Why do e-books cost so much?
Here鈥檚 a question I got聽on our聽Facebook page. Maybe you鈥檝e wondered about it too.
Why do your聽Kindle books聽cost more than a paperback copy? The Kindle version of聽Life or Debt聽on Amazon costs $9.73, but they鈥檙e selling the聽paperback聽for as little as $6.00. Since e-books should聽cost much less to produce, why do they cost more to buy? This seems unfair, especially when you鈥檙e writing about how to save money to pay off debt.
- Ted
I got a very similar question a little more than a year ago, published in a post called "Why Are E-Books So Expensive?"聽I鈥檓 going to answer it again, however, because since then things have happened that shed more light on this subject.
As I said in my earlier post,聽I have no control over聽the price of聽my books. When you work with a traditional publisher (mine is聽Simon & Schuster), you have no input 鈥� they set the price.
Whoever establishes the price, however, you鈥檝e still got to wonder鈥�
Why are e-books so expensive?
The first time I attempted to answer this question, I quoted聽an called "Why Do eBooks Cost So Much? (A Publisher鈥檚 Perspective)"聽by Michael Hyatt, CEO of聽Thomas Nelson Publishers. Here鈥檚 how he justified the high cost of聽e-books鈥�
鈥hysical manufacturing and distribution expenses cost less than you think. Some people assume that these two items represent the bulk of a book鈥檚 costs. They don鈥檛. Together, they account for about 12 percent of a physical book鈥檚 retail price. So eliminating these costs doesn鈥檛 do much to reduce the overall cost structure.
Even if this is accurate, shouldn鈥檛 the price of e-books be 12 percent lower than physical copies? No, he insists, because there are other costs associated exclusively with e-books, like formatting them to fit e-readers. He goes on to say鈥�
鈥淭he elimination of manufacturing and distribution costs are being offset by retail price reductions and the additional costs I have outlined. The good news is that we are making about the same margins, regardless of whether we sell the book in physical form or digital.鈥�
E-books cost as much to produce as hardcopy? Hogwash.
Despite this publisher鈥檚 claim, the reason e-books are as expensive, or even more expensive, than traditional books isn鈥檛 because they cost as much to produce and distribute. Anyone聽who produces anything digital that was formerly physical聽knows digital is cheaper.聽A website is cheaper than a newspaper. A digital version of a video costs less to deliver than a tape. An e-book costs less than a physical book. Anyone suggesting聽otherwise, like this publishing executive, probably has a dog in the fight.
If you want a single answer to why e-books are more expensive, it鈥檚 in the last few words聽of this publishing CEO鈥檚 explanation:聽鈥漈he good news is, we are making about the same margins, regardless of whether we sell the book in physical form or digital.鈥�
The lion鈥檚 share of the retail price of a book, whether in digital or physical form, is going to the publisher. And what鈥檚 good news for聽him is bad news for you. Want cheaper books?聽Eliminate the fattest fingers in the pie 鈥� the publisher鈥檚.
Publisher price-fixing?
Another reason聽e-book prices might聽have聽remained stubbornly high: According to聽a lawsuit by the Justice Department, their prices聽were fixed聽by five major publishers, along with a聽major distributor,聽Apple. From聽a recent DOJ press release鈥�
The five publishers and Apple were unhappy that competition聽among e-book sellers had reduced e-book prices and the retail profit margins of the book sellers to levels they thought were too low. To address these concerns, the department said the companies worked together to enter into contracts that eliminated price competition among bookstores selling e-books, substantially increasing prices paid by consumers. Before the companies began their conspiracy, retailers regularly sold e-book versions of new releases and bestsellers for, as described by one of the publisher鈥檚 CEO, the 鈥渨retched $9.99 price point.鈥� As a聽result of the conspiracy, consumers were typically forced to pay $12.99,聽$14.99, or more for the most sought-after e-books, the department said.
As I write this, four of the five publishers sued by the Justice Department have settled. The remaining defendants are Apple and Macmillan: They鈥檙e scheduled to go to trial in June.
My e-books are about to聽get cheaper. Here鈥檚 why:
As with the music industry, when it comes to publishing, the power has never been聽with the artist,聽or the consumer. It鈥檚 been with the distributor. In the case of music, the label. In the case of books, the publisher. But thanks to the Internet, that鈥檚 changing now.
When I wrote聽Life or Debt聽three years ago,聽there was no way around publishers: If you wanted distribution, you went to a major publisher. It was the only way into bookstores or onto Amazon.
A short three years later, however, the landscape has changed.聽The publishing industry 鈥� the gatekeeper between writers and readers 鈥� is collapsing under its own weight. I no longer need to surrender聽up to 90 percent of the price of a book聽to the publisher. Today I can self-publish an e-book, put it on Amazon,聽spread the word on the Web, and price it however I like.
And I鈥檓 about to do exactly that. We recently partnered with other voices in the personal finance space to聽create聽books about money.聽We鈥檙e going to publish them ourselves, promote them ourselves, and price them so they鈥檙e more affordable.
While you聽wait,聽avoid paying for books entirely by reading versions you鈥檝e already paid for with your tax dollars. They鈥檙e waiting for you at the library. Check out my post,聽.
Stacy Johnson is the founder and editor-in-chief of聽, a consumer/personal finance TV news feature that airs in about 80 cities as well as around the Web. This column first appeared in Money Talks News.
