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Mark_F
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I'm a good customer - it is BN's job to force the publishers down on price, not mine.

[ Edited ]

I've never been a big fan of the Kindle (nothing against it, just a personal preference)  but Amazon does have a somewhat better understanding of what the publisher/seller relationship should look like.  I'm seeing eBook prices continue to climb and I don't like it.

 

I buy a fairly steady stream of eBooks, however, I will not now or ever buy an eBook that costs more than $9.99 (before tax) and I don't think that anyone could ever justify doing so.  I went to look for the new Stephen Hawking book  seen here:

 

 

 

The Grand Design 

 

 

 

 

 

 

 

 

 

I would have bought this book today (actually pre-ordered) but it is $13.61 while the actual hardback book, a real physical copy with no DRM, with additional costs to manufacture is only $15.12.  Explain to me how that is justified in any universe.  Book sellers such as B&N need to play hardball with the publishers.  Tell them your customers will not pay practically the same price for an eBook as they would for the DTB.

 

Barnes & Noble, pay attention to this part:  You lost about $10.00 today on this one purchase. $10.00 that was pure profit - no cost to you or the publisher whatsoever.  You can continue to squabble over $2 or $3 dollars here and there in an effort to establish an artificially high baseline price or you can push back against the publishers and tell them how much you are going to charge for the book and not let them dictate to you, a book retailer, how to sell books.    Otherwise your customers will either go elsewhere, or forgo the purchase of these overpriced eBooks altogether.  As for me, if I can find a better price, under $10.00 I will buy the book elsewhere, otherwise I'll probably just wait and try to get it from the library or borrow it from a friend.

 

-Mark

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gqb
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Re: I'm a good customer - it is BN's job to force the publishers down on price, not mine.

Don't plan to buy any new releases, as most of them are in the $13 and up range.  If the publisher is part of the Agency 5, B&N has no say in the price.

 

This one is Random House, which is not part of the Agency 5.  Sometimes B&N has to see what others are pricing books at and then they'll adjust.  Wait until it actually comes out to see if the price goes down.

 

Amazon is showing the same price as B&N for the e-book.  Don't pre-order.

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bklvr896
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Re: I'm a good customer - it is BN's job to force the publishers down on price, not mine.

[ Edited ]

 


Mark_F wrote:

I've never been a big fan of the Kindle (nothing against it, just a personal preference)  but Amazon does have a somewhat better understding of what the publisher/seller relationship should look like.  I'm seeing eBook prices continue to climb and I don't like it.

 

I buy a fairly steady stream of eBooks, however, I will not now or ever buy an eBook that costs more than $9.99 (before tax) and I don't think that anyone could ever justify doing so.  I went to look for the new Stephen Hawking book  seen here:

 

 

 

 

 

 

 

 

 

 

I would have bought this book today (actually pre-ordered) but it is $13.61 while the actual hardback book, a real physical copy with no DRM, with additional costs to manufacture is only $15.12.  Explain to me how that is justified in any universe.  Book sellers such as B&N need to play hardball with the publishers.  Tell them your customers will not pay practically the same price for an eBook as they would for the DTB.

 

Barnes & Noble, pay attention to this part:  You lost about $10.00 today on this one purchase. $10.00 that was pure profit - no cost to you or the publisher whatsoever.  You can continue to squabble over $2 or $3 dollars here and there in an effort to establish an artificially high baseline price or you can push back against the publishers and tell them how much you are going to charge for the book and not let them dictate to you, a book retailer, how to sell books.    Otherwise your customers will either go elsewhere, or forgo the purchase of these overpriced eBooks altogether.  As for me, if I can find a better price, under $10.00 I will buy the book elsewhere, otherwise I'll probably just wait and try to get it from the library or borrow it from a friend.

