E-Customers Creeped Out By Price Creep

There’s a piece on page 1 of today’s Wall Street Journal about e-book sticker shock, another good job by the Journal’s book-beat reporter Jeff Trachtenberg. I’ve been railing about this issue ever since Apple persuaded the six major publishers to disallow any discounting by retailers on e-books. As Mr. Trachtenberg points out, this restriction doesn’t apply to print books, so you have the increasingly common phenomenon of e-editions equaling, and even surpassing, the discounted print edition at retailers like Amazon.com. In at least one instance (emphasis on “at least”), Ken Follett’s doorstop FALL OF GIANTS, the publisher’s e-book price is $18.99 – but the paperback edition can be bought new for $16.50.

Let’s re-emphasize what’s actually going on here. The major players in an industry which faces massive headwinds, book publishing, are deliberately overpricing their most promising and fastest-growing revenue stream, specifically to dampen e-demand and reduce “cannibalization” of “higher-margin” hardcover and trade paperback editions. Mr. Trachtenberg points out that under the “retail model,” by which Amazon was charging $9.99 for new e-bestsellers, it was the retailer who took the loss; the author and publisher still received roughly half of the full hardcover price. But under the current “agency model,” the publisher retains 70% of an e-book price which it alone can set, and the retailer gets the rest. No more “loss leaders,” and essentially no more $9.99 bestsellers.

But look closer at the Follett. Dutton’s suggested retail price for this 985-page tome in hardcover is $36. Under the “retail model,” it collected $18 per e-copy, just as it did for a hardcover, and Amazon could give it away if they liked. Of course, that’s no way to run a business: “How do we do it? Volume!” What Amazon was trying to do was to jump-start a nonexistent e-book market and worry about coaxing it into profitability later; they’ve always been forward-thinking in that way. But under the “agency model,” Dutton gets 70% of $18.99, the highest price I’ve encountered for a commercial trade e-book, which is $13.30 per e-copy, and all retailers receive the same $5.70 (I rounded both numbers to the next penny). $13.30 — and remember, this is the absolute Beluga of e-pricing — is $4.70 less than $18. But who’s counting?

My point exactly.

Now let’s consider Apple’s motives. It’s a wonderful company, but it’s no less ruthless just because its antagonizer-in-chief has passed away. When Apple was the “first mover” in digital music, it used the leverage of its huge installed iPod base to oppose the big record labels by dampening the retail price from $15-$16 for a whole CD to 99 cents for an individual song (boy, that price rings a bell. And it’s increased since then, too). But in e-books, Apple found itself, uncharacteristically, in Amazon’s wake (Steve Jobs had infamously sniffed at the Kindle’s launch: “People don’t read any more”). So now what it had to do was eliminate Amazon’s price advantage – and, amazingly, in a reversal of its effect on the music business, it succeeded in propping up the retail price of e-books! Justice is now looking into whether preventing discounting constitutes illegal collusion among the major publishers (as are European authorities), and I don’t know much about the law so can’t speculate, but it does sound fishy, and it protects retailers (guaranteed profit) at the expense of consumers (higher prices).

I have some friends in the book biz who’ve read my previous musings and have some pretty good arguments that nobody seems to be considering. For example, it’s an age-old fact that for big bestselling authors like Mr. Follett, or Stephen King or John Grisham or Danielle Steel or Nora Roberts, publishers pay way too much up front as an “advance (against earned royalties),” otherwise known as a “guarantee.” First, it’s necessary because everybody else is waving huge paychecks around, and you have to be there to compete. Second, a major author can be a tentpole for the rest of your list: if you, Ms. Retailer, want the new Grisham, you’ll have to hear about all the other great stuff we have. Third, there’s the intangible prestige factor, as authors and agents want to be with the house that publishes XXX. But these millions represent a nonrefundable sum which has to “earn out” before a book realizes its true potential for perennial profit down the road. (I’ve heard that Mr. King has a deal which plays down the guarantee in favor of a larger participation on the back end, like major movie stars sometimes do.) A surprise hit like THE HELP is very profitable immediately, but big bestsellers from well-known authors always start out deep in the red, and I’d love to know what Kathryn Stockett’s agent has in mind for her next contract.

