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It doesn’t matter what e-books cost to make

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Book publishers are trying hard to defend the pricing of e-books — perhaps in part because they’ve been accused by the Justice Department of rigging prices to keep them artificially high — by arguing that it costs a lot more than most people think to produce the electronic version of a book. But as author Chuck Wendig notes, what e-books cost to manufacture or distribute is irrelevant to everyone but the publishers themselves. All that matters is what book consumers are willing to pay for an e-book — and the same principle applies for any form of digital content.

Hearing the complaints of book buyers must be frustrating for publishers, because they actually have a pretty good case for why e-books cost what they do. Although many see the price of old-fashioned things like paper and printing presses and trucks to ship them as a big cost for printed books, publishers like Penguin point out that the main costs involve advance payments to authors, marketing and other support expenses — things that also apply to e-books. As Wendig puts it:

[P]roducing e-books costs more than you think. You’re paying for editors and cover design and, of course, for the book itself, and the mechanics of putting those things into a container are not the bulk of a book’s cost. Hence, e-books are always going to be close to their physical counterparts in cost.

But as the author also notes, consumers don’t really care what a publisher’s costs are, nor are they likely to pay more simply because a publisher argues that their content is really valuable. In the same way, movie-goers don’t really care how many millions of dollars a movie studio spent on their latest blockbuster — that has no bearing on whether they want to see it or not. It is the perceived value of the e-book that matters, not the cost — and there are some good reasons why e-book consumers might want to pay less.

Financial Times columnist John Gapper pointed out in a comment on Twitter that consumers often use justifications about how expensive content is to defend their right to download it without paying. And many e-book consumers probably do under-estimate what it costs to manufacture or distribute an e-book. At the same time, however, it doesn’t take an economist to figure out that publishers are determined not to let cheaper e-book prices (driven largely by Amazon) cannibalize their print business, which is why they cut the “agency pricing” deal with Apple that landed them in antitrust-lawsuit territory.

All that matters for readers is perceived value

Wendig also makes a good point about what you get when you “buy” an e-book versus a printed book. In many ways, what you are doing is renting the content rather than actually acquiring it, since you can’t sell it when you are finished with it, and most of the time you are prevented from even lending it to someone else to read — and in extreme cases, providers like Amazon can actually delete the book from your device remotely without your permission. So e-books may be convenient in ways that printed books aren’t, but they are also less functional.

An e-book is a digital good. Ephemeral and intangible. Sometimes we don’t even have access to the e-book itself in the form of a file — in the case of Amazon, we’re just “renting” the e-book the same way you rent Taco Bell food. You bought it. It’s inside your device. But if Amazon decides you don’t need it anymore, one snap of the wizard’s fingers and the e-books are poof, gone.

Even apart from that argument, however, there’s no realistic connection between what a content producer’s costs are and what people will pay. As journalism professor Jeff Jarvis noted some time ago, in reference to newspaper paywalls and subscription plans: “No one cares what you spent. Arguing that news costs a lot is irrelevant to the market.” And as David Pakman of NYC-based VC firm Venrock has pointed out, when it comes to digital goods, the marginal cost of producing another copy is effectively zero.

In the end, all that matters is what readers want to pay — and that isn’t always going to jibe with existing business models. During a panel discussion I was on recently, the editor-in-chief of a newspaper said he asked a businessman and loyal supporter of the paper what he would be willing to pay for a subscription plan, and the number was 50-percent lower than what the paper had planned to charge. Is that fair, given how much that content costs to produce? Perhaps not. But in the end, it doesn’t matter.

As I’ve argued before — including during a recent debate with my PaidContent colleague Laura Hazard Owen about the wisdom of agency pricing — I think publishers are shooting themselves in the foot by sticking rigidly to models that were appropriate for a different world, when “windowed” releases and regional restrictions made sense. There’s at least some evidence to show that if prices drop low enough, sales can climb by orders of magnitude. Why not allow e-book prices to float and then see where they end up?

Post and thumbnail images courtesy of Flickr users Aitor Calero and Marcus Hansson

56 Responses to “It doesn’t matter what e-books cost to make”

  1. ebooks I pay @amazon are often full of format, spelling errors. images/tables/charts? crappy! So, yeah, ebooks should be cheaper!

