A theory on e-book pricing

As far as I understand it, the price of the physical book is a trivial portion of the cost to produce a book. The difference in price between hardcover and paperback may have misled us in this regard, but what you’re paying for with a hardcover is traditionally earlier access to the book, with greater durability as a kind of bonus. Though I do not know the details, it seems obvious that the price differential between an e-book and a physical book is far greater than the price of the physical artifact — indeed, it’s almost certainly much greater than the cost of the physical artifact plus storage and shipping costs.

What accounts for the price differential, then? Part of the problem is surely that almost no one would buy e-books if they were the same price as a paperback. Yet I propose that the real root cause is Amazon, which has already aggressively pushed down physical book prices and irrevocably damaged the profitability of traditional publishers and bookstores. They’ve already racheted down what people are willing to pay for books, and e-books give them a pretext to cut the price even further.

Hence my theory: e-books, at their current price levels, are loss-leaders meant to ensure Amazon’s long-term control over publishing. My worry, though, is not so much that they’ll raise prices once they get monopoly power, but rather that they simply won’t do the stuff that traditional publishers have done — that they’re ushering in a world of universal self-publishing, with no infrastructure for providing editing and other services to authors who are not able to pay for such services out of pocket.

5 thoughts on “A theory on e-book pricing

  1. My worry is that the self-publishers just won’t bother with editing — and that no one else will either. Even today, the online magazines rather obviously do not. If I see one more article speculating about the fate of the ‘Tartars’…

  2. I always assumed that part of it is they need to compete with piracy, like music does. The price has to be low enough that “free+guilt” isn’t the better deal for a significant amount of the market.

    Also Wikipedia says that “Tartar” is an accepted alternate spelling, and cites Encyclopedia Brittanica for it. Which isn’t to say that much editing goes on in online work.

  3. I think the ongoing Amazon vs. Apple e-book pricing lawsuit battle pretty much proves your points here. The courts are basically giving Amazon monopoly power by allowing them to underprice e-books. They are using loss-leader pricing to destroy the market, crowd out any competitors, and presumably as a bid to make the Kindle the most desirable tablet. Apple tried to get publishers to move to an agency model of pricing, which, among other things, would mean that publishers had the right to set price minimums. Amazon sued Apple for collusion and won. Apple just filed an appeal. It will be interesting to see how this turns out.

    Who knows how trustworthy this Politico article is, but some people think this comes down to the fact that Amazon spends millions on lobbying and Apple does not: http://www.politico.com/story/2013/07/apple-finds-dc-is-tough-without-friends-94948.html

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