That means you have to scramble for every penny you can find during the hot new-release period with the ads and the DAILY SHOW spots, very much like movie studios do. My question is: why aren’t the big publishers doing so?

Mr. Trachtenberg quotes a publisher as saying people are realizing the advantages of e-books and are willing to pay a premium for them. I’ve heard that too from some consumers. But $18.99? (P.S.: Book prices never go anywhere but up.) He shares more ominous quotes from others. A reader says it’s hard to justify a $10-$15 e-book when you can pick up a used print copy for $2 or $3 on Amazon. If that was the Ken Follett, the author and publisher made no money on the used-copy resale, when they could have received $18 for a “retail-priced” e-book. Also, the ability to self-publish and shop online is hitting the major publishers from the low end. As an industry consultant says, some e-buyers may opt for “five-star-reviewed” self-published mysteries or romances which are going for $2.99 or $3.99. Plus, if it’s digital it’s stealable, and remember that millions of otherwise law-abiding kids believed downloading from Napster was justifiable because CD prices were too high.

I think it’s fair to say that most e-reading devices have been purchased since “agency pricing” went into effect about two years ago, so possibly it’s only the early adopters like me who recoil against $12.99 and $14.99 books, or e-editions which cost more than paperbacks. Most new e-reader owners may think that’s the going rate you pay for not having to lug the physical book around, being able to read it on damn near every mobile device there is, etc. Yet as a “veteran,” I’d still be willing to wait, even a whole year, so the publishers have time to sell every hardcover they possibly can, if they’d only then give me a fairly-priced e-edition so I could fairly pay the author and publisher instead of ignoring them.

As it is, I have a list of backlist books that I’ll never buy in print editions; I just want to read them once. Every month or so I check on them, and every so often a publisher will experiment with a temporary lower price (this is why the publishers will probably survive any accusation of price-fixing; each one is free to charge whatever it likes). Either I will get the price I want, or the publisher will lose a sale which I would guess is sorely needed. It’s as simple as that.

EDIT, 2/7/12: I have tried Dave Slusher’s program BuyItAtThatPrice, discussed in the comments section. It works like a charm, and the email that alerts you when the price of a book (and probably anything else on Amazon, but I’ve only used it to buy e-books) has been lowered to your satisfaction also includes a link directly back to the item’s Amazon page, so it’s delightfully easy to use. I heartily recommend it. Thanks, Dave.

Advertisements

27 Responses to E-Customers Creeped Out By Price Creep

  1. Jenny says:

    Couldn’t agree more that e-book prices are way too high. Publishers may be trying to stave off cannibalization, but it is the proverbial finger in the dike. What they are doing in the meantime is what the record labels did–pissing off their customers. E-books should cost less. E-books should never come close to print book prices. I won’t buy an e-book which costs more than I feel it is worth. With library rental coming on, publishers should be paying attention to their pricing strategy and using the tremendous momentum of hardward sales to create a vibrant explosive market in e-book content not stand with their sphincters tight wishing for the old days.

  2. John says:

    The trouble with your argument is that it is not clear to me that the market for books sales is elastic with respect to price in the same way as music. That is, it is not clear that a reduction in price will result in a corresponding or greater increase in sales volume. Why do I say this? Because it takes much longer to “consume” a book. Even if books were free, I would be hard pressed to read more than my present 15-18 per year. Price is not really the constraint on the volume of my reading.

    • Tom Dupree says:

      You make a valid point: in a strict business sense, books may not be as “essential” to today’s mass market as are music, video games (though they take *far longer* to “consume”), and so on. But judging from the time you say you spend reading, I infer that you’re not a book fanatic, thus you’re less of an influence on the dollars-and-sense industry. IOW, you’re more of a typical book consumer — in fact, you probably read *more* books than most others do! — but the industry doesn’t depend on you for a living.

      Over the last 25 years, and not counting manuscripts I was evaluating or editing, I read [past tense] an average of a book a week. (Yep, Nerdly P. Dupree wrote them all down!) So by definition I’m thrice as engaged as you are — but believe me, there are other readers who lap *both of us* around the track! I maintain that $18.99 will scare some of these folks away from what should by all rights be a rewarding impulse purchase — or at least a purchase that isn’t *discouraged* by the seller. In other words, there needs to be a clear e-quivalent of “waiting for the paperback.” Otherwise, get ready for Occupy Random House.