  2. Gary Young

    I more or less believe the publishers when they say that it costs _them_ about the same amount to produce an e-book as a paper book. This, however, ignores the elephant in the room, which is the cost of selling the book to the reader.
    For paper books, there are thousands of bricks and mortar stores, paying property tax and business tax and light and heat and water, and employing tens of thousands of employees. As I understand it, this drives a 100% markup on the publisher’s price to the bookseller, so that the public pays the bokseller twice as much as the bookseller pays the publisher.
    For e-books there are a small number of on-line bookstores. Each of these operations will have a few programmers and other people, a server, a web site address, an office in an industrial area, and only one instance of property and income tax. This is where I think that vast savings can be made, and passed on to the ebook reader.
    Strangely, the effect of eliminating the paper book distribution system costs are never mentioned in the publishers price comparisons.
    I would like any one of the publishers to just sell the paper books and the e-books to at the same price per unit, and let Amazon sell the units to the consumers at whatever price Amazon needs to charge to cover Amazon’s costs.
    I am completely uninterested in keeping the e-book price high to protect the traditional bricks and mortar bookstore distribution system, and that is what I believe is happening today.

  3. It’s incredible how naive a lot of people are about the publishing industry, particularly book publishing. For example, people think that printing a book is the biggest part of the cost. Well, take a 200-page book with just text and a print run of 5,000. The cost of printing that book will be around $2 per copy. Add about $1.50 if you want harcover. I know because I’ve been paying the printing bills for over 30 years. The real costs are people costs, which is true in any industry that relies on humans to produce their products.

    But I know this sentiment will be ignored as people talk about things with which they have no experience. That’s human nature I suppose. I know nothing about running a restaurant, but I’m happy to complain if my mashed potatoes aren’t hot enough.

    But here’s the dirty little secret that hasn’t been expressed in this discussion. Amazon gives the pubisher 70% of the selling price of an ebook book if the publisher agrees to price the book at $9.99 or less. If a publisher decides to price the ebook at $12.99, for example, Amazon cuts the percentage to 35%. So, let’s say we price a print book at $18.95 and, because we want to pass the savings of printing onto the buyer of an ebook, we want to price the ebook at $16.95. Because of Amazon’s policy, we will net less than if we priced it at $9.99.

    Why this bizarre Amazon policy? If I were a believer in conspiracies, I might say that Jeff Bezos has come to the conclusion that all books should be priced under $10 and he is trying his best to make that happen. I might even be tempted to think that he wants to take over the publishing industry entirely. Any way you look at it, he is doing great harm to an industry that has done humankind a great service over hundreds of years.

    • So, by pricing a book higher than people want to pay, you make less money. Perhaps two and two can be put together. Price the books lower and you’ll make more money.

      • The problem is that people talk about books as if they are all the same. Some books only have a potential audience of a few thousand. We pubished a book, for example, titled the Mobile Marketing Handbook. We hope we sell 5,000 copies in print and maybe another 2,000 as an ebook. Therefore we have to cover all our editorial and production costs over those 7,000 copies, so the selling price has to reflect that reality.

        Now we also pubished a book called Boardwalk Empire that, by some amazing luck, was picked up by HBO and made into a TV series, which naturally stimulated sales into the tens of thousands. In that instance we could keep our selling price much lower and still cover our costs and, hopefully, make a profit.

        It’s the same in any manufacturing sort of enterprise. If Toyota could only sell a hundred Corollas, they would have to charge a million dollars for each one of them. Because they can spread the cost of design and tooling over tens of thousands of cars, they can charge 18K and make a profit.

    • The publishing industry exists because it makes money. Any part of it that cannot figure out a way to make money in a digital world is going to have a difficult next decade, and if they don’t figure out how to do that it could easily be their last decade. I love reading (and writing), but I have trouble swallowing the idea that publishers are a public service industry.

    • Joe A

      The bizarre policy is probably in place to gain greater market share with a profit-“neutral” pricing scheme. Amazon doesn’t make its money off of books alone, so it can afford to drop prices in one market to get people to buy browse their other markets where they might make more of a profit.

