Ask Stacy: Why Are E-Books So Expensive?

I recently got this question on Facebook and it’s a darn good one…

Why do your Kindle books cost more than a paperback copy? Electronic books should be cheaper since you have already cut out the cost of paper, shipping and printing. I understand that you and the publisher still deserve a cut but to charge more just seems outrageous. Especially for someone who’s trying to sell books about money management!
- Annaka

Like most authors, Annaka, the amount of control I exert over the price of my books is exactly zero. It may be different for those who self-publish, but when it comes to books published by major publishing houses – my current publisher is Simon & Schuster, and before that, Random House – prices are set by publishers and retailers. Not authors.

Since I have no idea why e-books are priced at (or sometimes above) their paper counterparts, I went to the Internet for answers. While there are plenty of articles attempting to explain the discrepancy, none I found were particularly satisfying.

For example, Michael Hyatt, chairman of Thomas Nelson Publishers, answered the question about the high price of e-books in this post on his personal blog

First, the retail price has already been adjusted. As you are probably aware, Amazon is selling most eBooks for $9.99. That is already roughly half the price (depending on the format) of the typical physical book.

Second, physical manufacturing and distribution expenses cost less than you think. Some people assume that these two items represent the bulk of a book’s costs. They don’t. Together, they account for about 12 percent of a physical book’s retail price. So eliminating these costs doesn’t do much to reduce the overall cost structure.

While $9.99 might be roughly half the price of the typical hardcover physical book, it’s nowhere near half the price of the typical paperback. And since we’re not getting anything physical when we purchase an e-book, comparing it to the cost of a hardback is silly. In addition, that $9.99 price will soon be rising. According to this recent article in The New York Times, over the next few months e-book prices are scheduled to go to $12.99 – $14.99.

When it comes to Hyatt’s second point about the costs associated with printing and transporting physical books, even if his estimate is accurate, shouldn’t the price of e-books be 12 percent lower than physical copies? No, he insists, because there are other costs associated exclusively with e-books. From the same post…

In addition, publishers have to incur at least three new costs:

  1. Digital preparation. Publishers have to format the books, so they work on all the various eReaders.
  2. Quality assurance. Once the publisher gets the eBook formatted for a particular eReader, he then has to take it through a quality assurance process (often referred to as “QAing” the book) to make sure that each of the major eReaders renders the pages correctly. This is a time-consuming and laborious process.
  3. Digital distribution. Once publishers have finished the QA process, then they have to distribute the files to the various eRetailers. You might think Amazon, Barnes & Noble, Apple, and Sony are the only ones out there. They’re not. We are currently distributing our eBooks to more than twenty separate accounts.

Hyatt goes on to say that “the elimination of manufacturing and distribution costs are being offset by retail price reductions and the three additional costs I have outlined. The good news is that we are making about the same margins, regardless of whether we sell the book in physical form or digital.”

In my admittedly uninformed opinion, this is BS. I’ve lived through the switch from hard copy to digital delivery in both print and video. While I can’t speak to digital book publishing, I can testify that the cost of creating and delivering digital forms of everything I deal with is radically less than the physical version. So I’m sorry, Mr. Hyatt, but you’re going to have to make a much better argument before I’ll pick up what you’re attempting to put down.

Want to know why books are expensive? Follow the money. The lion’s share of the retail price of a book, whether in digital or physical form, is going to the publisher. Authors like me make little. If memory serves (I can’t immediately lay my hands on my publishing contract) my cut of the purchase price of one of my books is around 10 percent. And while higher book prices will increase my take, if my publisher is bringing more money to their bottom line by eliminating the expense of printing and transportation, they’re not sharing those savings with me.

Bottom line? Book publishers are the ones making the money, and they’re the ones controlling the price you pay. The reason they charge the same or more for e-books is simple: because they can. In fact, there’s a recent lawsuit accusing Apple and a group of publishers of price-fixing. You can read about it in this CNET article.

But the power of publishers may be on the decline, because the traditional publishing model is operating on borrowed time. Pre-Internet, they were necessary because the only way to get a book into national distribution was by getting it into bookstores, and the path into bookstores went through publishers. These days, however, I can write an e-book, put it on Amazon, price it competitively, publicize it myself, and earn close to 70 percent of the cover price. You can bet that’s something I’ll be considering the next time I write a book.

So when it comes to the cost of e-books, Annaka, I’m on your side. Not only are prices too high, but publishers are making too much of the purchase price. Like other antiquated industries, they’ll try to hold on to the status quo as long as they can. But just as the music industry was transformed first by Napster and then by Apple, the publishing industry is ultimately bound to change.

And while we wait for a system that will allow author input into the price you pay for e-books, you can always avoid paying for books entirely by reading the versions you’ve already paid for with your tax dollars. They’re waiting for you at the library. Check out my post Thousands of E-Books: Free.