      • John says:

        Tom,
        You raise an interesting question: What is the profile of a typical book reader? Or in other words, how does the book reading market breakdown in terms of age, genre preference, # of books read, etc. If you know of a source of this information, I would be very interested.

  3. Tom Dupree says:

    Identifying the “typical book buyer” is a tough job, because the industry is so fragmented into categories and genres, and because it has never cared much for raw numbers. The New York Times bestseller list, the most influential of them all, has for years depended on reporting forms filled out by individual bookstores and key mass merchandisers, not from the cash register. Veteran publishing reps rue the day that independent bookstores began using personal computers, because they could confront an author’s upcoming novel with accurate sales from hisser’s last: “b.s.” was forever retired as a sales weapon. Nielsen BookScan, which *does* use scanned sales figures, was founded only ten years ago. (An early pronouncement was that Harry Potter sells frickin trainloads of books.)

    We know that certain genres skew toward certain genders: see this piece

    https://tomdup.wordpress.com/2010/05/09/chix-n-boox/

    for some stereotyping. A die-hard romance fan would laugh at my one-a-week average: she and her pals tear through Harlequin paperbacks like so much popcorn, yet those books never make the Times list (what they make instead is money, and lots of it). We know that women tend to read fiction more than men do, except that military fiction like Tom Clancy is still mostly a lug’s game. Mysteries? It depends. There are “hard-boiled” novels and “cozies.” “Hard” or highly technical science fiction tips toward men, while fantasy – which outsells sf these days – is increasingly written and consumed by women. And paranormal romance? That’s a huge audience – white-hot in movies right now – but it’s still mostly women. When you get one that brings several circles into the Venn diagram, like THE HELP or HARRY POTTER (which adds young readers to the mix), you have the ultimate marketing proposition: everybody wants it and only you have it. But everybody wanting *any* particular book is so rare that “typicality” is basically meaningless — other than, of course, how often one reads a book of any kind. A 2007 Ipsos poll revealed that Americans claimed to have read a median of four books in the last year (that is, half read more and half read fewer), and one-fourth of those polled said they’d read none at all. Excluding these non-readers, the median number claimed was still only seven. What can we take from this? That a small proportion of the population drives the whole of the book industry.

  4. GinBerlin says:

    Clearly, since I read 10-14 books a month and a bunch of magazines (the Economist alone replaces several books). I have read that, as is usual in human statistics, 10% of readers read more tha 90% of books.
    Yes, e-prices have had me delaying the purchase of books. Sometimes so long that I forget that I wanted them until reminded ages later. It has also forced me to continue buying books in paper that I would prefer to purchase electronically and often in used paper, which gives nothing to author or publisher. That’s because I would prefer to buy the majority of my genre reading in e-form, rather than accumulating more clutter. I am willing to give up value for that (the ability to easily access books on a shelf, to loan author runs to friends, to share with anyone other than my spouse, to re-sell or donate my used books). What I am not willing to do is to buy my e-books at a cost higher than the same book’s availability in paper format (new).
    I have had my Kindle since long before agency pricing and I find it a pity that I still need tobuy so many books dead tree. I highly recommend Baen Books, well-priced and DRM free and Smashword, ditto. In addition, all books older than 1927 should be accessed through Guttenberg as .mobi (and other format) free downloads.

    • Tom Dupree says:

      Amazon also offers many Kindle-formatted public domain books for $0.00: Kindle convenience meets Gutenberg price.

      • GinBerlin says:

        I put all the .mobi’s on my Kindle: I prefer to keep as many of my books non-DRMed as possible. The .mobi files are saved on computer and then uploaded to the Kindle through my USB-cord, which also charges it. This way I don’t need to worry about using the books on other devices (the Kindle .azw or.tpz DRM model takes the free books from Guttenberg, throws DRM on them, and then one is constrained to not use the books on any other reader than a specific Amazon one. It’s even an issue if one owns more than one Kindle as Amazon encrypts it to a specific device ID). You should check out Mobileread forums as well.

