On the Economics of e-Books?

way0utwest asks: "I was searching on Amazon today for Lawrence Lessig's 'The Future of Ideas'. While browsing, I noticed that there was also an e-book version of the same title. What was amazing was that the hardcover copy of the book is $21 and the e-book, which is downloaded, is $24! Now I may be just a simple computer programmer, but it seems to me that there is less overall 'cost' involved with the e-book and it should be cheaper. There's very little 'inventory' to store (how much disk space and electricity cost can there be?). There's no risk of having to 'return' the book to the publisher. There's no labor needed to 'ship' me the book. How can it cost more? Is Adobe charging that much for the licensing of the e-book? Now I'm not sold on the idea of e-books, or electronic books in general (though I am looking forward to electronic paper), however it seems that either the industry is not interested in pushing e-books, or Amazon is not really paying attention (though the list price of the hardcover is $30) OR the publishers are trying to overcharge for the e-book to make up for potential piracy. Am I way off base? Is there anther explanation? Anyone?" It's frustrating to find digital media that is priced higher than the corresponding title in dead-tree form. way0utwest makes a good point in that one reason for the increased pricing is due to piracy, but one has to wonder how often e-Books get pirated? Are such prices justified or are eBooks doomed to failure because they have effectively priced themselves out of the market?

Comments

Gross margin?

[xyzzy]

First, Amazon has a set list of discounts, which the hardcover version probably falls into, and the electronic version does not.

Second, Amazon's gross margin on a hardcover version may be higher, so they have more room to discount. For instance, if the suggested list price of the HC is $30, and the electronic is $24, and they both are "sold" to Amazon by the publisher for $20, Amazon has more room to come down on the HC version.

Third, Amazon may just not care all that much!

e-Books and e-Books

[swillden]

When the word "e-Book" is used, everyone automatically thinks of reading books on a computer or PDA screen, probably because that's all most people have seen. There are numerous disadvantages to both approaches, but they all really boil down to "Those devices weren't designed for that." I think many people's preference for paper is just because they haven't seen a really good e-Book.

There are some devices out there that were designed to be electronic book readers, and they are *far* superior to PCs, Laptops and PDAs for this function. IMO, they're far superior to paper books as well in many ways (though not every way).

I have a Rocket e-Book, for example. It's a device that is just slightly larger than a paperback book, with a screen that is almost exactly the size of a paperback page. The screen is a very high resolution LCD with a backlight that can be turned on and off. It has 16MB of flash memory for storage of books and the (tiny) operating system. It connects to a computer via either a cable or infrared to download books, which are written in a simplified version of HTML and then run through a tool that packages and compresses them for download. The e-Book reader also has a high-capacity battery that allows it to run for as much as 18 hours on a charge. The UI is well-designed, with thin progress bar down the side to give you an idea of where in the book you're at, support for different font sizes, different orientations, etc., easy-to-use menus (which you almost never touch, other than to switch books).

This is a superb way to read. What do I like about it, as compared to paper?

• Hands-free reading. I can read while eating, working out, typing or just about any other situation where there's some kind of surface I can set the reader on. I only have to be able to reach out every few minutes to hit the page down button.
• Reading in the dark. The adjustable-intensity backlight means I can read in bed without disturbing my wife.
• Portable reading. I can easily take a dozen novels and a few of technical books with me on a business trip, all in one very compact package. If somehow I run out of reading material, I can store a vast amount of literature on my laptop hard drive. Or, if I really need to, I can always go on-line.
• Reading in wet, dusty, etc. environments. I've discovered that by placing my e-Book in a sealed plastic baggie, I can read in the tub, on the beach or just about anywhere. The screen can be ready easily through the plastic and there's no trouble manipulating the buttons. For that matter, I don't even have to take it out of the baggie to download e-Books to it, since I use IR from my laptop.
• No bookmarks required. The reader always keeps track of where I left off, so normally I can just turn it on and read. If I want, I can add other bookmarks, highlight passages, add marginal notes, etc. which is actually something I *don't* do in paper books, because I like to keep them pristine. With e-Books, I can always strip the markup with a single command.
• Other enhancements. I always keep the free Random House Dictionary loaded in my reader, so whenever I come across a word I don't know I can just poke it with my finger, hit a couple of on-screen menu buttons and a pop up window gives me a definition. Well, that's the theory, anyway. I have a pretty good vocabulary, and the Random House dictionary isn't that great, so usually if I don't know the word the dictionary doesn't either, but that just means I need a better dictionary. The feature is still very nice.

