Is there a fair price for an ebook?

Question

What is the cost of an ebook? What criteria should I use to decide a fair price when the price is left up to me. How can I be fair to the seller and to myself?

Several sites offers ebooks, often as bundles, at a low price, or at a price to be chosen by the buyer, usually above a minimum threshold. Examples I have seen include Humble Bundle and similar sites, or Phoenix Pick. Phoenix Pick also sells individual books, many of which are classic (more or less old), but seems to be mostly established authors, with significant price variations.

Then you have sites like Smashwords, more oriented towards indies (independent authors) who self publish. These are usually recent books, with little quality filtering (but is there much with some other publishers). Some books are free, others vary significantly in price, and prices vary in time. Here again, some books are sold for the price the buyer will give.

Thus I often wonder how much I should pay for an ebook, which is fair to the seller and to myself. (The problem is compounded in the case of bundles with the fact that one may be interested in only some books of the bundle.)

Hence I wonder what is the cost of an ebook, independently of the content value, which is the subjective part.

AFAIK, and I did look into some actual figures, most of the price of a paper book goes into its more material aspects. More than 50% is due to printing, storing, transportation, bookstore costs, not to mention the destruction of unsold copies. Hence, the cost of an ebook should not exceed half the paperback cost, without penalizing the author or the publisher. This does not seem to fit what I observe.

There is the cost of digital formating, but from looking at the ebooks available at the Internet Archive, it seem that many have been epub formatted mechanically. The result does leave much room for improvement, but it shows that digital formatting remains a quite tractable task.

Then, I am aware that contents matter. But still, what should be considered a reasonable payment for, say, the equivalent of 300 pages in paperback.

To give a bundle example, Humble Bundle asked for a minimum of $15 for a rather good selection of 20 books, while Phoenix Pick asks a minimum of $7 for a selection of 4 books, a lower limit in both cases.

Answer 1

Since some users want to close this question as off-topic or opinion based, I decided to give my own tentative answer, based on my own thinking since I asked the question, and influenced by some of the comments.

I am well aware of cost issues in publishing, but I have little experience as a customer where e-books are concerned. Having to fix my own price as an e-book customer is a new experience to me, and I was wondering how it is perceived and analyzed by other e-books customers and sellers. This type of pricing is not usual where paper books are concerned.

Is this off-topic on this site? I believe not. The topic page states:

The main focus is on the processes involved in publishing and/or consuming ebooks (and related tools), rather than on the content of ebooks.

Though this does not explicitly include economic aspects, it does not rule them out. A question such as pros and cons of publishing in XYZ format can typically have economic answers.

What is explicitly ruled out is questions about specific books or sites, or discussing specific ebooks or ereader retailers, when it can be shopping or opinion based, which does not rule out technical questions.

My question is about pricing in the general sense, not specific items, and it is an issue that is seriously analyzed by professionals and economists. It is a technical and scientific issue.

Many documents do address this issue, for both traditional paper books and more recently for ebooks.

It is true that many statements are opinion based, because all kinds of people have an opinion to voice, with or without competence to justify it (see Consumers Upset and Confused Over E-Book Pricing). Some people have also an interest in keeping this fuzzy, so that their market is not understood or analyzed too closely, especially by authors and consumers.

My own usual references on books cost are not in English. However, I was able to find rather quickly some new ones on the web, such as Book Cost Analysis – Cost of Physical Book Publishing which does itself use several external references.

This article agrees that about 50% of the printed book cost comes from distribution (10%) and retail (40%), to which one can add around 10% of printing costs. This is reduced to nearly nothing in the case of e-books.

Clearly, ebooks have their own costs, but they are very unlikely to be comparable to what is being saved (some more than 50%) on the material aspects of printed books.

What is more likely is that market behavior changes significantly, because eproducts have no marginal cost (it costs nearly nothing to make extra copies). That is to be taken into account by both the producers and the consumers of ebooks. One aspect of it is that the market is a lot more competitive as more authors can enter it (I am currently reading a very nice ebook that is available only for free).