      I found it interesting that you essentially give us the reasoning to have us argue for a cheaper ebook price. With all other things (editing, proofing, marketing) being equal, the only reason why a paper book (be it hardcover or paperback) is more expensive is because of the publishing cost. So, effectively, Mr. Ingram’s article is right in its insistence that ebooks are priced higher than they should be, and makes Amazon’s “bizarre” policy actually look like it naturally makes 20% just in mark-up.

  4. This is an interesting article and it touches on some of the issues affecting ebook pricing. Obviously, it costs less to produce and distribute an ebook than a printed book. But the time and effort required to write, edit, and proof the book is the same regardless of the format. I think that’s something a lot of readers overlook.

  5. I’ve had similar dialogue with the UK newspaper the Guardian. Its 50% cheaper for me to buy the physical paper and share it amongst my household ( 3 persons) then each of us take a digital paid for subscription for our iPads. Digital publishers (newspapers and ebooks) need to work out a business model that allows sharing amongst named individuals and their devices.

  6. A couple of thoughts in response to various people.

    Jeff Kibuule is quite right to mention that once a book has paid for itself and become backlist, a publisher can discount it more heavily than a printed book. This might suggest a model where new titles are priced at (eg) 70% of the paperback price and older titles are discounted.

    But I think people do forget how few copies most books sell. Many sell less than a thousand. Most sell less than five thousand. This means that for the average book to “pay for itself” is not that easy – some commenters above are being a bit casual about dismissing the work that is done by a publisher to prepare books for print (and yes some ebooks are shoddily done, but that doesn’t mean they all are). Sure, the writer gives you a digital file, but all that saves is the cost of a typist. Beyond that you have to set the book for print, prepare it for various formats, edit it, design it, cover any image costs, proofread it, maybe get it read by a lawyer if there is anything dodgy in it – all genuine costs even before you take into account overheads (which need to be split across all books) and, if you are really lucky, a bit of profit. As a writer I am also pretty grateful to my publisher for the money they spend on marketing, though of course, some are better than others in this respect.

    Only a pretty successful ebook will get past the point at which it is paying for itself and a business model where you have to slash your profit on your most successful titles isn’t a great way forwards.

    So while I know ebooks are currently overpriced (and bear in mind in the UK we also have VAT to add to the price) I think you should avoid assuming that many books are effectively “free” to produce.

    (Another interesting argument is whether cheaper ebooks will lead to much higher sales across the industry. I think this is possible, but if it happens it will be an evolution rather than an overnight leap).

  7. Kevin W. McCarthy

    Thoughtful article Matthew, especially with a guy whose last name happens to be the same as the largest print book distributor on the planet. I love the irony.

    Recently, I put my book, The On-Purpose Person, on kindle free for 5 days. Over 32,500 souls downloaded it for free. The book ranked as #1 in non-fiction, business, leadership, self-help, and more. As both the author and publisher I was delighted to have the On-Purpose® message shared so broadly.

    I decided to drop the price from $9.99 to $3 and the book continues to hold the #1 spot for business and leadership. The sowing and reaping principle is at work here!

    The publishing model isn’t so much broken as it is shifting. Ala Porter’s Marketing Myopia, publishers may need to become more talent managers than publishing houses. Think more along the lines of concert promoters in the music business. They identify talent, cultivate it, promote it, distribute it, and profit from it. We authors are generally lousy at self-promotion because we would sooner be thinking and writing. Having a creative team come along side us would be a blessing.

    eBoooks, therefore, become a promotional tool to engage the reader into a deeper relationship in which the price of the book has little to do with costs and more to do with the opportunity for the publisher and talent.

    Thanks for the provocation in your article.

    Be On-Purpose!
    Kevin W. McCarthy

  8. In terms of what consumers are willing to pay, here is where it gets bad for publishers: ebooks have enabled direct publishing by authors. As a result, price points of free to 3.99 are common.

    I do value the services of publishers, and I’m willing to pay more for vetted and edited books. However, many of these free books are publisher quality, or even backlist reprints of formerly published books. As a result, there is significant price pressure on books.

  9. Disrael

    Eventually, the market will determine the price. Recently, we’ve seen Amazon establish a price for bestsellers and newly released electronic “hard cover” books at a point considerably below the online discounted price of a physical book–in fact, at a price that results in a loss for every e-book sold. They sell these “lost leaders” to support both their dominant market position and sales of Kindle hardware. That is not market-based pricing. The publishers have reacted by attempting an agency model where they enforce a retail price for e-books, based on their traditional cost structure and profit expectations. This is also not market-based pricing.

