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).
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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