Ask Stacy: Why Are E-Books So Expensive?

Photo (cc) by brewbooks

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.

Got more money questions? Browse lots more Ask Stacy answers here.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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