What I don't like:

• Poor selection of e-Books. There's just not that much available. The selection was getting better for a while, but the PC-based e-Book reader software seems to have taken the wind from the sails of devices like the Rocket.
• The charger is too bulky. I don't really have to charge the reader that often, but it does need to be charged enough that I can't take it on a week-long business trip without the charger, and it could be a little smaller, or at least slimmer so that it would fit better in my small laptop case.
• (The subject of the article) Books are TOO expensive. I refuse to pay even the same price for a downloaded book as I do for a paper book. That's actually a funny attitude, I suppose, because I *like* the e-Books better and prefer them, but it just seems wrong to charge more for a purely electronic book, for all the reasons mentioned in the article. There are, however, a number of small publishers that publish electronic versions of new authors' works, for very low prices. The quality is mixed; I've found some really awesome stuff from a couple of sci-fi and fanstasy authors who haven't yet made it but are clearly destined to be big, but I've also run into crap that I deleted after the first three chapters. Most of these books can be purchased and downloaded for less than $3, though.
• Airplane reading. They always make me turn the thing off during takeoffs and landings. OTOH, the compact size of the reader is ideal for cramped airline seats.
• No loaning of books. Most books that you purchase are encrypted for your device (although there's a huge selection of Project Gutenberg texts that have been placed in e-Book format, and they're not encrypted). The DRM technology used is pretty well-done (I do security/cryptography stuff for a living, and I know good from bad), not like the Adobe crap, and breaking it would almost certainly require hardware hacking. So, if I buy a book and I like it, the only way I can give it to you is to loan you my whole reader. There are a number of ways to fix this, though, and some of them have been implemented on newer devices (mine's 3+ years old). Note that if your e-Book gets lost or broken, you can have all of your purchased books recoded for your new device. And, actually, I don't object to loaning being impossible, but if it is that's yet another reason why the price of an e-Book must be *lower* than the paper version.

As you can see, the upsides are more numerous and more compelling than the downsides. The biggest downsides really have more to do with the fact that publishers haven't decided how to approach this e-Book thing. Here's to hoping they get it. soon.

Rocket science

[Graymalkin]

I'm sorry to burst the collective slashdot bubble but the price of books is NOT entirely dependent on the cost of the medium. The actual physical putting of ink on paper and binding and all that jazz is about 17% of the net amount received from a particular publication. In a business you've got alot of costs before you get to the profit. There's the cost of goods which in the case of a book includes editorial and production costs (books need spell checking, formatting, proof reading, ect), design work needs to be done, and then finally the pesky cost of paying the author for their work. Then comes cost of sales which covers advertising and promotion which suprisingly can be fairly expensive for some books (think about all the cardboard displays you see when a novel comes out from a popular writer those aren't free). Then finally overhead which includes the actual cost of operating a business. Then FINALLY you get to profit but then it is still tricky. When you talk percentages you're talking the net of what you actually make off a product, not the list price. If a particular book sells a thousand copies little to no profit is made. Reducing the cost of goods price by making a book electronic saves you a couple bucks but not so much than you can wipe your ass with a hundred dollar bill. Getting the same content on a different medium doesn't make the cost of that content go down. Suprise suprise this is how most content producers do business whether they print books, CDs, or DVDs.