eBook vs. Regular Book Pricing

Facts about ebooks

With the recent news that Amazon is selling more e-books than hardcovers, it looks like e-books are more popular than ever. There’s a general expectation that e-books should be cheaper than traditional books, and The New York Times published a great article last March about the details of pricing e-books in comparison to regular books.

Everyone agrees that it is cheaper to sell an e-book than a traditional hardcover, there’s no printing, shipping or storage costs. What is not as well understood by many is how the different pricing models can affect author, publisher and retailer profits. When comparing e-books to the traditional book pricing model, publishers earn a larger percentage of the e-books sales price, while retailers lose a larger percentage of their profits.

This explains why publishers are willing to embrace e-books, since they are making more on a per e-book basis. Retailers are not completely at a disadvantage, though, because they offset profit loses from selling e-books by not having to pay those storage and shipping costs.

Additionally, the large margin that retailers enjoy with traditional books (approximately 50%) also gave them the ability to provide deep discounts on books from the moment they are published (e.g. the 30% off label that appears on most books at major retailers like Borders or Barnes & Noble).

The Huffington Post recently featured a great infographic from PrintingChoice that helps illustrate this point along with more e-book data.

eBooks vs. Regluar Book Pricing Model

As e-books become more and more mainstream, it will be interesting to see if the e-book publishers and retailers will maintain the $12-14 price level or will be willing to drop it to a lower price point as sales volumes of e-books pick up.

What do you think about e-book pricing? Is it too high, too low or just where it needs to be? Should traditional book prices be lowered as e-books become more popular? Let us know in the comments!

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  • http://amckiereads.wordpress.com Amy

    Hmmm Interesting to see that the author royalties are lower on the e-book, though the publisher profit is higher. That doesn’t make a lot of sense to me. I think the prices are decent, though I admit even at that price I think I should be able to lend it around.

    • http://www.daemonbooks.com Jose @ Daemons

      Excellent observation, Amy, here are some thoughts on that…

      For the author, the royalties shrink in dollars, but it is still about the same percentage of the overall price (approx 15-16%). This makes sense in that the author’s role/workload doesn’t change if the book is in print or e-book form. Unfortunately it means the author makes less in total dollars, but its one of the reasons printed books will never fully go away.

      The publisher’s profit though, rises because the retailer’s profit goes down significantly, though its really a redistribution of the profit along the value chain. The retailer has about 50% of profits under the traditional model and the e-book model gives about 50% of the profits to the publishers. The retailer’s justification for a higher profit (shipping and storage of the books in stores) disappears with e-books (all they’re shipping is bits to a device). The profit retailers do get under ebooks probably goes to cover marketing, bandwidth costs, and some profit for handling. The publisher’s profit rises, but I think the rise is only caused due to retailers not being able to justify a higher piece of the pie. I would also imagine there is a little more work on the publishers level under ebooks based on the learning curve involved with this new area of growth and the technology involved, but its not really enough to justify that large and increase. I would agree that maybe some of this should be passed on to the author.

    • http://amckiereads.wordpress.com Amy

      Ahhh good point! I hadn’t considered that it would be tied to the price. That does make more sense :)

  • Russ

    Great graphics. What most analyses like this overlook is the difference in books sold.

    The number of units sold for ebooks is higher than print, typically, because (1) the price is more affordable; (2) ebooks are never out of stock; (3) ebooks are never out of print; (4) online delivery and easy portability allows instant purchase on a whim; and (4) readers cannot buy the book used (which pays no royalty to the author).

    So even with exactly the numbers you cite, the author may well enjoy a higher aggregate profit. There is also the general benefit of a higher readership level.

    Yet this view emphasizes your main point even further. Given higher volumes and lower costs, there is no justification for publishers earning an increased profit per unit.

    In the eBook era, authors should be renegotiating to raise their cut of profits.

  • GhostWhoWalks

    The whole price model is wrong. Publishers should increase the price on trade and mass market books 25%, and then include the ebook “gratis” as part of the sale. DTB’s are not going anywhere.

  • Chris

    My problem with the ebook pricing is not so much the $12-14 price point in the abstract. What gets me is when the publisher forces the ebook to be sold at $12-14 while the mass market paperback is $7-8. Makes no sense to me. Then they top it off by refusing to permit use of coupons for ebooks that would further cut the price of the paperback and I am ready to throw my ereader across the room. The no coupon rule maybe made sense when the ebooks were held below $10, but why not now that they are comparably priced to physical books? I am sure it has to do with the captive nature of most e-readers, i.e. a kindle owner can only purchase a kindle book through Amazon, so Amazon has no incentive to further cut the price.