 

-Mark

 


 

They pretty much just went through this fight with the publishers earlier in the year and they lost, even Amazon lost the fight.  As the pp said, 5 of the 6 major publishers are now setting the price, so you won't see it cheaper anywhere else that is legal.  Amazon tried to fight Penguin and wound up not selling any new releases from Penguin for a month and they finally caved on it. So Amazon has entered into the same agreements with the publishers as BN and the other retailers. Books from the Agency 5 will be the same price everywhere.

 

And in my opinion, and this is just my opinion, $9.99 is an artificial price point set by Amazon who was willing to sell new releases at a loss.  I figure if I want to read a new release right away, I will pay more for it, just as I did before, when I would purchase the HC version as opposed to waiting for the paperback.  You are paying partly to read the book immediately.

 

And if you pay $9.99 for an eBook, how is that pure profit?

 

I'm more upset by the fact that paperbacks at BN tend to run around $7.19 because they can discount it and the eBook is usually $7.99.  That annoys me.

flyingtoastr
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Re: I'm a good customer - it is BN's job to force the publishers down on price, not mine.

 


Mark_F wrote:

 

Barnes & Noble, pay attention to this part:  You lost about $10.00 today on this one purchase. $10.00 that was pure profit - no cost to you or the publisher whatsoever.  You can continue to squabble over $2 or $3 dollars here and there in an effort to establish an artificially high baseline price or you can push back against the publishers and tell them how much you are going to charge for the book and not let them dictate to you, a book retailer, how to sell books.    Otherwise your customers will either go elsewhere, or forgo the purchase of these overpriced eBooks altogether.  As for me, if I can find a better price, under $10.00 I will buy the book elsewhere, otherwise I'll probably just wait and try to get it from the library or borrow it from a friend.

 


When you were paying 9.99 for every new release BN was losing $3 off every transaction. You really don't seem to understand how book pricing works, would you like a primer?

 

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bklvr896
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Re: I'm a good customer - it is BN's job to force the publishers down on price, not mine.

 


flyingtoastr wrote:

 


 

When you were paying 9.99 for every new release BN was losing $3 off every transaction. You really don't seem to understand how book pricing works, would you like a primer?

 


I still don't get the pure profit part.  Does the original poster think there is no cost associated with an eBook?

 

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ABthree
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Re: I'm a good customer - it is BN's job to force the publishers down on price, not mine.

OK, let's take this one apart:

 

1. "I'm a good customer" -- the implication here is that good customers deserve some consideration.  Fair enough.  About how many eBooks are you buying per month, and what's the average price you're paying per eBook?  A "good customer" by any rational definition is a profitable customer.   Buying a lot of eBooks for $9.99 doesn't count since, as Flyingtoastr points out, B&N loses money on each of those transactions.  Needless to say, there's no profit on free eBooks.  So, what exactly makes OP a "good customer"?

 

2." I will not now or ever buy an eBook that costs more than $9.99 (before tax) and I don't think that anyone could ever justify doing so. "

 

That was a number that Amazon picked out of thin air to encourage eBook sales volume.  There's no rational or economic basis for it, so what makes it the critical price point for a buy/don't buy decision?

 

3. "I would have bought this book today (actually pre-ordered) but it is $13.61

That's actually one of the lower prices for the pre-orders, according to Inkmesh.  The price will probably come down after the book is released -- that's how pre-orders run.

 

4. "while the actual hardback book, a real physical copy with no DRM, with additional costs to manufacture is only $15.12."

 

Yeah, just one copy, and the only way to share it to lend it or give it away, and then you don't have it.  Works a lot like DRM, hunh?

 

 5. Explain to me how that is justified in any universe.  

 

As for costs, this topic has been so extensively debated that there's no need to repeat it all here.  A search of the boards on "Agency Pricing" or "eBook pricing" or "book production costs" should produce plenty of clarifying information.

 

6. Book sellers such as B&N need to play hardball with the publishers.  Tell them your customers will not pay practically the same price for an eBook as they would for the DTB.

 

Or, you could write to the publisher and tell them yourself.