Another consequence is that some sellers consider that letting the customer fix his own price, possibly within limits, is a good way to do business. Why do they do this? Fixing my own price as a customer, in a way that is fair, also depends on my understanding of the economics and of the economic analysis of the seller. There can be, as always opinion based assessments of it: some people still have strange opinions about well established scientific facts. But this is clearly a matter for scientific and technical analysis.

The major point is that paper books both have fixed costs, independent of the number of books sold, and marginal costs for each (additional) book. They also have a high investment cost in the printing, since it must be done in large numbers to be economically acceptable.

The ebooks business has a lesser up-front investment, because no mass printing is needed, and no marginal costs (the more than 50% in printing, distribution and retail. Once the book exist in epub, mobi, or whaterver, it is essentially free for the publisher (except for advertising possibly, but that is done only when return is expected).

What matters to the publisher is not the number of books sold, but the total income it brings. Any addtional dollar is worth taking, since what is given in exchange no longer costs anything.

That is probably the motivations for open pricing and bundle pricing.

Then, I would think that what matters for the producers of ebooks is not to get a given price for a book or a bundle, but how much of my money I will input in the book production system every month. Giving me additional books, that I will probably not read all, cost them nothing and may increase my inclination to buy.

So my conclusion is that there is no real fair price for each individual buy. Rather one should spend monthly a global amount proportional to one's means and one's amount of reading.

The role of the seller is to induce a consumer behavior that will maximize the total income, rather than the profit per book sold. One role of the consumer is to make sure the producers can make a living (and keep producing), which does imply a level of spending, but not necessarily a high cost per book.

This analysis may not be totally accurate, but it is fairly precise (in a qualitative way) and can be disputed on objective facts and arguments, rather than opinions.

Answer 2

I don't have any substantial answer to your question, but I have been thinking hard about it over the years.

Let me summarize some dynamics of ebook pricing and then talk about "fair price."

Ebook production is a very speculative business. You have no idea whether there even exists an audience for your product.

Pricing for digital goods is elastic. You have very little capital costs (the supply is unlimited), and you can price it at whatever you want.

Marketing and promotion is the most significant cost here, and there's some debate whether money spent on marketing and promotion even is cost-effective.

I wrote elsewhere, (NAGLE’S FIRST LAW OF EBOOK PROMOTION AND DISTRIBUTION: Comparatively speaking, it requires more effort to persuade a reader to invest TIME in an e-book than MONEY).

Big 5 have two reasons they can justify increased marketing expenditures: 1)selling the publishing brand and 2)subsidiary rights (movies, translations, TV shows, etc). For most books though, these potential revenue streams don't exist; therefore there's more shoestring marketing involved.

An indie author could spend a lot of money on promotion and it might work, but it might make little difference. Publishers have more capital to spread the risk.

Should the author be entitled to a fair price for his labors (in much the same way as a fair-trade coffee grower should be entitled to a fair share of the profits)?

The more fundamental question is whether the author should be entitled to ANY profits. In other words, some profits are better than none.

Is the author entitled to a fair contract with a publisher? This is harder to pin down because an author wants the publisher to have a substantial enough stake in revenues to have an incentive to promote the ebook. If a book contract gave an author 1% of royalties, in some cases that could be a good deal if the publisher could bring substantial volume.

What attitude should the author have about promoting a "fair price" for the ebook?

In 2005 (before the Kindle) I wrote this article about ebook pricing:

DRM doesn't really matter for the little guy. It matters mainly for mega media companies who have made significant capital investments (in thousands, if not tens of thousands of dollars) and need to recoup their investment by selling tens of thousands of copies. The pricing strategies of big publishers have pretty much been "anti-chump change." In other words, set a retail price that no one seriously will pay (aside from library institutions) and then gradually lower the price until the merchandise starts moving somewhere (even if it is only to the remainder table). But for the independent content creator (say a popular litblogger who is selling ebook novels on his website) the pricing strategy is different. His strategy is not necessarily to maximize price, but to maximize audience. His strategy is to guess the price point readers would regard as "chump change" (so insubstantial that people used to getting things for free won't be bothered by paying it). This may not be the route to becoming a millionaire, but publishing royalties now aren't much better, and at least the poet or novelist doesn't have to wait forever to convince a publishing company to take a risk selling his work.

http://www.kuro5hin.org/story/2005/5/16/143632/005

The problem here is that Big 5 publishers typically price ebooks at significantly higher levels than indies to pay for the marketing machinery.