    So, where will it end? If you look at online pricing for music, the discounted retail price for top selling CD’s is at, or even below, the price for MP3 or iTune downloads of those same albums. The music market has settled the price, and it is a price based on the consumers’ perception of value. E-book pricing, and hard copy pricing, will eventually find their own state of equilibrium as e-retailers, publishers and consumers wrestle with volume, profit, cost structures and value. There is likely going to be even more (additional) pressure on physical book pricing than e-books down the road, with all of the associated cost and inventory management implications, based on the continued migration to e-books and changing perceptions of value. We may well see the prices for both, at discounted levels for the top sellers at leaset, fall in the $11.99 to $14.99 range. At those prices, everyone can find a way to be satisfied.

  10. Albin

    From the number of formatting errors I’m finding in the Amazon books I’ve bought, it’s pretty clear the ebooks are essentially rehashes of the electronic text produced for the hardcopies. It would be much more expensive to reformat a hard cover book to paperback than redo either to an ebook in their current crude state – all you get is hyperlinking of TOC and maybe subject index. Moreover, the publishers are saving a ton on wasted hard copy production runs of unsuccessful books (i.e. the great majority of books) that get shipped, discount binned, and shipped back.

  11. Part of the consumers’ perceptions of value has been fostered by decades of publishers pricing books based on format. they always charge more for hardback than trade paperback and more for trade paper than for mass market. Why are they surprised now that people expect ebooks to be radically cheaper?

  12. Peter

    Prices are set by supply and demand, nothing else.

    The problem with ebooks is that the supply is either 0 or infinity, depending on how you look at it.

  13. Awesome article. So I was thinking, maybe we should have some ads in the e-books or some sponsored books. Just imagine reading a book and having a small ad in the bottom about another book or about the same subject you are reading!!
    I think this can be another way to make money for both publishers and Amazon, and also users can benift from a lower price.

  14. John Hoggard

    I have two friends. Both published authors. One did it the traditional way: got an agent, got a two book deal. The other believed in his product enough to pay for a proper copy-edit, paid a professional model to do his cover and a graphic designer to design it, created a publishing company and published it electronically himself with a small number of paperback copies to sign and use as promotion (you can’t sign a Kindle!)

    So, my traditionally published friend got a tiny advance and zero help from marketing dept of publisher. She’s sent to do talks at the insistence of her publishers but pays her own way to get to and stay at these events. Her publisher has put it on Kindle but it’s expensive compared to many of her established and indie contemporaries. She has no control over the pricing or the promotions (of which there have been none). She’s doing OK, but it’s been very hard work.

    My indie publishing friend, studies the Amazon Kindle market closely, adjusts his pricing, works out when best to offer the book for free to get it riding high in the charts again, so people see those 4 and 5 star reviews and keep buying once its no longer free. In six months he’s made back £1500 of his £3000 own cash outlay.

    I still dream of being published but I see how lazy traditional publishers are about ebook pricing and strategy and I’m convinced that, for me, the traditional way is no longer the way forward.

    And finally, the first time Amazon deletes a book I’ve paid for, is when I start ripping them DRM-free to another device/format.

  15. Mathew, what does “Why not allow e-book prices to float” mean? If you’re a seller, what do you charge for your books, using that principle?

  16. These arguments grow dim in my mind. We’ve already seen this argument applied to both movies and music. The cost of physical distribution is tiny in comparison to the cost of the artistic work itself. In looking at these types of physical distribution, you must remember that these methods have had decades, if not a century at least to become as efficient and cost-effective as possible. The same cannot be said of eBooks, which, are still relatively quite new.

    This isn’t some myth of the industry, the bulk of the overhead is there regardless of format. Moreover as you add more and more formats the cost of doing business goes up. Thus making eBooks actually costs the publisher more money to manufacture. For the same reason a book published in hard cover and paperback is more expensive because the formats are dissimilar and that must be accounted for in editing and typesetting.

    The real problem here is that Amazon has fooled many people into believing that the price of an eBook was $9.99 or less.

