over time, and many of its patterns
reflect obsolete constraints that no longer exist.

~~~
tptacek
So, Charlie, let's stipulate that the current market for books does a lot of
stupid things based on the historical entry costs for new publishers.

Putting that aside, in the brave new future where StrossCorp publishes all
Stross-approved titles: do you envision pricing according to a small
industrywide set of price points, and, in particular, adhering to a fixed
"ebooks cost $9.99" price?

~~~
cstross
What I'd like to see tried is to debut ebooks at $20. Then, every month,
depreciate them by 5%, down to a floor of $5 or thereabouts. (Maybe even
lower.)

Unfortunately for a publisher to try this would require (a) all new
contractual boilerplate (which will be a whole barrel of laughs as they try to
get the authors and their agents to accept it) and (b) new accounting
procedures to calculate royalties based not on the net volume of sales but on
the time from publication date of those sales.

And even then, this is only going to work out if customers are willing to wait
until the book meets their criteria for affordability rather than going in
search of a pirate copy of the text.

~~~
stevenbedrick
Personally, this would be just about perfect for me- it sort of emulates the
way that I already buy books (i.e., a small number of hardcovers [usually
bought at their time of release], a larger number of paperbacks, and an even
larger number of used books).

------
joehand
It makes sense that ebooks can cost as much or more than the same print book.
Publishers' current revenue model for ebooks is an extension of that for their
print books. These are colossal organizations. At the Startup School today
Reid Hoffman (founder LinkedIn) talked about the ability for organizations to
pivot. Small startups can easily pivot, these large corporations take time and
money to change direction. Publishers have not changed their production
processes to respond to ebooks. They have just added another step in the
process.

Would I pay more for an ebook than a print book? probably not. Most ebooks
available have less features than a print book. Ebooks are portable, cant get
wet, font can be resized, etc... Print books dont expire or change formats, I
can share it with my buddy, and I can scribble in it. Unless the ebook costs
less I probably wont get it.

Does an ebook have to cost less than a print book? of course not. There are a
lot of cool features an online text could have. Searching the book is just the
beginning. Integrated audio, video, games could bring new life to stories. The
author can continually update the text and interact with readers. The problem
is ebooks dont have any of this stuff right now.

Whether any of the large publishers innovates, or new companies rise, the
future of publishing is through adding value to the digital texts. By adding
value to the texts, the publishers can embrace open content allowing sharing
and remixing of text. As the book marketplace moved online, barriers to
publishing will also be removed. This will enable authors to receive a greater
share for their work.

------
mgkimsal
I think we've gotten so used to format shifts - beta/vhs/dvd/blueray -
cassettes, albums, cds, mp3s - that trying to price for the long-haul of
ebooks isn't going to be in anyone's plans. :(

------
motters
Bits are cheaper to manufacture than paper, and presumably when you buy a
digital version of a book you don't own it and cannot resell it after you've
read it, as would be the case with paper. A resale value of zero should
justify a significantly lower price.

------
kilian
I can't wait until book publishers do what indie music sellers do: buy a cd,
get the mp3.

I will pay extra money for hardcover books that come with an ebook: I have a
nice looking version for in my bookcase to casually peruse, and a spaceless,
weightless copy I can read on any of the devices I tend to already have with
me.

------
joshuacc
I don't understand the assumption that ebooks should cost less than print
books. At this point in time, Kindle/iPad owners tend to have more disposable
income than the average book buyer. And the fact that they have an electronic
reader indicates their willingness to pay a premium for convenience.

~~~
endtime
Print books require raw materials, physical distribution, and have to compete
for shelf space (<100% of physical books are sold online). None of those costs
applies to ebooks.

>At this point in time, Kindle/iPad owners tend to have more disposable income
than the average book buyer.

Uh, so what?

~~~
mediaman
Products aren't based on cost. They're based on value. If value is less than
cost, they don't sell, and don't get made.

What it cost is irrelevant. What the market will bear is what matters. Only
when we achieve low barriers to entry and high competition do prices converge
to cost.

~~~
hugh3
This argument seems to be going around in circles. The fact that the vast
majority of people think that ebooks should cost less than physical books
means that they _should_ , because people's perceptions of value are what
makes up the market.

