@Sheamus

But the $11.50 price is a promotion, not the RRP. The RRP is $25.95, so the Kindle price is actually some 40 per cent lower. Given that it still needs marketing, the author still needs a royalty and soforth, I don't find that unreasonable - they've probably more than taken out the print costs.

Books on Amazon are *always* on promotion. It'll never be sold for full price there! As it is, the Kindle price is some 22% higher.

It's in Amazon's interest to convert everybody to the electronic book format as their costs (shipping, admin, production etc) will decrease enormously. Are you saying that in a utopian future where all media was electronic you'd be happy to pay the same price for a download as you would the hard copy?

And don't even get me started on the version that is available on the Kindle app on the iPhone, which is also $14.09.

It's a scandal. And if Apple can figure out a way to down-price electronic books, much like they did with iTunes, they'll wipe the Kindle off the map.

I've been discussing this with other writers, and blogging on the implications of the crazy goings on with both Amazon and the olde-worlde publishing houses who've allowed Macmillan to be mount a proxy attack to actually force even higher prices on the Kindle.

As you say, there is no physical product, just a bundle of data not much heftier than a high quality photograph might use, that can be hosted for pennies, indefinitely, and downloaded infinitely. A million customers could be served with no production costs, no warehouse storage and no physical distribution infrastructure required.

Amazon and traditional publishing houses have learned nothing from the digital distribution experiences of the music industry and game industry. They should study iTunes and Steam with great care and formulate strategies that fit the media, instead of trying to work the same business model for digital products as for physical ones.

Isn't the real issue here the price of e-readers? Once that comes down, 'ordinary folk' might buy them. Making e-books cheap as chips won't put them in more hands if people can't afford a Kindle.

You say "The author isn’t going to lose out, as the costs of making that book in that format are almost zero." This only applies if the author will make the same on each download as she would for a physical book. Do you know if this is the case now?

@Sally - it's my opinion that more expensive hardware (the reader) with cheaper software (the books) is the correct model here. If, like the iPad, the Kindle had better features (colour, etc) and came with 10 free books of your choice and then all books were $4.99 or less, they'd shift millions of Kindles and hundreds of millions of books. As I said if Apple figures this out and can undercut the book market they'll be on to a real winner.

@John - making a book the old-fashioned way is, as you know, expensive. You have production, administration, storage, shipping and marketing. With a digital book, you really just have a little bit of admin and the marketing. I'm not sure how it accurately breaks down but you'll probably save, what, 80% of all costs, mostly from production alone? And none of that costing is profit - it's all drain. Strip all that out, and I'd imagine you have more than enough left to pay both the author and the distributor the amounts they are used to now. I don't see any artists complaining about their share from iTunes!

Bottom line: charging the same or more for electronic media as a hard copy is conning the public. And they shouldn't tolerate it.

So ... you don't care how many Kindles and e-books Amazon has sold, they are doomed to failure? Exactly how do measure success?

I think if the Kindle had sales of ten times what they are now we'd call it a success. Three million units is pretty reasonable given that it's only available on Amazon, but the device hasn't integrated itself at all into the greater consciousness. The iPhone is expected to sell as many as 50 million units in 2010. I don''t know anybody personally who owns a Kindle, or has even shown any interest in buying one. And I know lots of hardcore book readers, each who hungrily devour several novels a week.

I don't care that the Kindle has sold 3 million units, predominately to early adopters and gadget freaks, because that alone isn't enough to justify the meaty price tag for electronic media. The point here is that digital media should be a fraction of the price of a hard copy. Even if the Kindle sells 10, 20 or 50 million units, the pricing of the books is still all wrong.

Another thought: why can't you rent books on the Kindle, like from a library? Rent a book for 99c for a month. That might be one way around the pricing issue, and could really open up the e-reader market to the masses.

Surely the one major difference between the music industry and the book industry is the end product. Sure, you can deliver music and books electronically, but the consumption of the two is completely different. You listen to an album/track in minutes, whereas a book can take you days, weeks or months to get through.

Suggesting that e-books are priced low is an insult to the amount of time put into writing it to begin with. It's ban enough that Amazon shoves out books at reduced prices as it is, without it being reduced even further because there's no paper involved!

And I know musicians take time writing music, but touring with a band is a far more communal experience and way of making additional revenue that touring with a book!

Maybe once Ian McEwan starts doing stadium tours reading an extract from his latest novel you'll convince me otherwise, but until then...

I think creating is creating. In most cases, it takes easily as much time to make an album as it does to write a book. Sometimes longer, sometimes less, but the average is probably fairly close. Disposable pop albums take the same month or two as a disposable romance novel. Literary works of art take a long time to write and produce, much like classic albums.

Few people listen to music just the once. I would imagine the investment in an album takes up at least the same amount of time as a book, and likely a lot more because of repeat plays. How many books are read more than once? VERY few. Certainly over a short period of time. People listen to their favourite music again and again.

Plenty of high-level authors tour with their books, reading excerpts in stores.