        • Tom Dupree says:

          All true, but the Kindle file, unlike the .mobi, is always available across all my media through the Kindle app. I can download anything in my Kindle cloud/”library” using any device and sync with any other. We use Kindle on a desktop, mobile phones (one iOS, one Android), an iPad, and, of course, a Kindle itself (in fact, two of them. I dispute your statement that Amazon restricts a purchase to just one Kindle). So the Kindle file, despite DRM, gives us more flexibility, not less. Note that this portability is possible because all these devices are tethered to the same Amazon account, so our entire Kindle library is available on any device, anytime. It would only get complicated if we both tried to read the same book at the same time — just as it would with a physical book.

          • Jasper Janssen says:

            While it’s true that a Kindle-ecosystem purchase can be downloaded to many or infinite Kindle devices/apps/etc, that isn’t the same file. Each Kindle book file is encrypted to that particular device and will not work on any other device — but Amazon will give you files for that book encrypted to any particular device linked to your account.

            In the hypothetical case that Amazon goes away suddenly (early adopters in the ebook market know about this phenomenon intimately, even if it is unlikely in Amazon’s case specifically), your azw files are only useful until your device craps out. Much like your purchased Rocket eBook files.

            Given the fact that stripping Amazon’s DRM is trivial, though, I’m not all that bothered.

  5. debooker says:

    I agree that price fixing of some sort is going on. I refuse to pay the about the same price for an e-book as a print book. That’s idiotic, considering there is no printing cost, little in the way of warehousing and shipping costs. I have long maintained that Apple is its own monopoly, just as Microsoft has been accused of being.

  6. Blue Tyson says:

    You should see Hachette’s Australian pricing. Heaps of books more than 18.99

    Ken MacLeod’s new book is 26.04.

    See Teleread – Hachette is Australian for ripoff for example

  7. I agree completely. I should never have to pay more for a book than I pay for a McDonalds value meal. What’s a book worth? Surely less than a ticket to the movies! Authors rate themselves far to highly when they price their books at higher than a cost of a pack of 20 cigarettes or a shot of Jack Daniels at the bar.

    • Tom Dupree says:

      I agree with your sentiment but not your pricing comparisons. I rate many, many (but not all!) authors way higher than a shot of Jack.

    • John says:

      I understand and agree that a book must provide a value to its reader that is consistent with its price but I am not sure I understand why a book should cost less than a ticket to the movies.

      On an hourly basis, most authors earn less than the person at the McDonald’s drive-thru window that hands you your value meal.

      Frankly if you value writing so little, I suggest you read all the books that are available to you for free or from the authors willing to sell their work for $2.99. Clearly you will get what you are willing to pay. Sorry to be so blunt but picking on authors is not the right place to attack the book business IMHO.

    • Jasper Janssen says:

      I assume that mr Blarkon here is being sarcastic — he certainly sounds it.

      He’s also attacking a straw man with that sarcasm — Nobody said books, e- or otherwise, had to be cheap. What we were discussing whether e-books should be cheaper, the same, or more expensive as paper versions of the same books.

      I would argue it’s pretty clear that e-books need to be significantly cheaper than paper books. I would say that, with libraries, secondhand bookstores, loans to friends, book donations, and everything else, the average number of readers per paper copy of a non-runaway-bestseller is probably in the 2-3 range. Runaway bestsellers a bit less, because everyone already has a copy by the time things end up in secondhand.

      E-books, on the other hand, even with the ridiculously limited loan to friends features on Nook and Kindle, the library programs, the ability to have multiple readers assigned to an account, etc, are probably still pretty darn close to 1 reader per bought copy. Which means to get price parity the ebook needs to be prices somewhere around .5-.66 of the paper price.

      Baen’s $4 for books in mmpb or $6 for books in hb seems about right to me.

  8. Tom, if I can plug a site I recently built for exactly the case you describe – Kindle price too high and my memory too scattered to allow me to remember to return:

    http://www.buyitatthatprice.com/

    Register, enter an Amazon Kindle book and the price you would be willing to pay and you’ll get an email when/if the price reaches that point. Just today, I got an email about this book:

    http://www.buyitatthatprice.com/price_history/summary/B004BA57W6

    That let me know the book had gone on a special sale before even the authors knew.