    Time and time again when I discuss this with people they forget that Amazon was, and is selling eBooks at a loss to gain market share. That is Amazon was paying the publishers their suggested MSRP, and then Amazon was marking that down to $9.99 or below. Once Amazon owned the marketplace for eBooks, they could then tell the publishers to lower their prices or leave.

    For all that’s written on the internet about this topic few seem to remember that Amazon did this. While *some* cry about the rising cost of eBooks, the real cost has not changed, its simply that Amazon would not be able to forcibly constrain market pricing and consumer mindset such that people would balk at an eBook costing over $9.99.

    Strangely while eBook purchasing did well with the Amazon model, it really didn’t explode until we had the agency model in place. This could simply be timing, but when you want to note what the market will bear for a product, you should note that the market did indeed have no trouble paying the actual cost of the product in question. Those who complain about the product being too pricey are the same people who make the physical versus digital argument and refuse to notice that Amazon has manipulated them into thinking that the *real* price is lower.

    • Joe A

      If I already have the book in digital format, upon reception from the author or editor, what possible overhead cost is there? The storage of the data could possibly construed as an overhead cost, but with USB thumb drives at $1/GB, I highly doubt that this is a transferable cost to the consumer that would account for, in a fair number of cases, higher prices than a paper-bound edition.

      The problem is with the current payment model that the publsiher’s insist on using, when the market is moving more and more toward a digital market. This was the RIAA’s problem for the better part of two decades before they realized how much of a goldmine the digital system is over the cost of producing physical media.

      The cost of a paperback in the US is $7.99, on average, per book. So if the cost of a digital edition is 9.99, you can only draw one of two conclusions. 1) The price is $2 higher because there is a loss of revenue, to the publisher, by not having greater sales of the hardcover editions, which is where the publisher usually makes it money back. Or 2) The price is not in keeping with the cost to distribute, and thus not in keeping with the price that is perceived to be the proper price for a consumer to buy it.

      It gets even worse when you consider the audiobook format and places such as Audible, who, for $15/month gives me not one…but TWO audiobooks. This now includes the, in most cases, 20-80 hours of reading by either a single reader or multiple readers. And I have a fully downloaded copy of the audio book and not just a licensed “rental” through Amazon. What is interesting is that while the Audible cost to the consumer is $7.50/book…the physical media for an audiobook is usually $19.99-49.99/book. And the cost of pressing CD’s is much cheaper than procuring the services of a bookbinder, let alone the physical weight of the books in transporting versus the lack of weight for an audiobook on CD.

      What is obviously the case is that the Book Publishing industry is still using an outdated system, much like the RIAA did for a good 10-20 years, and the MPAA is still using. Until they change it, than they can expect to continue to have problems dealing with the consumer’s angst over the price to produce a digital copy.

      • Hey Joe,

        To answer your question, the editor would give the publisher the edited copy. This is not the edition that you receive in an eBook format. The typesetter would have to typeset the book for one or more possible eBook formats, which may, or may not differ from the paperback typeset. You then have to take that typeset and format it for ePub or whatever other book formats you are hoping to sell in, and furthermore you must check the type in any format to make sure the product is displaying correctly.

        Depending on the number of online sellers you plan on using you may require more staff to interact through those channels.

        In regards to your comment concerning audiobooks. It is my understanding that they are a niche market in the bookstores themselves and as such they sell at a premium. Moreover Audible is a subscription service, and currently they give you one credit a month for $14.95. You may have a older membership that doesn’t have the restrictions that newer members have, but it is $14.95 per audiobook now and they show you the pricing of audiobooks which is about 150% of what they offer from what I’ve seen.

        I think you confuse what the RIAA and the MPAA are. Perhaps some research into what those groups actually do may be helpful, but I can assure you they have little to do with the business models of individual companies.

  17. Donnie Berkholz

    The absurdity, and what really drives people nuts, is when the ebooks are *more* expensive than the paper books! This happens all the time on Amazon, browse around for 5 minutes and I’m sure you can find multiple examples. I can understand if they’re only $1-$2 cheaper, or even equal, but more expensive? That’s just idiocy on the part of the publishers.

  18. Ryan Steiner

    It seems like the major liability for the publishing industry right now is the high (relative to perceived value of the product) salary of the folks involved in the making of books.

