My wife is going nuts (ebook pricing)

[Terie]

Originally Posted by Cliffhanger

I'm talking about the differences between taking a single book to market either as a print format or as a digital format.

But that's not what this thread is about. This thread is about people (the OP and his wife, to begin with) who are complaining about the price of an e-book as compared to the same book in print form. Which, of necessity, means discussing the costs associated with books released in both formats, not one or the other.

[Cliffhanger]

Originally Posted by Terie

But that's not what this thread is about. This thread is about people (the OP and his wife, to begin with) who are complaining about the price of an e-book as compared to the same book in print form. Which, of necessity, means discussing the costs associated with books released in both formats, not one or the other.

The comparison is still relevant as the universal costs are not paid twice for one book released in both formats, and discussing the actual cost differences associated with the format (the unique costs) can show us at what price point pubs can make the same profit from each, i.e. at what price point a digital book can be sold and still make as much, if not more, per unit as a print book.

[Medievalist]

Originally Posted by Cliffhanger

I've worked in the industry long enough to know this poster is flat-out wrong. And simply repeating the same tired arguments again and again don't turn fiction into fact.

Really? That's very convenient from the postion of anonymity.

I can go into any library or bookstore and find books with my name on the cover and inside.

Going all the way back to 1989.

I've typeset books for the Modern Library, produced over 100 ebooks by authors ranging from Neil Postman to Richard Lanham, licensed rights for print and digital titles, and been hired as a consultant by W. W. Norton and Xerox.

I've created royalty tracking and report generating systems, and cashed my own royalty checks for better than twenty years.

I'm known in real life by editors, typesetters, publishers and hundreds of authors because I've worked on their books.

I get that you're a librarian, I get that you've probably worked as an employee at a small or niche indie pres, but you really don't have as much experience as you think you do.

[Williebee]

Shipping & warehousing costs fluctuate so are hard to nail down. There are none of these costs in digital. Yes, you need to store the digital files, but that is a universal expslense, you don't need to store files just because it's a digital book, an pub worth their salt is going to keep their prig ready files. Compare the files sizes (print ready) to the various digital formats and the printers files still take more space. But again, you're storing the files anyway so this isn't unique.

Still not true. Perhaps because you don't understand the digital/technology aspects.

In digital land:
"Warehousing" = Storage and databasing. The digital files you maintain for integrity are not the same copies of the file you are maintaining in various formats for purchasers to download at any time around the clock. (And keeping up to date so that they still work every time one of the collection of E-readers does an update.)

"Transportation: = digital access and transmission. Which equals the hosting servers, the firewalls, routers, wiring, switches, power and support staff -- whether you host them yourself or are paying a server farm to do it; and the bandwidth that is being used for window shoppers to view your product offerings and the bandwidth involved in the downloading of purchases.

Another thought related to this +/- debate -- if I buy six copies of a book at the bookstore I pay for that shipping cost every time I buy it, Same price, each time (yeah, unless I buy in bulk.) Compare that to the digital copy I purchased once and can pull copies down for each of my devices. The seller(s) have to factor that reality of their bandwidth expenses into the cost of doing business.

I'm not suggesting that digital is cheaper or more expensive or even "just the same" as a print copy.

I will suggest that the interactive opportunities of digital and the development and programming behind taking advantage of that will soon make this debate obsolete.

[Medievalist]

Since the tax laws changed (via the Supreme Court's 1979 ruling in Thor Power Tool Company v. Commissioner of Internal Revenue) to require publishers to pay taxes on the real value on stock in a warehouse, large-scale warehousing of inventory, common in the past, dropped off significantly.

After the Supremes were done, publishers (and other inventory-based businesses) couldn't semi-arbitrarily reduce the real value of inventory that hadn't sold, a technique that reduced taxable income.

Publishers reduced print-run sizes to avoid taxable inventory, and with better tracking, print runs got much closer to advance orders in size, and back lists shrank.

So warehouses started to shrink. Inventory control and tracking got better, and faster (30 days instead of 90). With digital printing and better web-press technology, and companies like OPM becoming even larger, and using better technology, warehouses have become a smaller part of the picture for publishers.