 

7. Barnes & Noble, pay attention to this part:  You lost about $10.00 today on this one purchase. $10.00 that was pure profit - no cost to you or the publisher whatsoever.

 

Check the cost discussions.  $10 is a losing number.  For just one example:  author royalties based on hardcover prices have to come out of that $10 -- one cut into that "pure profit".

 

 8. Otherwise your customers will either go elsewhere, or forgo the purchase of these overpriced eBooks altogether.  As for me, if I can find a better price, under $10.00 I will buy the book elsewhere, otherwise I'll probably just wait and try to get it from the library or borrow it from a friend.

 

All good choices.  That's the great thing about Nook:  you have options.  Since B&N created those options, trying to use them as threats to change behavior may not be ... very effective. :smileyvery-happy:

 

 

 

+LORD, preserve the good in their goodness, and+
+in your kindness, make the wicked become good.+
-- St. Basil the Great+
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CoryN
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Re: I'm a good customer - it is BN's job to force the publishers down on price, not mine.

[ Edited ]

NYTimes wrote an article that breaks down the costs of ebooks and hardcovers.  They showed that on a $10 ebook, B&N makes around $4 in profit -- the same amount of profit as a $26 hardcover, and that was before including certain overhead costs that would apply primarily to physical books, like staff salaries, electricity, and rent.  I'd be interested to see where flyingtoastr got his $3 loss numbers from.

 

ABthree's comparison with DRM is pretty poor -- with B&N's DRM you can only lend a book once, for a limited amount of time, and you can't ever donate or sell one when you're done.  DRM is about forcing people to buy books when they wouldn't have needed to with DTBs, so there's a hidden amount of extra profit with ebooks over DTBs that most people probably don't consider too.

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ABthree
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Re: I'm a good customer - it is BN's job to force the publishers down on price, not mine.

[ Edited ]

 


CoryN wrote:

NYTimes wrote an article that breaks down the costs of ebooks and hardcovers.  They showed that on a $10 ebook, B&N makes around $4 in profit -- the same amount of profit as a $26 hardcover, and that was before including certain overhead costs that would apply primarily to physical books, like staff salaries, electricity, and rent.  I'd be interested to see where flyingtoastr got his $3 loss numbers from.


What in the world makes yoiu think that staff salaries, electricity and rent shouldn't apply to eBooks as well?  The only costs that you can legitmately exclude from eBooks are the production and logistics costs of paper books.  EBooks need to shoulder their fair share of the business's overall costs.

 

Besides which, it's been widely reported that, prior to implementation of the Agency Model, the booksellers were paying the publishers half of the hardcover price for eBooks.  So, whatever the estimate of the production cost of an eBook, that's the relevant cost number for figuring B&N's profit on the deal.

 

+LORD, preserve the good in their goodness, and+
+in your kindness, make the wicked become good.+
-- St. Basil the Great+
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bklvr896
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Re: I'm a good customer - it is BN's job to force the publishers down on price, not mine.

[ Edited ]

 


CoryN wrote:

NYTimes wrote an article that breaks down the costs of ebooks and hardcovers.  They showed that on a $10 ebook, B&N makes around $4 in profit -- the same amount of profit as a $26 hardcover, and that was before including certain overhead costs that would apply primarily to physical books, like staff salaries, electricity, and rent.  I'd be interested to see where flyingtoastr got his $3 loss numbers from.

 

 


 

I'm not seeing where it says in either article that BN makes around $4 profit on a $10 ebook.  The cost breakdown is the the publishers cost not the sellers cost.  And it says for a $12.99 ebook, the publisher is paid $9.09, so at most, that's a about $4.00 for the seller, who has costs that must come out of that.  They may not have brick and mortar costs, but there are costs associated with acquiring, housing and maintaining the servers required to store the ebooks, and with the website that allows the user to buy the books.

 

The article also says on a HC book the publisher sets the retail price at $26 and the bookseller pays about $13.  This is what the publishers were charging the sellers for the eBook, $13 before the advent of the agency model, so if the sold the book at $9.99, that was a $3.00 loss.