    If I were connected in the publishing industry, I think I would find a talented writer, make a great book and work my butt off at building a brand around the writer. Set pricing to meet the needs of my audience, and grow accordingly (that part is important).

    Later, take on a couple more writers who have a lot in common, leave that as one publishing brand, and move on. This keeps staffing costs low and allows me to focus on meeting the wants and needs of my audience. Really, it allows me to be what publishers really can’t afford to be: flexible.

  19. Len Feldman

    Unless the cost of printing, binding, packaging, warehousing and shipping print books, along with the cost of accepting, inspecting, re-warehousing and reshipping or pulping returns is virtually zero, the cost of eBooks is not “close to their physical counterparts.” That’s why consumers believe that the price of eBooks should be lower than the price of print–they truly believe that the cost is lower, and they’re right. In short, it’s not that customers don’t care about the production cost–they do care, and they expect bits to be cheaper than atoms.

    • Mathew,

      You say “this value is ultimately determined by the market for that work, not by the artist.”

      This is a fundamental misunderstanding of economics. The value (or price) is set by the interaction between seller and buyer. The seller sets their price, the buyer decides what they will pay, if the two coincide then a deal can be done, if not then a deal can’t be done.

      Your statement above looks to me like a dressed-up version of the childish stuff one finds on internet discussions about pricing of books/movies/music where people argue that “I only pirate stuff because it is too expensive” or “Why should I pay $xx for something that only cost $x to produce” etc etc. The answer is, if you don’t agree with the price the seller sets, then don’t buy it.

      In the medium term I agree that ebooks are probably going to come down in price because of consumers’ price perceptions (eg sellers will only sell a lot of units when they lower their price). But it is ludicrous to suggest that either of the buyer or seller is in complete control of an economic transaction and “value”. The buyer always has the option of not buying if they think the price set is too high. That doesn’t mean the seller is obliged to cut the price in order to meet that particular buyer’s perceptions of value.

      • But you are talking as though there is a single buyer, or a uniform mass of buyers with the same level of demand. In fact there are a lot of separate buyers with a sliding scale of demand, in other words some are prepared to pay more than others. As you lower price you sell more – that’s the basic theory of a supply and demand curve.

        So the choice facing publishers is how far to lower price in order to increase sales and profitability. This doesn’t necessarily mean lowering them to minimal levels. Your argument would suggest that for any given good or service, the best path is to sell at minimal prices, which simply isn’t true.

        What does disturb me is when I see people (not you) making the argument that since a seller/publisher is charging more than a particular individual wants to pay, that somehow justifies that individual if they choose to it without payment.

    • True, but commissioning, development/structural editing, copy-editing, proofreading, design, setting, digitizing and marketing costs still have to be borne by the publisher, though. And if an e-book is part of a broader publishing programme (including print) then it’s still going to have to take an overhead hit, like any other product on the books. Any discussion about e-book pricing can’t ignore these factors. Bits are cheaper than atoms, but you can’t measure these costs in terms of either. To understand how much cheaper an e-book “should be” you have to know what percentage of the bottom line the “atoms” stuff makes up for the publisher in question. If the business model means that it’s a small percentage, the impact of e-publishing on the margin won’t necessarily be that high. Many consumers aren’t aware of this.

  20. Thank you for this. There are SO many ebooks that I have passed on purchasing because I didn’t like the price/ don’t agree with the price fixing. I don’t download books because I don’t want to steal someone’s hard work, so I go without. I work a lot, and I have a busy life, so as nice as it would be to be able to buy books and then have time to read them, I don’t have time to read traditional media or the ability to lug it around with me. However, the Kindle app on my phone is my BFF.

  21. Joe A

    I think one of the more compelling arguments against the publisher’s “model” of pricing for e-books, is the independent writer who simply sells their book on vendors such as Amazon, without any advance payment. They have to be driving the publishers crazy with this. Especially when, in some cases, these folks are making 100’s of thousands of dollars doing so. They subvert the publisher’s “logic” of how much it actually costs to make the book. There is also the flawed understanding that the advance of money to the author is somehow included in the actual production of the book. What most people understand, when associating costs to production costs, is what does it actually cost to take the book from manuscript form (which is always sent in digital form, nowadays, with some exceptions) to e-book form. In most cases, the answer is…very little. And this is why people are not as interested in paying for digital content that hasn’t even so much as gone through a format shift (from paper to digital).