    Turns out there are multiple sites that do about the same thing. I never knew about any of the others before I built this one or I might not have bothered. If you try it and like it or have suggestions, let me know.

    Dave

  9. I love ebooks, and the way I approach pricing is very simple.

    I won’t pay more than $4.99 for an ebook, period.

    This means I mostly buy from self-published authors and the publishers that have reasonable pricing, such as Angry Robot.

    If I want a book, be it in print or ebook format, and it’s not available for the price I’m willing to pay, then I’ll just buy it in print format used.

    That supports the seller of the book, but not the author or the publisher. If enough of that goes on, perhaps the publishers will get the message they need to set more realistic prices instead of artificially inflating the prices. And, perhaps, more authors will start self-publishing themselves.

  10. G says:

    I think it’s really silly to compare a book to a meal. Even what I consider a “popcorn” book is worth more than a McDonald’s meal to me.
    But I won’t pay more for an e-book than the physical book, with its increased rights (of sale, donation, passing to a friend) costs. So when I can buy a paperback for 6.99 and the e-book is 9-14.99, I am vastly annoyed.
    I am still also saying that when one buys a HardCover, one should be able to tag an e-book to it for an extra 1.99: that’s the only way I can read these huge novels anymore- they weigh too much!

    • Tom Dupree says:

      Most studio blockbusters use that model, with “digital copies” bundled into a higher-priced DVD package.

      • Jasper Janssen says:

        Of course, the “Digital Copy” is mostly a scam — it either eats into the bitrate of the DVD, or it’s on a separate disc (god, wasteful), it’s not that much easier or quicker than ripping the DVD and downconverting it yourself into a DRM-free file, and who wants to view feature length movies on their phone anyway?

        I’ve mostly been buying blu-ray discs, and while the DVD copy they often include is great, if only to have when you go somewhere without a blu-ray player or to have something to downconvert from easily, I’ve never yet used the Digital Copy.

        An ebook version included with a hardcover, on the other hand, is actual value. Datapoint: My Sybex IT training books (hardcover or TPB size) have included a CD that contains among other things a no-DRM PDF version of the book for years.

        • Tom Dupree says:

          Digital copies look just fine on larger screens — iPads, for example. That said, I would never pay extra for a “digital copy edition” unless I was positive I was actually going to use the darn thing. My point was only that the film business has no problem bundling a little “added value” alongside a home video blockbuster.

          Ripping and converting to a no-DRM file without the rightsholder’s permission is stealing. Nobody, and especially nobody who works in a copyright business, should ever do that unless you’re prepared to let others steal *your* stuff.

  11. pinkpelican says:

    As a reader, I’m willing to pay a range of prices for e-books. For most genre fiction, my limit is usually maxed out at 7.99, which is equivalent to mass market paperback prices. I will occasionally pay more, but ONLY if it is a beloved writer & I can’t wait to read it, AND it is a new release. I LOVE it when I find a good book at substantially less, but I read a lot and I’m used to mmpb prices, so they don’t offend me for e-books.

    I will sometimes pay higher prices for non-fiction e-books, but only if the savings are significant over the paper versions, and only if I REALLY want it.

    One thing that infuriates me is when a backlist e-book is sold at a ridiculously high price. I was looking at a favorite romance author’s backlist, & the e-book I wanted was priced at 15.99. This was a book written in the 90’s. I guarantee you it earned out in paper (it ran through several editions & this writer is a NYT repeat bestseller), years & years ago. This is one of her best-selling backlist titles. I am positive that every penny of revenue this e-book brings in is pure profit (minus the royalty to the author). And on top of all of that, every other backlist e-book title from this author was 7.99 or less. I checked, & the e-book was released through the author’s traditional publisher, who set the price.

    I fired an email off to the publisher protesting the obnoxious pricing on this book. I got back a patronizing form letter explaining “how things work” — things I actually addressed in my letter. Thus confirming that the big publisher doesn’t care enough about it’s customers to LISTEN to us.

    Still love the author. Still refuse to download that book at that obnoxious price. AND I now think that publishing company is made of “fail” & think of them only with contempt. Way to build a brand & customer loyalty there, big stupid publishing company.

    • Jasper Janssen says:

      Have you by any chance posted your letter & the reply on a blog somewhere or something? Would be interested in seeing it.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: