Thursday, April 21, 2011


I've been musing for a while about the cost of digital books. Typically, they're about 25% cheaper than paper. Although it's nice to see a cheaper alternative, that's a pretty outrageous price when you analyse it. In some cases, the Kindle versions are actually more expensive (the Kindle version of Game of Thrones costs $8.99, but the paperback is only $7.59, or $5.03 if you want the mass market paperback) and there's no justification for that pricing at all.

As a general rule, 35% of the cost of the book is for printing and paper. Then there's 5% to cover distribution (to the retailer, not the customer). The retailer takes about 30%, which pays for his staff and shelf space. None of those costs apply for a digital book, apart from a minuscule amount for listing it on a web site. So you could cut the cost of a book by 70% and make the same profit.

I've seen it argued in several places that you could reduce the cost of a digital book to a flat fee of $1.99 and you'd still have a viable business. Probably, from the publisher's (and author's) point of view, a more viable business, as people would buy more books at that price. What's more, since you don't have to worry about print runs, overstocks and remainders, you can publish more niche books and expand your inventory. You can't do that right now, because of the fees Amazon and the like charge, but let's assume for the next few minutes that it could be done.

Then what I'd like to see is this.

I pay $20 a month, and can download as many books as I want. Absolutely unlimited. But here's the catch. If I stop paying my membership, those books are no longer available to me. It works just like Netflix or Lovefilm. I can get whatever I want, whenever I want it, as long as I'm a member.

Practically, I can only read a book a day, and that's pushing it. More realistically, I might get through 15-20 books a month. So even if I download hundreds or thousands of books in one month (equivalent to loading my Netflix queue with hundreds of movies), I won't be able to read them all for $20. It'll take me all year. So I'm not paying for the actual downloads, I'm paying to read.

Sure, this isn't the same as owning them. If I stop paying my monthly sub, I "lose" all those books I've "bought". That's true, but frankly, I don't want to re-read 99% of the books I read. So maybe the system could allow me to keep any book I like for an extra $1. It's just like using a library (which I do, much more than buying books anyway), except that I can take out as much as I like, I don't have to go there, there are no late fees or due dates, I don't have to worry about whether they've got the book in stock or how many copies they have, and I pay for it directly instead of through my taxes.

In fact, I'd go so far as to suggest that one day, I'll be able to get a single media subscription covering books, movies, games and music. Pay a flat monthly fee, and read, watch, play or listen to anything I like, when I like, where I like. I'd sign up for that in an instant. Wouldn't you?


J.R. LeMar said...

I got my Kindle last August, and I've noticed this problem, too. I've got about 20 books on my Kindle, so far, but I've still been buying print books because sometimes it's cheaper. And I don't understand why that is.

Like, right now, I want this book that just came out Tuesay, by Paul Allen the co-founder of Microsoft. Amazon has the hardcover @ $15.35 and the Kindle ebook is $14.99! How the heck do they justify that?

So I'm waiting on it. Either they'll lower the ebook price, or a much cheaper used print copy will become available, and then I'll get. $9.99 has been the most I've been willing to pay for an ebook, so far. But, you're right, that's too much, too.

Matt Kelland said...

Much of the time, the pricing is due to the retailer's charges.

Did you know that Amazon charge the publisher a "delivery fee" for wireless delivery of a Kindle book, ostensibly to cover bandwidth? So the publisher pays the shipping costs, not the purchaser. Typically it's about 50c (which for a book that's probably under 1Mb, is absurd). If you decline to pay that, they take a massive 65% fee, which is way higher than they take for a printed book.

As a result, Amazon make far more out of a digital book than a paper one, and the publishers have to keep the prices high to cover their retail costs, but what option do they have if they want to get into the #1 retail channel?

As for why we're not going to see $1.99 books any time soon - that's Amazon's decision. If you take the 70% royalty option (i.e. where you only pay Amazon 30%), you're not permitted to price lower than $2.99. If you want to hit a lower price point, you have to take their 35% royalty option, which means they keep nearly everything. At $1.99, Amazon get $1.30, and the publisher gets just 69c, which simply isn't worth it.

While the Kindle is a wonderful thing in many ways, Amazon's near monopoly position (like Apple's position in the digital music business) is not good for anyone except themselves.

J.R. LeMar said...

That's crazy. I have bought several kindle-only books that they sell for .99 cents. Of course they're all usually small publishers and new writers, so I guess they're just basically giving them away for "free", in order to get their work out there now.

Hopefully, as the technology progresses there will be more avenues for ebooks in the future, and Amazon won't be able to be so strict.

Matt Kelland said...

For a self-published author, 99c makes perfect commercial sense. You get 35c from each book, which is probably the same as your cut from a $10 printed book, but in theory your sales will be higher.