    Everyone understands that there is much more that goes into initially making the book, because people understand that books don’t appear out of thin air and require a great deal of time from the author involved in creating the book. But what is being asserted by the publisher’s is THEIR cost in producing the book, once it reaches them, and getting it to market. Aside from the actual production cost, what exactly is entailed in the creation of the book? I can understand a marginal marketing cost but nothing like 10% of the cost of purchasing the book. There is so little marketing done for books and the vast majority of that is done by the vendor, the author, and the fans.

    The publishing industry is simply delusional to even consider that the cost of production between a paper book and a digital book are similar.

  22. Droidfan

    Wait just a minute. No paper, ink, binding, cover material, warehousing cost and distribution cost….just to name the biggies. And it cost almost as much to do an e-book as paper book. BUUUULLLLLLLL SHIT. Editor….paid once. Cover designer….paid once.

    If a book sells just a few hundred e-books…EH. The truth is…that if publishers are worth their salt they can put more books out…increasing the possibility of successful editions.

  23. Jim Kukral

    Meanwhile… I’m just going to keep writing my own books and pricing them however I wish and selling them. All these arguments/fights are about control, plain and simple. The publishing industry had control for 300 years, and now they don’t, or won’t anymore as soon as everyone realizes they aren’t needed.

    • Lucie H

      Gosh, now you’re the expert – I wonder how your rights sales are doing?! Do you go to all the key book fair to do business? Rights is where the money can be really made on books : )

  24. This is such a contentious issue in the arts because non creative folks, who have never followed the the course of developing an artist whether it be a writer , a musician, a painter , a filmmaker or any creative entity that has been colonized by the current thought processes of technocrats, that non-creative person places zero value on the writer or artist who created the content in the first place! with the mentality of , “All music, art, books, and films, should be for free because i can down load it so easily from the internet”. I dont think people who write code and create software applications believe their creativity should be for free!!! the writer is the most important part of the e-book market and the second most important part of the market is the publisher. an e-book is no different than a transistor radio or cassette recorder. when those technologies become obsolete and if the power grid fails, people will be forced to pick up a hard back or paper back book AND READ IT. i use the term colonization because Apple did not create ipods to sell music, ipods were created to sell ipods, plain and simple and Apple devalued content in order to sell those ipods. the introduction of the ipod has been the primary reason CD sales across the globe has decreased proportionally. so, with the introduction of the electronic book devices comes the same misery and attacks on the writers and artist. squeezing out the creatives such as writers and publishers by the technology industry placing more value on those who created the technology and no value on those who created the content, which would be the books themselves. Any recording artist who has achieved success never has done so alone. there has always been a team of experienced professionals behind them, a promotion machine of individuals who drive the project to success and global visibility.the technocrats seem to place no value upon the artist who creates the content so the majority of the profit will be made by the company who created the device, the e-book device, the ipod the smart phone. my question is ; What will happen when the tech community finishes cataloguing all the previously created content that exists in the world? when that sector finishes chopping up the great literary works and music and putting it into 1’s and 0’s then loading it up on an electronic device? if the artist is exterminated by starving them out then what will folks be able to load up on to their devices? nothing new will be created. what a miserable world that would be. E-books do cost money to create in terms of marketing and promotion. the writer still needs to promote the book, adverts need to be purchased and the book needs to be promoted in order to be read. how can people convince themselves otherwise? just as musicians need to go on tour to sell CD’s or songs on itunes or spotifyed because PROMOTION COSTS MONEY and IT REQUIRES HUMANS TO CREATE THE CONTENT (SAID WRITER OR ARTIST) AND MORE HUMANS TO PUBLISH THE CONTENT AND MORE HUMANS TO CREATE THE PROMOTION CAMPAIGN!!! Lady Gaga was created by a the famous hip-hop promotion team. even in politics, to become an elected official, requires a great promotion team to get behind the candidate. SEO costs money to get traffic to a website… why is this even an issue? Because it very well may be the ‘puffing’ of the technology creators promotion machine pushing this idea through advertisements that art and writing are inconsequential to the electronic devices they are trying to sell to the public! its disgusting that so many people have allowed themselves to be convinced by such shameless ipod, e-book, smartphone promotion campaigns which depict the artists and writers as nonentities to their technology. As a daughter to a studio artist, my father was a painter who physically got up every morning and painted paintings to pay the rent and put food on the table. My father passed away in 2008. Never more will there be his artistic view point expressed in this world, what paintings and drawings he created in his life time have already been created, so what currently exists that’s it. that is why it is important for people to stop believing the technology hype of device selling and start realizing that the content which is loaded on to the device is what matters. to quote the famous rappers Public Enemy, ‘Don’t believe the hype!”