 

And in this article, the NY times says 

 

"For the moment, say some publishers, Amazon is effectively subsidizing the $9.99 price tag for new book titles in digital form by paying publishers the same $13 it pays them for a new hardcover title with a list price of $26. It’s a classic “loss leader” situation. Although Amazon won’t comment on the arrangement, the online bookseller is using low-price e-books as a lure to persuade consumers to pay $359 to buy a Kindle, or $489 for the new, larger Kindle DX.",

 

In any event, there is no way that the $10. charged for an eBook is pure profit, especially if you believe the article you posted which says they are paying the publisher $9.09 for a $12.99 priced eBook.  Even if they pay less than the $9.09, they still have to pay the publisher for the book out of the $10.

flyingtoastr
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Re: I'm a good customer - it is BN's job to force the publishers down on price, not mine.

 


CoryN wrote:

NYTimes wrote an article that breaks down the costs of ebooks and hardcovers.  They showed that on a $10 ebook, B&N makes around $4 in profit -- the same amount of profit as a $26 hardcover, and that was before including certain overhead costs that would apply primarily to physical books, like staff salaries, electricity, and rent.  I'd be interested to see where flyingtoastr got his $3 loss numbers from.


Under the old wholesale method of ebook sales BN would pay the publisher between $12 and $13 and then turn around and sell it to you for $9.99. Loss.

 

It was crippling the industry by forcing everyone to play by Amazon's game and lose money to try and stay competitive. Since most other companies (BN included) don't have Amazon's gross income it was a shifty method for Amazon to remain the only major player in the ebook market.

 

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DblGee
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Registered: ‎10-25-2009

Re: I'm a good customer - it is BN's job to force the publishers down on price, not mine.

As pointed out in other places on this board.  E-books are not a "brand new" technology.  Many of us were reading e-books on palm pilot like devices long ago - however e-readers simply did not take off in main stream markets.  With the advent of Kindle the timing and acceptance of e-books/readers had finally arrived. 

 

I think a large part of the pricing dilemma (or debacle depending on your perspective) for everyone - authors, publishers, booksellers - is because they are still operating on their historical business models.  

 

While this is only my opinion - no matter how they try to market it or plead costs, expenses, royalties, overhead, etc - true or not -consumers are having a hard time percieving that the costs of producing e-books are equivalant or even close to producing DTB books and with economies such as they are now - I don't see that changing any time soon. 

 

The world is changing as is pointed out to us daily and all of us are learning to adjust our sites accordingly.  Sooner or later these things will shake out, shape up and reform.    Consumers will either buy or not buy and  Business models will change based on statistics and revenue...and everyone will adjust up or down accordingly.

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JustTrish
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Re: I'm a good customer - it is BN's job to force the publishers down on price, not mine.

[ Edited ]

 


CoryN wrote:

NYTimes wrote an article that breaks down the costs of ebooks and hardcovers.  They showed that on a $10 ebook, B&N makes around $4 in profit -- the same amount of profit as a $26 hardcover, and that was before including certain overhead costs that would apply primarily to physical books, like staff salaries, electricity, and rent.  I'd be interested to see where flyingtoastr got his $3 loss numbers from.

 

ABthree's comparison with DRM is pretty poor -- with B&N's DRM you can only lend a book once, for a limited amount of time, and you can't ever donate or sell one when you're done.  DRM is about forcing people to buy books when they wouldn't have needed to with DTBs, so there's a hidden amount of extra profit with ebooks over DTBs that most people probably don't consider too.


As per the costs breakdown,  the profits of a $26 hardcover book is similar to the profits of a $9.99 ebook, therefore, there is no good reason for any book to be priced higher than $9.99, especially since hardcover books are eligible for all sorts of discounts such as coupons, promotion, and B&N membership discounts and ebooks do not produce the same overhead costs.