Now, personally I refuse to pay anything more than $0 for ebooks, since I can
easily fill up my Nook with all the out-of-copyright reading material I could
ever want. If I'm going to pay actual money for a book, I want it on paper so
I have a guarantee that it'll still be readable in thirty years time (natural
disasters notwithstanding), and because I happen to think that shelves full of
books are a pretty nice thing to have.

~~~
joshuacc
"The fact that the vast majority of people think that ebooks should cost less
than physical books means that they should, because people's perceptions of
value are what makes up the market."

That's oversimplifying. What people think things should cost and what they are
willing to actually pay may be entirely different things.

Furthermore, as demonstrated by your own comment, people's ideas of what
ebooks should cost varies wildly. In this situation, publishers are segmenting
their customers.

If you haven't read it, I highly recommend Joel's _Camels and Rubber Duckies_
:
[http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...](http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html)

------
stcredzero
_Never in the history of American business has one industry done so much to
guarantee its own failure._

Don't know about that one. Newspapers and the big 3 auto makers did potent
things to themselves to put themselves out of business.

------
sigzero
It would be nice if they were even half the cost but more went to the authors
so that it would encourage people to take the time to write. The bad stuff
will get weeded out by opinion sharing.

~~~
angstrom
I tend to believe that's already the case. If someone truly wants to write,
the cost of taking up the activity is fairly cheap. People don't write just
for money, they also write because they have something that wants to get out.

------
danilocampos
Forget the shoulds, look at the reality. Publishers are going to create a
piracy nightmare for themselves. Lightweight files, easy consumption through
devices that get more and more popular.

iTunes proves you have to compete with piracy. Make it easy and fairly priced
and you can move a bunch of volume in digital content. $7 is the no brainer
pricepoint for books. The first publisher to optimize for that is going to be
king of the Kindles.

~~~
tptacek
Does it bother anyone else that _piracy_ would force an arbitrary low price
point for books?

Books are actually a great example of this problem.

Authorship is much less of a lifestyle decision than musicianship (commercial
musicians have to practice and gig, for instance). That means authors don't
have to commit themselves to a career of writing; they have more of an option
to write or not write.

Meanwhile, books are a notoriously bad deal for authors, most of whom
apparently earn sustenance wages for their efforts. So there's already little
incentive to create them.

Search back through the archives of HN for the comments asking 'patio11 to
write up his marketing-engineering insights, and pay close attention to his
"are you nuts why would I waste my time doing that" responses for a vivid
example of this.

Piracy is preventing the market from establishing a real clearing price for
books; it's creating whole categories of books that simply can't be sold
effectively, because once priced correctly, the incentive to steal the book is
too high.

(Meanwhile, Neko Case is going to keep putting albums out whether they're
pirated or not, because she's pot-committed to being a musician.)

~~~
jcroberts
> Does it bother anyone else that piracy would force

> an arbitrary low price point for books?

> ...

> Piracy is preventing the market from establishing a real

> clearing price for books;

In the above question about being bothered by sharing, it seems you are
forgetting your previous arguments about value, particularly in the sense of
limiting the idea of value to fit your argument. To give an example, the time
you spend reading this email might be a completely wasted effort, or even a
mostly wasted effort, but with some degree of luck and skill, I _might_ manage
to make the time you spend worthwhile. Essentially, the words I'm writing
_might_ have value to you.

In a world where writing something is extremely easy, the overwhelming
majority of written text has little or no value. The invention of text
editors, desktop publishing, printers, and all associated technology has
vastly increased the volume of written text, but at the same time it has
decreased the value of written text. It's a signal to noise problem, since
when any idiot can write, many do (myself included).

Please don't fall into the trap of believing "reviews" (or karma for that
matter) will be an adequate filter. There will always be a risk/reward ratio
for time invested in reading, and for something to be ranked poorly, someone
had to waste their time reading it.

There are really only two primary motivations for writing, fame and fortune.
The minor motivations such as sharing and contributing thoughts or efforts are
often entangled with the primary motivations. This goes back to the
pessimistic view of, "There's no such thing as a selfless act," but
rationally, it is applicable.

For the sake of argument, imagine the end of copyright, and hence the end of
books as we know them. More accurately, we're looking at the end of the
financial motivations to write, edit, and publish books in any form. With
fortune now missing from the rather short list of primary motivations, all we
have left is fame. Since one can profit from fame, financial motivations have
not been completely removed.

When you boil it down, no matter how "useful" written content may be, it is
still a form of advertising.