Printers will ship books to Amazon, B and N, and distributors. Typically, distributors don't even unpack the books; they stash the bar-coded UPC labeled boxes on shelves. And they don't keep a lot of back inventory either, for the same reasons publishers don't. (And this is part of the demise of the midlist, too, and why the best PR is a NEW BOOK, while the old one is in print, so sales increase, and maybe, you'll be reprinted).

Publishers do have some stock warehoused, but it's not anything at all like it was in the 1990s. Some publishers use rented storage units now, designed for consumer use.

There's no point in lots of stock. It's much easier to track inventory and sales—from the cash register pos to the distributor/central office, to the publisher. The publisher has to pay taxes and warehousing costs on stock.

There's a reason a hardcover release of a mid-list or low-ranking "best seller" title sells through so fast—and why you'll see lots of large print run authors remaindered, but not so much the middle rankings. You'll see Robert Jordan, for instance, but not so much Jo Walton—because the initial print runs are smaller for the two books, comparatively, and both runs are smaller than they would have been in the 1990s.

I know that W. W. Norton still has warehouses plural but they're mostly for textbooks, not consumer mass market/trade.

Small print runs are the rule now too, and they're faster printers.

[James D. Macdonald]

Originally Posted by Medievalist

1. Is acquired—and yes, advances may be paid on exclusively digital books; it depends on the book and the publisher. (Note that publishers still will pay an advance for a paperback trade and/or mass market edition of a previously published hard cover first ed).

Even if the publisher pays no advances at all, there's still an acquisition cost: The time and salaries of the slush readers and the acquiring editors. The time to send an acceptance letter to the author, the time to receive a reply. How much does it cost to get that work on the table and signed as a forthcoming book, before the first bit of actual editing is done?

[HoneyBadger]

Chuck Wendig posted recently about the ebook pricing crisis and sums up this entire thread, pretty much.

It matters little what the e-book actually costs.

It only matters what the audience thinks they should cost.

Now, the audience won’t agree on an actual number (they’re cagey, those fuckers), but what they do seem to roughly agree on is, e-books should be cheaper than their print counterparts. What the e-book actually costs is irrelevant. What matters is the expected value loss by going with an ephemeral digital item — and, further, added into that is the expectation of, “I bought a device to read this, which cost me money already.”

[Old Hack]

Forgive my following paretheses.

It matters little what the e-book actually costs.

It only matters what the audience thinks they should cost.

If the "audience" (why not "reader", or "customer"?) thinks that e-books should retail for less than they cost to produce, which does often seem to be the case, then the publisher is stuck. The only options for them there are to either lose money on the book, which would be ridiculous, or to stop putting out e-editions completely, which would also be ridiculous. Or to put out books which hadn't been the focus of enough attention, which would rightly upset readers and authors.

Big publishers are often criticised for being slow to adapt to new technology (when often they're no slower than anyone else, because as this thread shows much of what they do isn't understood by people without publishing experience, and it happens behind-scenes); then when they do use it, and use it properly (by which I mean they spend money to put out the best books they can, in the way they think their readers will most enjoy them), they're criticised for overpricing their books. I have no doubt they'll adapt and find ways to resolve this, because adapting is what publishing does: change is the only constant I've seen in my years at the coal-face. But I am getting very weary of seeing writers unfairly directing their anger at trade publishing, instead of learning why things are as they are.

[Cliffhanger]

Originally Posted by Williebee

In digital land:
"Warehousing" = Storage and databasing. The digital files you maintain for integrity are not the same copies of the file you are maintaining in various formats for purchasers to download at any time around the clock. (And keeping up to date so that they still work every time one of the collection of E-readers does an update.)

The exported InDesign file package for a print book, mostly straight text little to no images runs about 200mb (cover & interior, all images, fonts, etc). The actual ready to sell PDF of the same book runs about 22mb. The Complete Works of Shakespeare .epub I have is 2.2mb, fairly well done, including cover image. You can store 10 of those per salable PDF, or about 90 Complete Works of Shakespeare .epubs for each printers package for a print book. I doubt you need that many different iterations of the same book.