 

If you read the article itself, you learn:

 

Another reason publishers want to avoid lower e-book prices is that print booksellers like Barnes & Noble, Borders and independents across the country would be unable to compete. As more consumers buy electronic readers and become comfortable with reading digitally, if the e-books are priced much lower than the print editions, no one but the aficionados and collectors will want to buy paper books.


“If you want bookstores to stay alive, then you want to slow down this movement to e-books,” said Mike Shatzkin, chief executive of the Idea Logical Company, a consultant to publishers. “The simplest way to slow down e-books is not to make them too cheap.”

flyingtoastr
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Re: I'm a good customer - it is BN's job to force the publishers down on price, not mine.

[ Edited ]

 


JustTrish wrote:

 

As per the costs breakdown,  the profits of a $26 hardcover book is similar to the profits of a $9.99 ebook, therefore, there is no good reason for any book to be priced higher than $9.99, especially since hardcover books are eligible for all sorts of discounts such as coupons, promotion, and B&N membership discounts and ebooks do not produce the same overhead costs.


Authors trying to get larger royalties out of ebook sales would beg to differ. If they get their way (and its a pretty good chance they will), the amount of money going to the authors will more than double, reducing the margin on ebooks to near nothing if they stay priced as is.

 

Remember also that hardcovers are not discounted by the publisher, they are discounted by the retailer. Huge difference.

 

Also, god forbid the publishers try to run a profitable business, amirite?

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Flyweight
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Re: I'm a good customer - it is BN's job to force the publishers down on price, not mine.

 


flyingtoastr wrote:

 


CoryN wrote:

NYTimes wrote an article that breaks down the costs of ebooks and hardcovers.  They showed that on a $10 ebook, B&N makes around $4 in profit -- the same amount of profit as a $26 hardcover, and that was before including certain overhead costs that would apply primarily to physical books, like staff salaries, electricity, and rent.  I'd be interested to see where flyingtoastr got his $3 loss numbers from.


Under the old wholesale method of ebook sales BN would pay the publisher between $12 and $13 and then turn around and sell it to you for $9.99. Loss.

 

It was crippling the industry by forcing everyone to play by Amazon's game and lose money to try and stay competitive. Since most other companies (BN included) don't have Amazon's gross income it was a shifty method for Amazon to remain the only major player in the ebook market.

 


 

That is one of the advantages I see to the agency model.  Everyone likes to trash it, but I see the model's advantage in taming the Amazon monster.

 

The $9.99 pricing threshold that consumers say shouldn't be breached is abritrary.

 

I am not as opposed to the agency model as most people are.  I think it has levelled the playing field for other retailers like BN.

 

And what makes us think we have some sort of "right" to pay $9.99 or less for an ebook?

 

The bottomline is: pay whatever the book is worth to you.  People need to quit using the $9.99 as some sort of magic number.

 

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Publication costs


JustTrish wrote:

 

As per the costs breakdown,  the profits of a $26 hardcover book is similar to the profits of a $9.99 ebook


We can argue costs all day, but since each publisher's costs are different, it's kind of pointless. Still, that "costs breakdown" chart is totally lame.

 

It assumes that the costs are a straight percentage of the list price, which is not even close to accurate. Most of the costs are fixed, up-front costs that the publisher sinks before any sales are ever made. The cost per copy is identical for those, because it's a matter of the publisher trying to recover its investment. The big question is, how many copies will be sold?

 

The figures for "design, typesetting, and editing" are well below figures reported elsewhere. Those other reported figures run around $4/copy rather than $0.80. Also the handwaving about "overhead" is bizarre, because it isn't profit if it pays for overhead. The 'Big 6' trade publishers all operate out of Manhattan, and overhead there is enormous.

 

The big savings shown for the e-book figures is the author royalties. This is on the assumption that  the author is getting screwed by being paid the same percentage of list, or less. A few publishers are trying to get away with it, but most literary agents are smarter than that. The whole Andrew Wylie Agency e-publishing venture was basically about getting the publishers to pay proper e-book royalties on titles whose publishing contracts pre-dated the emergence of the e-book and didn't provide an increased royalty rate for e-books. Most publishers now end up paying around twice the print royalty percentage for e-books.

