11 Replies Latest reply: Mar 3, 2010 10:57 AM by bleaker

    Why $9.99 is the perfect price point & Publishers are gouging customers

      For people who feel that paying more than $10 for an eBook just doesn't feel right, here's some news to make you feel a little bit smug. The publishers are lying to you, of course. They want you to spend more money on eBooks, claiming the content should cost the same regardless of media. But then again, they charge more for hard cover books than paper backs, so this argument is entirely disingenuous. Pretty much the publishers want to rape your wallet. Here's a cost analysis break-down of the money that gets put into a hard cover book, and shows why $10 is the ideal target for an eBook that results in near identical profits for the publishers and authors (the retailers eat most of the loss):

       

      The most detailed cost rundown for costs associated with a hardcover book I've found are:

       

       


      Book Retail Price: $27.95.
      Retailer (discount, staffing, rent, etc.) - $12.58 (45%)
      Author Royalties - $4.19 (15%)
      Wholesaler - $2.80 (10%)
      Pre-production (Publisher) - $3.55 (12.7%)
      Printing (Publisher) - $2.83 (10.125%)
      Marketing (Publisher) - $2 (7.15%)

       


       

       

      Starting with the MSRP of $27.95 for a hardcover book. The retailer should be able to set their own price for their profit. If a retailer wants to make $0 profit on an eBook as a loss lead, then that is their prerogative, as they've been doing that for years with physical product.

       

      $27.95 - $12.58 = $15.37

       

      Next on the list is printing. It's an eBook, there is no printing. No paper, no ink, no binding. This line item disappears entirely.

       

      $15.37 - $2.83 = $12.54

       

      But we're not done yet. There's one more item: wholesale. Why does an eBook need a wholesaler? There's not 200,000 physical books needing housing and distribution. We can lose the wholesale item, or at least a vast majority of the costs associated with it.

       

      $12.54 - $2.80 = $9.74

       

      So, to the book publishers, they can charge $9.74 and not lose any profits over their hardcover book offerings and the authors can get the exact same dollar number (with an increased percentage). By wanting to push the price of eBooks far above and beyond this number they are looking to (1) kill the fledgling eBook market so it does not eat into their physical product sales because lower print sales affect the profits as they have extra physical product, and (2) they're using eBook transitioning as a means to pry more money out of people's pockets.

       

      A $9.99 price on eBook versions of hardcover books would maintain profit lines for publishers, appeal to the perceived value of an eBook to customers, and give retailers a little bit of change per book for profit (hey, at least it's better than taking a loss on each eBook, and considering retailer costs are also dramatically reduced, it may make sense for them ... we all know they're willing to do it).

       

      So when the publishers spout off their lies, misconceptions, and misdirections about eBook pricing, remember: the numbers don't add up to their arguments. Barnes & Noble wants to give us $9.99 eBooks. We want to pay $9.99 for new eBooks. The publishers are getting greedy and scared. They don't know what to do with their own business and are making poor decisions. It's important as consumers we know the truth and the facts.

       

      Don't support publishers that look to raise the price of eBooks to unreasonable levels. And DO support those publishers, authors, and retailers that are nurturing the eBook market with reasonably priced or free content. The nook allows you to load content from a variety of sources in a handful of formats. Use that feature to its fullest and give support to those who are making the eBook market successful, and do not support those who are trying to poison it.

       

       

      Update:

      By popular demand, SOURCES:

      Book Cost Analysis – Cost of Physical Book Publishing

      Breakdown of book costs

       


      As your body grows bigger

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        • Re: Why $9.99 is the perfect price point & Publishers are gouging customers
          FrogAlum

          Isn't a lot of that going to be variable, i.e. author's royalties???

           

          What is your support for this, WHERE did you get your information?  Cite your sources please.

           

          AND are you saying the retailer should make no more than .25 cents in order to reach your much vaunted $9.99?

           

           

          • Re: Why $9.99 is the perfect price point & Publishers are gouging customers

            I feel very strongly that the cost of an ebook should be significantly less than the cost of a physical book.  My biggest rationale for this is that if I buy a physical book it is mine to do with as I would like. I can loan it to as many people as I want for as long as I want,  I can sell it, and I can trade it.  With an ebook I don't have that flexibility.  As a trade off, I would expect the ebook to be lower cost. I am willing to except these limitations in exchange for the lower cost. If publishers start expecting me to pay the same for an ebook as I do for the physical book, then they better also give me more freedoms to loan it out or sell it. 

              • Re: Why $9.99 is the perfect price point & Publishers are gouging customers
                maxcat

                Very good point! I think there is a price gouging war going on and we're caught in the middle. Some of the books on b&n sell for the same price you would get if you had a b&n card and the book was 40% off. It's not fair to ebook readers as It is costing to much to put something on your Nook or Kindle and find you could buy the hard copy for about the same price.

                • Re: Why $9.99 is the perfect price point & Publishers are gouging customers

                   


                  kritter217 wrote:

                  I feel very strongly that the cost of an ebook should be significantly less than the cost of a physical book.  My biggest rationale for this is that if I buy a physical book it is mine to do with as I would like. I can loan it to as many people as I want for as long as I want,  I can sell it, and I can trade it.  With an ebook I don't have that flexibility.  As a trade off, I would expect the ebook to be lower cost. I am willing to except these limitations in exchange for the lower cost. If publishers start expecting me to pay the same for an ebook as I do for the physical book, then they better also give me more freedoms to loan it out or sell it. 