When you want to hire someone for a programming position, you look at their
advertisements, such as open source contributions.

When you want to be entertained, ...

When you want to be informed, ...

Assuming you've read a book (advertisement) by J.K. Rowling, and enjoyed it,
would you be willing to pay to see her read/tell a new story to an audience?

Assuming you've read a book (advertisement) by Lawrence (Larry) Harris on
"Trading & Exchanges," and found it useful/enjoyable, would you be willing to
pay to attend one of his classes or lectures? (note: he's a prof at USC, and
hence, actually teaching/lecturing as well as maintaining his employment by
advertising his mastery of a subject).

Similar could be said for everything covered by unjust and corrupt imaginary
property laws, but the more important question is very simple; Have you fallen
for the typical "Price Anchoring" [1] and are responding in a "Predictably
Irrational" [2] manner by purchasing advertisements?

The time and effort invested by a 'user' to evaluate a work has value,
regardless if the user determines the work to be worthwhile. Additionally, a
user admiring a work has value for the creator of the work, regardless if the
work itself is purchased.

Go look at your karma score and think about the non-obvious ways you have
financially or otherwise profited from "freely" contributing your words to HN.

[1] <http://news.ycombinator.com/item?id=1244967> [2]
[http://www.ted.com/talks/dan_ariely_asks_are_we_in_control_o...](http://www.ted.com/talks/dan_ariely_asks_are_we_in_control_of_our_own_decisions.html)

~~~
tptacek
My concern is over institutionalized theft, which is not a feature of a
functional marketplace.

~~~
jcroberts
I don't know why you were down-voted, but I agree with what you seem to _mean_
even though your use of strong rhetoric distracts from your point.

The trouble is one can define "institutionalized theft" as either widespread
"illegal" sharing (as you do), or as "unjust" laws preventing sharing, but not
both. More accurately, the former is the masses breaking the laws, so only the
latter actually qualifies as institutionalized. Though "institutionalized" was
a poor choice of words, I see no merit in rehashing the tired debate over the
term "theft" versus the more legally correct "copyright infringement."
--Either way, I still get what you mean.

Both of us value good work and believe the worker should be rewarded.

A functional marketplace can be simply defined as paying someone else to do
something you are unable or unwilling to do yourself. There is usually a level
where it makes more sense to pay someone else to provide for a particular
need. Those who specialize in providing for a particular type of need, gain
advantages (expertise, resources, tooling, scale, ...), and can therefore sell
for far less than it would normally cost others who don't have the advantage
of specialization.

The most important thing to realize is both "theft" and "monopoly" are
deterrents to a fair and functional marketplace. Yes, I intentionally put
"monopoly" in quotes because it is admittedly equally strong rhetoric as
"theft" but I simply could not think of an better word.

When one gets to the point of being able to admit both theft and monopoly are
bad for markets, the very nature of the discussion changes dramatically; The
question becomes, "How do we reward good work?"

I'll be the first to admit any attempt to address the root cause will be
exceedingly difficult. Additionally, we will most likely fail at completely
eradicating theft and completely eradicating monopoly, but one needs to
maintain an overly-optimistic view order to find a better solution to an
unsolvable problem.

I think you're a bright person and level headed, but if you'd rather not
discuss this issue publicly, I completely understand. Like myself, I'd bet you
have close friends or partners with vested interests in the status quo, and
any public mention of change will undoubtedly piss them off. I like to think
I'm very lucky in that my friends trust me to be fair minded even when the
don't like me questioning the most difficult things. --maybe off-list?

------
jasonlotito
The author complains about the cost of an ebook out now when compared to a
paperback that isn't being released until March of next year. Ignores shipping
costs that make the book more expensive then the Kindle version.

Nothing to see here.

------
lzw
This is one of the areas where government has distorted the market via
regulations, namely around copyright, to benefit big publishers over authors.
I'm not sure of the best solution to this, but if we had thousands of
independant publishers or authors self-publishing, then there would be more
competition, and pricing would be more in line with profitability.

EG: It is more profitable to produce and sell and ebook than a paperback,
because paperback production is expensive. Therefore, the author would likely
price the ebook lower and still make more profits on each sale. Further, he'd
get more sales because the price was lower.

I think publishers don't quite understand he market here and are afraid to
make a mistake, and so they are pricing ebooks defensively.