 

However! Author royalties also take us back to my first comment, which is that most publishers' costs are up-front. The publisher gives the author a royalty advance. The royalty percentage you see in these breakdowns is the publisher attempting to recover the advance; the author doesn't actually get that per-copy cut until the book has "earned out", and only a tiny percentage of books ever earn out their advances. Some of the 'publisher's profit' goes to cover the vast majority of advances that didn't earn out.

 

Which brings us to my last comment: the business of traditional 'trade' publishing is like movie-making. It's a gamble where most of the product loses money, but some titles hit it big. The publisher generally doesn't know what's going to take off and what isn't. The pricing has to be high enough on all titles such that the few winners can more than compensate for the many losers. You'd think that blockbuster authors would be a sure thing, but their author royalty advances are enormous. Random House is believed to be paying Janet Evanovich $12.5 million for each of her next four books, and most industry observers don't see how RH will be able to turn a profit on those titles.

 

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Discounting


JustTrish wrote:

 

hardcover books are eligible for all sorts of discounts such as coupons, promotion, and B&N membership discounts and ebooks do not produce the same overhead costs.


The print discounts and such are taken out of the retailer's cut, and do not in any way affect the wholesale price that the publisher gets paid. For the Agency Model, which is where discounts are no longer allowed, the discounts would directly affect what the publisher gets paid for e-books.

 

The Agency 5 publishers do their own e-book discounts and promotions—some publishers more than others. Unlike print discounts, these promotions are almost always on older titles in order to generate interest in current releases. HarperCollins is probably the most aggressive in this area, with Penguin in second place.

 

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Coanda-1910
Posts: 128
Registered: ‎03-04-2010

Re: Discounting

It's literally out of their hands - their choice is either sell you the books at the publisher's price, or don't sell you the book at all. No one eBookstore has sufficient clout at this point to dispute that successfully, especially since half the major publishers are somewhat suspicious of eBooks anyways and wouldn't really mind not selling them.

 

I'm not even going to get into the whole "ebook vs. physical book cost" issue right here. The fundamental issue is that the costs aren't driving ebook prices. They aren't even driving paper book prices very much. Some basic microeconomics here.

 

Consider a very simple market - the widget market. Anyone can make and sell a widget - the market is open. There is no particular R&D or initial investment needed to start making them - sunk costs are low. And the marginal costs of production are constant. Anyone can make 1 widget for $5, 2 widgets for $10, or 1000 widgets for $5000. In this situation, it's a fairly simple thought-experiment starting from these assumptions to show that over time, the price at which widgets are sold will converge on the cost-per-unit of production. Economists get all dewy-eyed about this sort of market.

 

If books were like the aforementioned widgets, then you'd expect hardcover books to sell for somewhere around $4 - the marginal cost to sell one additional book. In that case, you could quite rightly expect that an innovation such as eBooks, which cut marginal costs to practically nothing, would result in eBooks being sold for practically nothing - that is, a $4 decrease in production costs leads to a $4 decrease in sale price.

 

In practice, neither of the two above basic assumptions even comes close to applying to the book market. There are huge sunk costs involved in making a book. There are many salaried people involved in the "research and development" of a book. In fact, the vast majority of the costs associated with books are sunk costs which have to be paid once to create and market the book, but then need not be paid again for each additional copy of the book sold. This creates what is generally termed a "natural monopoly." By granting copyright protections to authors, the government legally protects that monopoly. The rights to produce, distribute, and sell any given book are given to the creator of the book, who generally contracts them over to the publisher. It is not an open market; it is nothing even remotely resembling an open market. It is a monopoly market.