"Transportation: = digital access and transmission. Which equals the hosting servers, the firewalls, routers, wiring, switches, power and support staff -- whether you host them yourself or are paying a server farm to do it; and the bandwidth that is being used for window shoppers to view your product offerings and the bandwidth involved in the downloading of purchases.

This is misleading, as is part of the top bit I quoted. These aren't costs incurred by actually producing a digital book, but rather a cost incurred for hosting a storefront to sell digital books directly as a publisher. Many digital publishers don't have their own storefronts, but rather rely on distribution channels (Apple, Amazon, Powell's, etc) to host and sell the files. So again, these are possible costs incurred for directly selling digital books on your site, but not for simply producing a digital book. But, the additional bandwidth load of customers window shopping your website would be incurred irrelevant of which distribution model you chose.

But fine, for the sake of argument, toss those both out. You're still left with several factors that make a staggering difference in the cost of production.

Printing. These costs are a significant expense, that simply isn't incurred with digital. Depending on various factors, this can be as much as $5 per unit on a trade paperback with a 5000 unit offset print run. You have to roughly quadruple the print run, around 18-20k, to bring you down around $2.50 per unit. So for that 5k print run that's a $25,000 expense just to print the books, not including overages. For the larger print run you're looking at $50,000 to print, not including overages.

Distribution. Typically the distribution channel takes 65% of retail and the pub only gets 35%. With digital it varies, but to make things easier let's use Apple which takes 30% of retail, leaving 70% for the pub. I'm using Apple here because it's a nice round number and they also take the largest chunk of each sale that I'm aware of.

Royalties. Print typically sees up to 10% of retail, while digital often sees 50% of retail.

So run the same book through those numbers. Fiction, nothing fancy design-wise, or production-wise (no spot colors, or wonky trim). A $25 trade paperback would earn the publisher 35% of retail from a standard distro channel sale, so $8.75. Then consider the $5 per unit to actually print the physical product, brings us down to $3.75 for the publisher to pay all expenses. Next up is the royalties, which if we're generous are 10% of retail, or $2.50, finally bringing us down to $1.25 per unit for the pub to pay all expenses. When people say publishing is a narrow margin industry, they ain't kidding.

The same content as an ebook would look like this. At less than half the cover price of the trade paperback, say $10, our ebook (sold through Apple, the biggest distro hit) would lose 30% of retail off the top, so $7 goes to the publisher. Out of that you're then paying, if generous, about 50% of retail in royalties to the author, so drop $5 off that, which leaves the publisher $2 per unit sold to keep the lights on and cover all expenses. So at less than half the retail price, a single digital sale nets the publisher more per unit.

For the sake of argument, let's run that 20k print run and jump the ebook price up to match. The retail of most books are about 5-6x the printing cost, so let's say our $2.50 per unit print run will each retail at $15 because it's a nice round number (and 6x the print costs). So $15 retail gives the publisher $5.25 per unit per sale, minus the print costs ($2.50), leaving $2.75. From that we need to pay royalties, $1.50 (10% of retail still), which leaves $1.25 for the publisher to cover all expenses.

The digital sale of the same content, at the same price ($15), would have $10.50 go to the publisher per unit (30% for the distro). Minus the 50% of retail for royalties ($7.50) which leaves $3 per unit to cover all expenses.

Several unique factors are scrubbed from these figures for the sake of argument, each of which would lean the scales further toward digital books being cheaper. Also the extreme case is taken, such as using Apple which takes the largest piece of the pie compared to other digital distros, and assuming the highest royalty rate of any digital publisher I've seen for these figures. Using more accurate figures in each case would shift the scales even more in favor of digital.

I will suggest that the interactive opportunities of digital and the development and programming behind taking advantage of that will soon make this debate obsolete.

I couldn't agree more. I would add that with the increasing quality and slowly decreasing price of POD, we will likely see nothing less than a paradigm shift in publishing quite a bit sooner than some are willing to accept.