                   

                  I completely disagree.  You are paying for convenience.  That alone has value to me personally.  If you don't like the pricing of ebooks, why even use an ereader?  When I buy music off of iTunes, I don't complain that I could get it cheaper elsewhere or that I can't loan it to others.  The same goes to my digital video collection.  I like the convenience of streaming it to my TV or surround sound system and saving the space of storing a bunch of discs. 

                   

                    • Re: Why $9.99 is the perfect price point & Publishers are gouging customers
                      Jason_Corner

                      Not that its a huge cost on a per book basis, but eBooks do require some cost to Barnes and Noble to sell and maintain.  There is computer software and hardware to maintain and the employees to maintain them. 

                        • Re: Why $9.99 is the perfect price point & Publishers are gouging customers

                           


                          Jason_Corner wrote:

                          Not that its a huge cost on a per book basis, but eBooks do require some cost to Barnes and Noble to sell and maintain.  There is computer software and hardware to maintain and the employees to maintain them. 


                           

                          I'm not sure I fully agree with you Jason. I've been getting my books from baen (I read Sci-fi) and baen being a publishing house has been selling thier books as ebooks for about 10 years now at a cost of $5.00 each. And they're also paying thier authors well also (I read it in one of thier blogs). I can't possibly imagine that a publishing house would sell anything for 10 years without making a profit. The only real expense I see the retailers having is the bill for 3G, which would be in thier benefit, since the moment they get you using it, the odds are you're using it to browse and possibly buy a new book so that would be part of thier cost-of-doing-business.

                           

                            • Re: Why $9.99 is the perfect price point & Publishers are gouging customers

                               


                              Phigment wrote:

                               

                              I've been getting my books from baen (I read Sci-fi) and baen being a publishing house has been selling thier books as ebooks for about 10 years now at a cost of $5.00 each. 


                               

                              I forgot to add Baen to my "you're buying convenience" smack-down.... and I try to pimp them every chance I get.

                               

                              • Re: Why $9.99 is the perfect price point & Publishers are gouging customers
                                Jason_Corner

                                 


                                Phigment wrote:

                                 

                                I'm not sure I fully agree with you Jason. I've been getting my books from baen (I read Sci-fi) and baen being a publishing house has been selling thier books as ebooks for about 10 years now at a cost of $5.00 each. And they're also paying thier authors well also (I read it in one of thier blogs). I can't possibly imagine that a publishing house would sell anything for 10 years without making a profit. The only real expense I see the retailers having is the bill for 3G, which would be in thier benefit, since the moment they get you using it, the odds are you're using it to browse and possibly buy a new book so that would be part of thier cost-of-doing-business.

                                 


                                 

                                I'm not saying its a huge cost, but the OP was not including any cost in maintaining the electronic storefront and servers required to have a million books ready for download.  Baen does not have the infrastructure costs that Barnes and Noble or Apple has in maintaining their servers. 

                                 

                                  • Re: Why $9.99 is the perfect price point & Publishers are gouging customers

                                    All good points... and I might be more sympathetic to publishers than I was before... but the elephant in the room is DRM. DRM turns buyers into tenants. DRM will always make eBooks worth significantly less than dead tree books. B&N's adoption of ePub alleviates some of the problems, but not all. Think about all the things eBooks forbid you from doing because of DR: copying, lending for more than two weeks, sale, use on devices not supporting that format, use with software that doesn't support that format, etc. Products with DRM are inherently defective versions of those without it. 

                              • Re: Why $9.99 is the perfect price point & Publishers are gouging customers

                                 


                                Alley415 wrote:

                                 

                                You are paying for convenience.  That alone has value to me personally.  If you don't like the pricing of ebooks, why even use an ereader?  When I buy music off of iTunes, I don't complain that I could get it cheaper elsewhere or that I can't loan it to others.  


                                 

                                 

                                Blah.  The convenience argument is ridiculous.

                                 

                                You can now "loan" most iTunes music to anyone you want as most of the music has now gone DRM free.  I don't have the iTunes store, so I had to use Amazon but:

                                Surfer Blood:  Astro Coast

                                    CD = 10.99 (on sale) ... 12.98 (regularly).  The album from Best Buy is 15.98.

                                            MP3 = 5.00 (album/on sale) or 0.89 (per track)... probably 7.99 - 10.99 regularly.

                                 

                                Digital video collections have a long way to go before I even consider it (plus, DVDs just take too much disk space to back up... and HD video... forget about it). Of course, Netflix makes owning most movies a fairly ridiculous proposition.

                            • Re: Why $9.99 is the perfect price point & Publishers are gouging customers

                              I'm an agnistic on the price of ebooks, but there are some problems with the OPs post that bear examining.

                               

                              Both of the support links point to an analysis of the cost of producing physical books.  Then some suppositions are made about how that applies to ebooks.

                               

                              Here's a link to a cost breakdown for ebooks.  The link was contributed by  JoanieGranola from another thread on the difference between Amazon and B&N pricing but it is appropos to this conversation.

                               

                              The bottom line I took away from this article is that it seems doubtful that ebooks will ever be priced at the level of paperback books and the $9.99 price-point expectation created by Amazon is probably unrealistic unless something in the cost breakdown is way off or changes.