 

So Monopolies R Us has absolute, dictatorial control over any production or sale of gizmos. In that case, you expect the price at which gizmos are sold to be determined not by how much it costs them to make a gizmo, but by how much consumers are willing to pay for a gizmo. As presumably different consumers are willing to pay different amounts (and unless they're very tricky, Monopolies R Us can only charge one price), they look for the point at which the mathematical product of number of sales and profit per sale is maximized. This is an important point - it means that in a monopoly situation where the marginal cost per item is low and constant, the selling price is determined by the demand curve, not supply curve.

 

But books, like most forms of entertainment, aren't a complete monopoly market. The publisher may have total control over sales of a specific book, but consumers are free to buy a different book, or to go watch a movie, see a play, play a videogame...

 

I'll set aside for the moment non-book-related entertainment - while there is some interchange, book readers often are specifically hooked to reading books, and it would take a big change in prices to convince them to stop reading. This means you're looking at an unusual situation - each bookseller has a small "monopoly," but most books have other, similar books that are substitute products.

 

And now I'm finally done with basic background, and in a position to discuss specifically what's determing book prices. Each publisher has a monopoly over each title in their inventory. But anyone could sell a different book, which might be similar enough to steal some of their custom. So if a bookseller does nothing to distinguish their books from the other, similar books, the price they can charge closely approximates the marginal cost of producting each additional book. Odds are, given the large one-off costs for creating a book, that such a bookseller would go bankrupt rather quickly. But a bookseller who can distinguish books in their catalogue can charge more than the marginal cost of production (and maybe even turn a profit). They use all sorts of tools to achieve this - author "brand recognition," serialized novels and sequels, publisher brand reputation, prominent book placement in stores... the list goes on. This is, in fact, why they can charge more than $4 for a hardcover. And they're very, very good at it. Anyone who's looked at the price of a hardcover book lately probably realizes that they've transformed their markets into very close approximations of pure monopolies (and to be fair, the main way they've done that is by providing consistently better books!)..So when they manage to cut the marginal cost of production by $4, you cannot expect $4 to be passed on to you in savings. You probably shouldn't even expect $1 to be passed on to you in savings. They might cut costs by $0.50 in order to appeal to a wider market than before, but that's about all you can hope for.

 

But wait, there's more! Why the big push for the Agency model? They're looking to the future. If consumers view books as sizeable purchases, they are more reluctant to experiment with new authors - and commensurately more likely to stick with their known authors. In an "idealized" setup, consumers previously buying from publisher A would realize that publisher B was selling for significantly less, and thus be willing to try new books from publisher B's catalogue. But in practice, consumers don't have the time to check or interest in checking every book's price before buying a book. Instead, they go in large part based on their perception of what a book costs. If they think of books as generally costing $25, then they are probably reluctant to go hunting for new books. If they think of books as generally costing $2.50, they're likely fairly willing to look around. And the main way a consumer forms a perception of how expensive books are is by buying books, likely from the major booksellers. So oddly enough, by charging more for a book, booksellers enable themselves to charge more. If they cut prices, they have difficulty raising them again, because consumers might go find a different author to read. And heaven forbid consumers get in the habit of switching authors, because in that case their cozy monopoly is gone. But note that the consumer doesn't know (or particularly care) what price the publisher charges the retalier - only what price the retalier charges. So if retaliers are free to set their own prices (including taking a loss on some books if they want to build recognition), then consumers' will be buying these discounted books, which will cause them to think of book purchases as less significant decisions. Here's the short walk-through: Publishers sell books for $20. Retailers accept that price and charge $20. Consumers think of books as costing $20 apiece. They're generally unwilling to experiment. Publishers have a solid monopoly control over their individual book markets, and can continue charging $20. OR, Publishers sell books for $20. Some retaliers undercut that price, and sell books for $10. Consumers start thinking of books as costing $10 apiece. They're somewhat willing to experiment. The individual book markets start to blur into one overall book market, meaning publishers no longer have solid monopoly control. They are no unable to continue charging $20. And note that the problem here wasn't that they were (initially) making less money per sale, but that individual retailers, breaking with the pack selling at a large discount, were changing how much they could charge in the future for books. The only way they can prevent this, though, is if they are able to dictate to publishers how much they should charge per book. Voila! The Agency Model.