If you strip out all the production, shipping and admin costs then the e-book can be priced lower and not hurt the author or the distributor. Say a hardcopy book costs $15, and production, shipping and admin - i.e., everything that goes into making a real, tangible product - is $8, and marketing is $2. That means $5 is profit. So, if the e-book was charged at $7, then everybody still wins.

Currently, I think authors receive between 8-15% of a book's selling price, depending on the units sold and whether it's hard or softback. With an e-book model, you'd have to adjust this percentage because the selling price is mostly profit, as opposed to being mostly production as it is now.

If you continue to charge a high (or, in this case, higher) price for electronic media then it's just more profit for the distributor.

I very much doubt the author is seeing anything else. Be great if they were, but it wouldn't take anything away from how screwed up Amazon's pricing is. I'm certainly not trying to hurt the author, but if the future is electronic books then several things need to change, and one of them is how the huge profits from e-book sales (both in a total and percentage sense) need to be more fairly distributed to the writers.

Yes the author needs royalties: onthe hardback, if lucky it will be $2+ per book actually sold. Ok kindle should not be 2.99 but say 6.
Marketing costs? unless it is a well known writer and a possible best sellr the publisher will spend close to 0+ on it. Bullshit.
And electronic books never run out of print if you want them to, for the average book that will not sell a lot, so their costs will ease on a very long period.
Sheamus is right: these expensive toys will not reach past the wealthy and fashion until:
books are cheaper
you actually own them
they have ONE system unified so you can buy from everywhere (sort of MP3 for music)
the damn machine gets cheaper and
battery time gets better
they have colored, nicer screens.
Wait and see.
Jc

I agree with you in all aspects, Shea.
Although, being specific on pricing is hard if we don't work on the book industry. (I understood, you were not specific, just proposed an average priced based on a hard copy's price, what makes sense!)
I've been working in the music industry for years and I know that what you are saying still applies for music downloads, however the costs with recording and artistically producing are so high that the extreme low price is fair only to the overall costs of high-selling mainstream bands. They sell millions, so the overall quantity of legal downloads should compensate for the low profit per copy (at least imagining a perfect world, no pirate downloads).
The somehow "low-prices" charged today on a electronic copy of music is calculated over the low demand, too. We have to deal with the reality that higher prices on mp3s would drive people away, as long as it's easy to download a pirate copy. For a small artist, albums are economically being slowly converted on a promotional piece for touring, cause even with all the technology and reduced costs compared to the past, a pro-album is still expensive enough to justify a price higher than what has to be charged now for a mp3.
Maybe that applies for a book too, although I don't think so.
Artist's revenue, company's revenues, marketing, all applies for both industries. However costs with music involves studio (still very high anyway on a professional level, unless it's 100% electronic music), extra equipments, specific instruments, hired musicians (many times this applies even for bands), producer...

Anyway, you took the right direction on pricing when you compared the prices of a electronic copy and a hardcopy. It makes no sense to charge the same or, worse, more - a true rip-off!

I'd just add that your example of 80% on production costs is maybe a little too much. In the case of music I'd say that the lowest percentage of costs is related to the physical product (but the desire for fast lucre might be a higher percentage, sadly).

Thanks for clearing a lot of that up, Bruno. :) As you imply, there's a very fine balancing point between over-pricing for electronic media, and encouraging piracy, and not going too low to make it worthless to artists on the lower end of the scale (or, for that matter, authors).

It interests me that Kindle books do not seem to be heavily pirated, which is perhaps suggestive of a general lack of interest in the greater community. If an e-book reader (say, the iPad) does really take off, I'd imagine this will become increasingly common. Best to price it right now, before piracy gets a real hold, before it's too late.

I hate to think of a future where e-books are the norm and they're all priced at $14.99 or more. Have we not learnt anything from the success of the App Store? Because of volume, 99c is a winner. If all books are five dollars or less, they'll shift tons more to existing Kindle users, and sceptics like me will really, *really* think about buying a Kindle, too. As I said above, a more expensive device with VERY cheap books is a better solution than the other way around.

JC makes a very valid point about a unified system, too. Of course, the absence of that may be another reason why piracy is currently so slight.

I have to say, one thing that's really bugging me about Linchpin is Amazon UK has the paperback for a very reasonable £5.99, but it's out of stock! (http://bit.ly/alR1Sp)

haha, yeah, I saw it. Out of stock. That bugs anyone out. But, back to the subject, we cannot compare the price of a mp3 to a book, should compare a "whole album" to a book, unless it's a specific "light" book, with few pages. But I also guess, but can only guess, not be sure, that around $5 seems VERY fair per book! And, yes, you are sure, they should start now pricing it right, before the piracy comes along. The current lack of demand on e-books, probably relates to the current lack of tablets, something that will change very fast from 2010 on. Good post!

It interests me that Amazon might be about to give away a free Kindle to all Amazon Prime subscribers. Are they getting desperate?