[bearilou]

Originally Posted by Old Hack

If the "audience" (why not "reader", or "customer"?) thinks that e-books should retail for less than they cost to produce, which does often seem to be the case, then the publisher is stuck. The only options for them there are to either lose money on the book, which would be ridiculous, or to stop putting out e-editions completely, which would also be ridiculous. Or to put out books which hadn't been the focus of enough attention, which would rightly upset readers and authors.

Yep. Honestly, this is what it comes down to. Perception. And it's not just perceptions of authors. I hear far more squawking from readers than I hear from authors. As an author, yes I've squawked *shameface* but only because, as you point out below, I didn't understand the process.

But I'm a writer and as a writer, I'm familiarizing myself with the whole process so I'm following the conversation with a little more understanding than, say, my mother would (even though I think she's a pretty bright lady, she's still ignorant of the publishing process).

I have conversations with my reader friends and even though I think they're pretty bright, too, (I surround myself with bright people!) they also don't understand just how involved the process is.

I know this thread has been tiresome for some and I am sorry that you're tired for repeating yourself again (and you are, I'm aware of that), for some reason the information has finally 'clicked' with me.

I finally understand more. (Just for what it's worth, it was Medi's fork discussion that finally made the leap for me)

Originally Posted by Old Hack

Big publishers are often criticised for being slow to adapt to new technology (when often they're no slower than anyone else, because as this thread shows much of what they do isn't understood by people without publishing experience, and it happens behind-scenes); then when they do use it, and use it properly (by which I mean they spend money to put out the best books they can, in the way they think their readers will most enjoy them), they're criticised for overpricing their books. I have no doubt they'll adapt and find ways to resolve this, because adapting is what publishing does: change is the only constant I've seen in my years at the coal-face. But I am getting very weary of seeing writers unfairly directing their anger at trade publishing, instead of learning why things are as they are.

I'm afraid it's just going to get worse before it gets any better. It's back to that perception thing, and with the rise of Amazon self-publishing and how 'easy' it appears to be, along with the dreadfully low priced books, coupled with the fact that many readers don't care 'who' is the publisher, flavor it with (sorry to say) dreadfully written books that shouldn't see the light of day before an editor can get a look at it, topped with the attitudes of many writers who are willing to give their work away for nothing just for the chance to be 'published and read'...all these little things are starting to contribute to the furthering chasm of understanding with the general reader.

[DennisB]

I wonder how many people who have weighed in here have actually run a retail business. If the reader believes an ebook is worth the same as a cup of coffee, and won't pay more, then (sadly) that's what it's worth. Demand sets prices, no matter what people think about Amazon.

[Amarie]

Originally Posted by Cliffhanger

Royalties. Print typically sees up to 10% of retail, while digital often sees 50% of retail.

.

Thanks for all the info. I just wanted to add that most authors I know would love to make 50% of retail on ebooks. 25% before others take their share is more typical for many.

[James D. Macdonald]

If perception is reality then the sun really does go around the earth.

I track all the e-books that contain my stories.

Two of the consistently best-selling cost the readers, respectively, $6.99 and $10.99.

Price is by no means the limiting factor on books.

Nor, if I'm looking for an action/adventure novel will I buy a sweet romance instead even if the first costs twice as much as the second.

Books are unique art works, along with everything else they may or may not be. While a consumer may pick one bar of soap over another because of a two-cent price difference that just doesn't work with books (as many an MBA who thought they could be publishers have learned to their sorrow).

[shadowwalker]

Originally Posted by DennisB

I wonder how many people who have weighed in here have actually run a retail business. If the reader believes an ebook is worth the same as a cup of coffee, and won't pay more, then (sadly) that's what it's worth. Demand sets prices, no matter what people think about Amazon.

But customer education (ie, advertising) is also a factor in what customers perceive as value. And who better to give the customers (readers) that information than the authors - the reason people want to buy books at all? And that would also involve explaining the difference between a marketing ploy and actual value. Not to mention perhaps reminding ourselves that if our work is worth $25 in print, it's worth $25 in digital, gold inlay, or carved on rock.