 

And it goes further. Most book publishers aren't really comfortable with the idea of eBooks. They did their best to avoid digitally releasing their titles as long as possible, and it's only in the last ~5 years (when, coincidentally, easy high-quality bookscanners have started making pirated digital copies appear online) that they've started really getting on board. That is to say - as long as there were no digital copies available, most publishers wanted to keep it that way. It's only when people started pirating their books that they got off their behinds and starting releasing legitimate copies to compete. However, they still see the eBook market as a more risky one (they aren't sure how well their traditional business models will translate, what risks are involved...). This means they aren't just considering profit when deciding pricing for eBooks. They're also trying to slow the growth of the market, which means they are deliberately over-pricing their eBooks to discourage eReaders in general. Give it 5-10 years and this behavior will likely no longer be an issue, but it's darn irritating for those of us with eReaders now.

 

Personally, I have my doubts about some of the logic the publishers are applying (particularly to the Agency model issue, and their pricing in general). But I have only anecdotal evidence on that topic, whereas I presume they have fairly detailed studies, so I'm hesitant to disagree too strongly.

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03FLHT2
Posts: 695
Registered: ‎02-05-2010
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Re: Publication costs

Doug:  I think the cost of you mention here (The figures for "design, typesetting, and editing" are well below figures reported elsewhere. Those other reported figures run around $4/copy rather than $0.80. Also the handwaving about "overhead" is bizarre,)

If you only sell about a 1000 copies yes I can see the price being that high but when you start getting into the thousands of copies, it has to go down.  No way does it cost that much to continue to print the book.  I have several printers and binders as customers and all do it for the Agency 5 so to speak as OEM's.  Most has been moved to Canada or maybe Mexico because of lower price, but I have been seeing some come back as it wasn't as cheap as first thought.  That's for another thread.    For a few thousand your going to pay once price but as that number goes up so does the price go down, and that's a fact.   I can see $0.80 being a real number when you have those kind of numbers.  

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DLCrouch
Posts: 34
Registered: ‎06-03-2010
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Re: Publication costs

I'm not an accountant nor do I play one on TV. Reading is one of my favorite leisure time activities and the idea of sitting on home or on a plane w/o something to read is a frightening thought.

I've put aside all the fretting of eBook vs.. Hardback vs.. Paperback pricing and buy new eBooks when the mood strikes and I feel it's worth the price. I'm not a complete spendthrift, so I do read book reviews, talk to friends with similar tastes and always check public libraries before purchases.

If I obsess about eBook pricing like I do about electronics and sports equipment, I'd never have anything to read.

All that said, I am curious to see how all this plays out - I'm a big fan of the online subscription models like Rhapsody and Netflix offer for music and video. Wonder how they'd price an all you can read best seller plan?

 

Distinguished Bibliophile
ABthree
Posts: 4,123
Registered: ‎01-27-2010
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Re: Discounting

@Coanda - 1910

 

Excellent analysis, for those willing to stick it out until the end. :smileywink:

 

The "natural monopoly" aspect is one I've tried to highlight in various threads, and an argument the significance of which the "$9.99 or I Won't Buy It!" faction chronically underestimates, or can't understand. 

 

As long as the relationship is "One Author-One Publisher" -- in other words, for the forseeable future -- books are not perfectly fungible.  For a well known current example, when Towers of Midnight comes out on November 2, Robert Jordan fans are going to buy it.  Even if they like fantasy, as they probably do, they aren't going to substitute another, cheaper title by another author.  They'll want THAT particular book, as soon as they can get their hands on it.  That gives Tor a pricing power completely unrelated to production costs in any medium.

+LORD, preserve the good in their goodness, and+
+in your kindness, make the wicked become good.+
-- St. Basil the Great+