    • Thanks for the passionate comment — but I don’t think anyone is arguing that artistic work doesn’t have value. The problem is that in a business sense, this value is ultimately determined by the market for that work, not by the artist.

      • Hey folks this author is a proponent of all content being free, just remember that Matt thinks that piracy isn’t really stealing. This is borne out in the drool that he constantly harps on. When you read his articles, you need to understand that he likes the free internet, the way it once was.. Napster, Kazaa and all that stuff.

        Matt wants to live in a free, or at the most… a 99 cent internet. These articles are the closest thing to BS that Gigaom puts out.

    • Sean Carr

      It’s amazing how musicians were never exploited or had their work cheapened by the music business — the folks who cared about the hardware that contained the music much more than the content itself — before MP3 players were invented. Oh, what a golden age that was.

  25. Steve K

    The upshot of all this is that it really is a free market. Publishers place e-books and printed copies on the market at some price. And consumers vote with their dollars. While everyone would like things to be cheaper, trying to legislate it because someone who doesn’t understand the industry thinks it should be cheaper, is not the way to go.
    A similar thing exists in music. It costs a lot of money to make a professional sounding record. Both in people and facilities. And while Guitar Center would like you to think that you can do professional recordings in your garage like Dave Grohl said he did at the Grammys, the reality is that he has hundreds of thousands of dollars of equipment in his garage and employed many expensive professionals to do it. Pressing physical CDs is but a fraction of those costs. Just because it appears that downloading bits doesn’t cost anything (everyone thinks servers and bandwidth are similarly free) it doesn’t mean that soft copies are going to be a fraction of physical ones.
    I’ve converted to e-books just to save on the piles of paper books that were collecting around the house, and the demise of used bookstores you used to be able to recycle them through. Along with better selection than you can find at the local brick and mortar. It’s really frustrating to read one of a series and not be able to find the others. Or it’s a trilogy and all you can find are the first and third.
    The only problem that comes up is when I read something that I think someone else in the family might enjoy and I can’t just hand them the book and say “check it out”.

      • Terrence Martineau

        why?? in many ways eBooks are a superior product because of the convenience they provide.. you can view them on any number of devices.. they don’t take up physical space or weigh anything so you can carry 100 or 1000s of them with you at a time and choose which one you want to read at any given time.. likewise you don’t need a huge physical storage space in you home to store them etc.. etc..

        it’s a free market.. and like you said buyers will set the price in the end.. publisher will set a price and buyer will either think it’s fair and buy or not.. the price to produce a physical but is negligible in comparison to the price to pay authors, editors, artist for cover art, advertising, layout people etc.. etc.. all the large cost are still there for eBook and on top of those they need people to put the books into several formats for inclusion in the various stores out there.. and like I’ve said earlier eBook for many are a MORE compelling and convenient product so why should they cost just as much a the physical copy or even more..

        it DOESN’T matter what eBooks cost to make.. the going rate will be whatever value buyer place on them.. let’s let the market decide what that is.. the cost to produce eBooks is irrelevant and negligible just like it is for physical books..

  26. ghughbodell

    The basic premise of the article is that readers will in the end determine how much they are willing to pay.

    I really hope that is correct and I also hope that Legacy Publishers continue to think $8.99 to $12.99 is a good price for their product.

    That way Independents like my wife and I can offer and sell good content at $2.99 every day. I have recently tried a real bargain, offering my first three novels in a single e-book at $4.99.

    It’s working!

    Random house, et al, I think you should raise your prices!!!!

  27. Jeff Kibuule

    All it means is that once a book as “paid for itself”, a publisher can more heavily discount it to generate sales without ever really going into the red. Physical books cost money to produce, e-books do not.