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Comments & discussion

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  • http://pulse.yahoo.com/_WIRPTXVIAZ6MYBP4PDN6YW3ABI Brendan

    What a bunch of garbage. Digital preparation. Free programs such as Calibre will effortlessly change the format with no problem. Quality Assurance!! Didn’t they used to call this proof reading. Digital distribution. Oh come on, 20 accounts!! My mid size company has 5000 accounts. Publishers are gouging both readers and writers

  • Anonymous

    Against Michael Hyatt:
    1. Digital preparation – Except for the Kindle and Sony Libre, all readers support epub. They only need to distribute epub and mobi (there are several epub->mobi converters). So prep epub, convert to mobi. I’ve heard that most authors write and submit as epub. Peachtree also provides epub versions with their paper books. Then for the paper books, how much time and money does typesetting take? Typesetting is done electronically, and from the school newspapers that I have seen, typesetting is done digitally. How much energy is used by digital preparation vs. paper books (you still have to set the digitized book for typesetting). What is the carbon footprint of paper (which must have a digital step) vs. digital only.
    2. Quality assurance – you only have to QA it for once for epub and once for mobi. In other words, you should be done already. You don’t need to do each book. With epub you can also get these to libraries. For paper books, you have to QA each production run of books. Why is this different? It would appear that you have to do each book per production run since from run to run, the physical printing is never 100% consistant.
    3. Digital distribution – So, you distribute the digital version to say 100 or so different readers. How many bookstores do you ship the books to (I would hope more than a 100)? How much does it cost to ship the paper books. What is the carbon footprint of shipping the paper books?

    12% – ok, then the digital books should be at least 12% lower since each of the steps above, particularly prep and QA have to be done no matter which medium is used.

  • Leslie Cremeens

    Great article, I was wondering that myself!

  • Anonymous

    So few people seem to comprehend that printing is not publishing, it’s only the manufacture of the finished product, the very last step–and not necessarily even the most expensive one–in a long process that can take months, even years prior to printing, depending on the subject matter and about fifty other variables.  And whether you agree that it’s necessary or not, the people involved expect to be paid a salary for their work along the way.  Maybe you feel they’re unnecessary (or worse), but be that as it may, until publishers cease to exist their employees are not going to work for free.

    As for the technology, most publishers don’t do their own digital conversion, any more than they do their own printing on paper.  Both are done by outside vendors, who expect to be paid, and not a little.  There’s more to digital conversion of a complex title that a glorified “Save As” command.

    Also, font vendors have jumped on the bandwagon and are demanding that “digital rights” to use their fonts be licensed–and paid for–separately from print rights.  Some of these licenses for full font families can run to thousands of dollars, and some must be renewed annually.

    Authors like to believe that royalties and printing costs are the only expenses in publishing, or at least the only substantial ones, and after that all the money goes to greedy editors, hiding in some back room counting the stacks of money that the author just *knows* his/her book must be making them!  I know writers don’t want to believe this (they cling to the fantasy that there’s a fortune to be made in publishing, if only they could cut out the middleman), but the reality is it’s a low-margin business. (As for those greedy editors who we all know are hoarding what should rightfully be author royalties, after 25 years as an editor my salary is finally approaching that of a reasonably well-paid mid-level secretary in just about any other industry.)

    A few other points:

    No, “quality control” is not proofreading. That’s done before the book ever goes to press with or without an ebook edition, and doesn’t have anything to do with ebook QC.

    Saying, “except for Kindle,” as if that were some sort of minor exception, is a clear sign of a complete lack of even the most fundamental understanding of how and where books are marketed and sold. (And BTW there are at least half a dozen digital formats that I know of, not just two or three.)

    No, authors do *not* submit in epub format. Ever. They may sincerely *think* that’s what they’re doing and may claim to be doing so, but they’re not.  What they do submit once in a very great while–usually over the publisher’s objections since it creates more work rather than less–are PDFs, which are not the same thing as epubs or even ePDFs.  They’re useless for either print or digital production because the average author doesn’t know how to prepare PDF files properly for either medium. They almost always have to be converted into an editable format first, and ultimately converted again by the typesetter into press-ready PDFs, and then converted again into however many ebook formats are required.  So much for sending the author’s “epubs” directly to the end user.

    If anyone seriously believes publishing is like printing money and that all you need is a manuscript and a home computer, there’s nothing stopping them.  Self-publishing has always been around in one form or another.  For some publications and markets, that really *is* probably all you need. Good luck and godspeed.  But they’re not the same, and you might find the experience eye-opening.

    Nobody would suggest that all you need to run a successful restaurant business is how to eat. But for some reason everybody thinks they know everything about publishing because they know how to read and write.

    I confess I’m venting a little bit here, but if I had a dollar for every hour I’ve spent on the phone biting my tongue while an author (especially a first-time author) oh-so-patiently “explains” my job to me, sure in the conviction that everything will go so much more smoothly and quickly once I understand how simple the whole process really is. Unless, of course, I’m part of the vast industry-wide conspiracy seeking to do authors out of their millions, in which case I’ll be impervious to reason anyway.

    • http://pulse.yahoo.com/_4X4NYYGJS6SK6EOVIXXBP77XBA LilBitsMom

      My background is largely print based publications. I have some experience with digital, mostly pdfs and web based delivery.

      Know a self published author (part time) who has recently prepared someone else’s work with illustrations for various digital readers as a side job to his regular video production and design work (full time). He’s a very talented person who found the conversions more challenging than first anticipated. He didn’t net much financially from the project.

      One big expense most of the public forgets is advertising and marketing. If your concept is good but has a limited audience, self publishing and targeted marketing (usually word of mouth) may work well enough. But to really be heard, a book (print and digital) has to be mentioned to every potental customer through a variety of ways, which isn’t free.

  • Diana Guess

    In my opinion, they are not so expensive than those heavy books. Of course, it depends a lot what kind of books are. It’s great that if we don’t want to pay for them, we can download some eBooks from different sites. Alternatives are many, but personally I love to get them from All you can books, because they are free…unfortunately for a limited time period.

  • http://www.SherBailey.com Sherri Bailey

    I self-published an eBook (humor) on Amazon. I don’t get even close to what the eBook sells for – Amazon is the real money-maker. I have no recourse but to accept whatever deal they offer.