But low price is also a significant marketing device! Part of Amazon's genius is giving authors maximum control over how to price their ebooks and just giving them a consistent share of the profits. Therefore, the author can decide for themselves what is fair.

Now that I have put these thoughts down, I have concluded that a "fair price" is whatever an author determines is the best way to receive a consistent stream of revenue over time...

If an author prices a 1000 page novel at 99 cents,then that is a fair price (because the author assumes that the lower price will make you more likely to buy it). The author might be banking that you will buy future ebooks as well.

One final thing. Places like noisetrade (and even Humble Bundle) let the buyer decide. There is some debate about whether this works (I think it works when you already have some visibility), but the advantage is that some people can compensate the author according to their subjective estimation of value. That might result in more revenue, or it might not.

There is no magical formula, and every author and publisher is trying something different. I've learned not to dismiss any publishing or pricing model just because it doesn't resemble mine.

One final thing. Every year on his Smashwords blog Mark Coker reports on what price has been shown to maximize revenue. I think his most recent survey revealed that $3.99 seems to be the most effective price for a new ebook-- and one might argue that empirically, this is the current "fair price" according to prevailing standards.

Answer 3

Ebook pricing is interesting topic and iritating as well.

For example here in Poland, there is like a few percent difference between a paper book and ebook cost. It is all about taxes, which in Poland are really harsh. And people who get used to paper books - it is obvious what would they choose.

And even because ebook "production" costs are way lower than printing a book, you can't see it because of the prices.

I heard that the situation should be better soon but I hear it since two, three years already. And there's nothing going on except talking and talking about it.

The worst thing is that ebook is considered as a service, not a product. Except when you buy ebook on a CD for example, then it is considered as a product and tax value is 12% different (polish example). But hey - it is unluckily still not that much. Because we are still talking about tax cost difference, not 12% of the whole ebook price. Ridiculous.

As I run a blog about electronic way of reading, I see that a lot of people are sceptical to pay for something they can download for free or have it in a paper version. They still keep a distance to buy something that they can't touch.

Somehow, the most popular way people are buying ebooks here are discounts, which can be really huge and you have a possibility to buy a few ebooks in a bundles which you mentioned. We have a polish portal that works like a comparision site which alerts you via e-mail when there is a discount on ebook that you are interested about. On a bigger bookstore events you can get your ebook for even 90% (!) less price (example of a last holiday event of one of polish bookstores - "Napoleon the Great" by Andrew Roberts which is a huge and expensive book was about 90% cheaper).

Going back on taxes topic - I heard that France and Germany made a revolutional change of pricing and made the taxes for ebooks way smaller. But then EU came up with anger that it conflicts the constitution and rules and I heard that it doesn't work the way they managed anymore... That doesn't help as well...

Content? I don't think so. Unless it is for example a historical, huge book which costs in normal way a lot (again the closest "Napoleon the Great" by Andrew Roberts example), the difference in ebook price is much more seen than in case of a 'common' popular (f.e. fantasy, thriller) book/ebook which costs - let's say - a half of it in the beginning.

I don't say that ebooks should be close to be free-to-download. I just say that if you would see for example up to 50% difference between paper version and ebook version, people would be much more interested in convincing themselves to read ebooks. And what comes after - a scale of a piracy would be way lower.

And it wouldn't harm the paper books sale for sure. Because if someone like to have impressive library - they will buy paper books anyway.

Because no matter how - reading counts in every way.

But let's be fair and don't pay for something you can avoid.

And the most important: Less price = higher sales, doesn't it work like that?