Shéa, as I was reading your posts, the thought occurred to me that having an expensive reader and cheap books was possibly the wrong way to go about it. Your comment about giving away Kindles free prompted me to write this.

I don't think they're desperate, I think they're using the Gillette approach to marketing: sell razors below cost and make all the profit on the razor blades. If that's a viable approach in this sector then giving (or selling very cheaply) Kindles to Amazon's best customers - the Amazon Prime subscribers (of which I'm one) and offering them books at reasonable prices makes a great deal of sense.

I wholeheartedly agree that digital books have to be below the cost of printed ones - but this is nothing to do with cost. Lesson 1 of any pricing training is that cost and price have nothing to do with one another: Cost is what it costs you to make/distribute the product or service, price what the customer will pay for it. If it's worth more to the customer than it costs you to make/distribute it then you can make a profit.

So making digital books cheaper than paper ones is sensible market positioning to encourage sales of digital rather than analogue books - and also to test the price elasticity of the products - if you drop the price will you sell more than enough to make up the difference? It's an affordable strategy because, as your thread clearly identifies, it costs less to make and distribute a digital book than a paper one.

Given the competition that Amazon are already encountering with other e-book formats and other readers, it needs to lock people into the Kindle as quickly as possible - so raising the barrier by premium pricing the reader doesn't make sense.

You raise some good points, Mike. I appreciate the difference between cost and what the customer is prepared to pay, and I'm not for a second suggesting Amazon should make little or no money on their ebooks.

But this is the problem. Costs are only high for ebooks now because making the real, hold-in-your-hands book, which 99.99% of the market is still buying, is expensive. As I said, you have production, administration, storage, shipping and marketing, which all adds up. So, it makes absolute sense for the book publishers to convert everybody to electronic media, because then those costs reduce massively.

Hence, if Amazon took one on the chin for a few years (as they did with regular books when they first started) and sold all ebooks for $5 or less, possibly alongside a 'lite' version of the Kindle at $99 or thereabouts, they could probably convert a very healthy percentage of 'real' readers to electronic media readers. This would quickly help them to lock people into the Kindle.

Once they've got that market, they can then start to adopt a more realistic pricing system, but it should *never* be as high as it has been for 'real' books, because everybody will (eventually) be fully aware that Amazon are saving a boatload on costs.

The thing is, it isn't just Amazon. TechCrunch just wrote a piece about Kobo, who are also charging more for best-selling ebooks than Amazon charges for the paperback.

http://eu.techcrunch.com/2010/02/23/kobo-books-launches-in-the-uk-to-put-the-heat-on-the-kindle/

It makes me a little angry, to be honest. How can it possibly be justified?

I suspect that all of this is moot, as I'm fairly confident that Jobs will undercut all of these competitors when the iPad launches in a few weeks. But even then I doubt we'll see fair pricing because there's something of an inevitability about all of this, and that's that we're going to be royally screwed over. The bottom line is that once ebooks become the 'norm', so will ebook piracy. And the circle will be complete.

In Oz the Kindle books are generally about 50% cheaper on release then the papery equivalent. A newly released paperback here will generally hit the shelves for $25-35. Even books you can pick up in the UK for a quid (Moby Dick, Pride and Prejudice, Oliver Twist etc) will be $25 on the shelf. The only thing approaching reasonable value is the Penguin classics for $10.

It's cheaper to buy books on Amazon and pay 3 quid per book to have them imported than it is to buy from Aussie shops and it's even cheaper to just buy an e-book. Depending on where you are in the world $17 or $18 for an e-book is bloody good value.

Fair enough, but that's more of a problem with Australia's ridiculous book policy, and nothing really to do with the mark-up on ebooks per se.

It doesn't help there's no Amazon Oz, as you say, which seems a bit of an oversight. There's a market there just waiting for a competitor to reap the rewards. Perhaps the ebook market will give Australia the kick in the arse it obviously needs.

Some attempt to explain the costings for e-books, although most of it sounds like publishers self-justifying an artificially high price. Anne Rice's comments at the end are the most sensible. http://www.nytimes.com/2010/03/01/business/media/01ebooks.html?ref=business

That's a great link Victor - thank you.

It seems the issue is justifying a higher price on ebooks now because 'real' books are still with us (in abundance) and until they're gone completely the costs of making them will always be a factor. As well as an excuse.

There's clearly an equilibrium point to work towards here - how much of overall sales will digital books have to account for before publishers start to ignore and phase out the costs and production of creating books as we know them now? 50%? 75%? 99.99%?

The fact that someone has established as Anne Rice can make a statement like "None of us know what books cost" says so much about the industry. My concern is that artificially high ebook prices will be with us for so long that when they've become the norm and publishers are in a position to drastically cut prices because 'real' book sales are so low, they won't, and nobody will be any the wiser.

Of course bookshops as we know them are in trouble. Much the same way record shops have all but been eliminated. With Blockbuster et al to follow suit as first-rate home media becomes more freely available. And cinemas after that. That's unfortunate, but that's the way commerce works. It's not and never should be reason alone to continue to milk the public.