I still maintain that people will gripe, but like anything else, they'll learn about it and then get used to it. If they don't like the price of ebooks, they'll buy their favorite authors in print.

[Alitriona]

Originally Posted by DennisB

I wonder how many people who have weighed in here have actually run a retail business. If the reader believes an ebook is worth the same as a cup of coffee, and won't pay more, then (sadly) that's what it's worth. Demand sets prices, no matter what people think about Amazon.

And if readers believe ebooks should be free, which many do, does that mean writers should stop writing or publishers should throw their hands up and stop publishing altogether?

If I believe my coffee should be free, my local deli is still not going to provide it as less than cost because I want them to. Cost includes the time to make it as well as the price of the coffee beans. If a business can't make a profit, it goes out of business. Publishing is a business and authors are in that business.

I wouldn't expect a plumber to fix my pipes for free or for what I decide is fair based on no knowledge of plumbing. I can't decide what a doctor costs, or a designer pair of shoes. So why should a reader with a woeful knowledge of publishing decide how much a ebook costs?

[Perks]

I wonder how many people who have weighed in here have actually run a retail business. If the reader believes an ebook is worth the same as a cup of coffee, and won't pay more, then (sadly) that's what it's worth.

That doesn't work with gasoline, eggs, cable tv, or mascara... or pretty much anything I can think of. Consumers grumble and pay anyway.

It would be nice if readers understood what all went into producing a book. Some will learn about it, most will never know and buy what they like anyway, and a few will strike a wordmine and fill their libraries with .99 ebooks.

[Williebee]

This is misleading, as is part of the top bit I quoted. These aren't costs incurred by actually producing a digital book, but rather a cost incurred for hosting a storefront to sell digital books directly as a publisher. Many digital publishers don't have their own storefronts, but rather rely on distribution channels (Apple, Amazon, Powell's, etc) to host and sell the files. So again, these are possible costs incurred for directly selling digital books on your site, but not for simply producing a digital book. But, the additional bandwidth load of customers window shopping your website would be incurred irrelevant of which distribution model you chose.

It's not misleading, it's looking at the cost of doing business. Certainly some publishers hire/pay other companies to host and retail their product. Just as with brick and mortar stores that cost is factored into the price.

The bolded section is certainly true. The bandwidth for window shopping (hopefully) happens either way. But not the cost of uploading salable copies and downloading (transportation.)

Books don't exist in a vacuum. A single copy certainly doesn't. The cost of producing and the cost of selling are tied together with a number of other factors when the price is set -- if a company wants to stay in business.

[Cliffhanger]

It's misleading because you're saying a digital publisher needs a storefront of their very own, on their own website, to sell digital books. Which is like saying a print publisher needs a brick and mortar store of their very own to sell print books. It's simply not true. The cost of a digital storefront of the publisher's very own is not an expense that needs be included in the price of the digital book, just as the cost of setting up a brick and mortar store of the publisher's very own is not an expense that needs be included in the price of the print book.

The cost of databases, increased traffic, downloads of sales, files storage for sales, etc are all expenses paid for (and covered by) the online distributor. Those expenses are all wrapped up in the cut the distro takes off the top. Apple takes the most (30%) which is why I used their figure.

Again, as mentioned, the 30% distro cut and the 50% royalties figure are intentionally high. Using more accurate numbers for each would yield even more of a disparity between print and digital, in favor of digital making more money for the publisher per unit.

[Cliffhanger]

Originally Posted by shadowwalker

But customer education (ie, advertising) is also a factor in what customers perceive as value. And who better to give the customers (readers) that information than the authors - the reason people want to buy books at all? And that would also involve explaining the difference between a marketing ploy and actual value. Not to mention perhaps reminding ourselves that if our work is worth $25 in print, it's worth $25 in digital, gold inlay, or carved on rock.

I still maintain that people will gripe, but like anything else, they'll learn about it and then get used to it. If they don't like the price of ebooks, they'll buy their favorite authors in print.

But that's the very heart of the issue underlying the pricing question. What's the fiction worth? The price of a printed book is not the same as the worth of the fiction contained therein. The price of the printed, physical thing is simple a factor of the price of printing, and the means of distribution.

Perfect example: hardback vs trade paperback vs paperback. The same contents (the fiction) are priced at wildly different points. Something like $26, $16, and $8 typically. The fiction isn't different based on the physical container (the book block + cover), yet the price fluctuates. Why? Because the cost of these objects is based on the cost of production and bringing that object to market. Not on the inherent value of the contents (the fiction).

[kaitie]

But even if the price varies, the point is still (unless you can provide links otherwise) that ebooks don't cost vastly less than print books to produce, which is what many readers seem to think. Thus, if a reader thinks a book should cost no more than $2.00, that price point isn't realistic for the publisher if it doesn't cover costs.

Amazon has made a concerted effort to sell ebooks cheaply, even at a loss, in order to encourage readers to only buy ebooks from Amazon. They've also done the opposite. When they feel a publisher charges too much, they've lowered the costs of hardcovers to less than the ebook precisely to rile up readers to put pressure on publishers for lower prices--prices that only Amazon can sustain because they have enough money coming in from other sales to avoid losing in the short-run. The goal is to make readers expect ebooks to cost less so that publishers are pushed to cut costs and go under or keep costs higher (at which point Amazon still wins because they get the customers). And it's working.

Nathan Bransford did a couple of surveys only a year apart, and you can see a marked difference in the prices that customers expected. A couple of years ago, readers wouldn't have cared about a 9 or 10 dollar ebook. Now that's viewed as too high by the majority. I'm sure the glut of self-published books that are being sold for a dollar or two have helped. Even if a reader doesn't read those books, it does make you say, "Why should I pay $10? This other book is only $1."

[Lexxie]

I really don't care how much I have to pay for an e-book, if it is by an author I love, or part of a series I really like, I will buy it. I have so many books to read, I really want to make sure that I get good quality, and I am willing to pay to make sure I get the best quality I can.

I am 'only' a reader, and I may be in the minority among readers, but I have bought a few e-books that were very cheap, and in most cases I realized very quickly just why those books were so cheap. I think even $0.99 is too expensive for something that is so badly written that it is hard to read and even harder to understand the story. Which is why I am willing to pay $12 for a book I have high hopes for based on the author or what friends who like the same kinds of books as me think about it.

[Terie]

Originally Posted by DennisB

I wonder how many people who have weighed in here have actually run a retail business. If the reader believes an ebook is worth the same as a cup of coffee, and won't pay more, then (sadly) that's what it's worth. Demand sets prices, no matter what people think about Amazon.

Everybody here who wants to be able to buy a brand new car of any make and model for under $2,000, raise your hands.

Wow! Look at all them hands!!!

Now let's see if auto dealerships lower their prices.

Ooops.

[GregB]

Originally Posted by Perks

That doesn't work with gasoline, eggs, cable tv, or mascara... or pretty much anything I can think of. Consumers grumble and pay anyway.

I'm sure that's comforting to unemployed newspaper and magazine journalists, film and food critics, and encyclopedia writers.

Personally, I don't think "customers will grumble and pay anyway" is a particularly sound business strategy in a world where vast amounts of dirt-cheap or free media content is at every customer's fingertips.

[Medievalist]

Originally Posted by GregB

Personally, I don't think "customers will grumble and pay anyway" is a particularly sound business strategy in a world where vast amounts of dirt-cheap or free media content is at every customer's fingertips.

If people want quality they'll pay for it.

If they don't, they won't.

But people deserve to be paid for their work, and that includes authors, agents, editors, sales and marketing, production staff and all the others involved with making book.

[GregB]

Originally Posted by Medievalist

If people want quality they'll pay for it.

Not if they can get "quality" elsewhere for less than a particular provider wants to charge for it, or for free. Encyclopedia Britannica is a quality encyclopedia, but people aren't willing to pay for it anymore because they can get the same, quality information for free.

Likewise, if readers (a declining population, to be sure) can't find quality ebooks for less than $12.99 or whatever, then there's no problem and the whistling I hear isn't actually in the vicinity of a graveyard.