As an author, I expect to be adequately compensated for my creative efforts in writing a book.

Fact is, most authors don't make much money from their writing and have to work at a "real job" to earn a living. Luckily, I have been able to earn a decent income in the last few years, in part because I independently publish 3 of my books.

I also believe that a publisher should be adequately compensated for bringing a book to market, whether it is a hardcover, a paperback, or an e-book.

The problem in today's North American society is that the majority of people have a sense of entitlement to getting e-books for free (along with a lot of other stuff that they don't want to work for or pay for). This is another variation of the world-owes-me-a-living syndrome that Robert Ringer talked about in his bestselling book Looking Out for Number."

Interestingly, people who have this sense of entitlement or suffer from the world-owes-me-a-living syndrome never create anything valuable for society themselves. That is why they have to settle for being imprisoned in corporations working for a paycheck.

I know that I have created something valuable for society because my books have sold over 625,000 copies worldwide. Results don't lie, in other words.

I have 3 books that have sold over 100,000 copies. Keep in mind that over 95 percent of books sell less than 5,000 copies in their lifetime.

But I refuse to let have these international bestsellers come out in e-book format if I don't get adequate compensation.

Sure, a lot of authors will settle for peanuts if they don't think that can get anything more, but I won't.


As an independent publisher, I have not rushed to get my books sold in e-book form.

Perhaps I will eventually release a few e-books for sale but only if I am adequately cwompensated and assured that these e-books will not be acquired for free by the people who suffer from the orld-owes-me-a-living syndrome.

In the same vein, I fully support the stand that Macmillan Publishing took against Amazon in not allowing Amazon to sell its books for less that $9.95 or whatever the price was.

It's too bad that more publishers and writers are not willing to take the same stand and say, "It you are not going to pay adequately for the e-book, then we don't make it available as an e-book."

Ernie J. Zelinski
Author of "How to Retire Happy, Wild, and Free"
(Over 110,000 copies sold and published in 9 languages)
and "The Joy of Not Working"
(Over 225,000 copies sold and published in 17 languages)

http://www.thejoyofnotworking.com
http://www.how-to-retire-happy.com
http://www.retirement-cafe.com/Retirement-Plann...
http://www.UnrealJob.com

No one is arguing it costs money to publish e-books. And, well, if they are they're delusional. What readers are arguing about is why are they paying so much for an ebook that has already been edited, formatted, etc., when compared to a wood pulp novel they can't even loan it to friends even though it's just a bunch of electrons?

Seriously, publishers had better get it together. Readers simply aren't going for this at all. Nor shoudl they.

hello im 14 years old and this may sound weird but im writing a book i know you probably think i dont know what im getting myself into but ive been doing so much research and i know that it takes alot of hard work and effort and im prepared to put everything i got into this book and maybe one day my book will be on the shelves

hi im 14 years old and this may sound weird but im trying to write a book its extremely hard and it takes alot of time but i think if i really put everything i got into this book i can really make somthing of it im doing alot of research and maybe one day you all will see my book on the shelves

There seems to be something fundamental missing in this discussion. If you take the price of a book and break it down to say X% production, Y% publishing costs, that totally depends on how many you sell. The publishing costs ($100,000 used an example) are a one-time cost, they do not repeat with every book.

After you have sold a certain number of books, your publishing costs are recovered, and the portion of the sale that goes to the publisher is pure profit. For physical books, there are still ongoing costs to be recovered with each book (pulping, printing, binding, transportation, storage, etc.). With e-books, none of those ongoing costs exist (or are so small as to be inconsequential).

As a result, your sales on e-books convert to paying royalties and making profit, whereas that never happens in the paper book lifecycle.

Perhaps to avoid killing the Hardcover market, e-book prices should reflect a discount off of hard cover until the soft cover is out, then should reduce accordingly to reflect a discount off of soft cover. Early adopters are likely to be willing to pay a premium (as is the case with so many other things).

I for one didn't think about how much of the cost is in the pre-production for a lack of better term. my frustration is not the lack of significant discounts it is in the relative lack of offerings. Why aren't more book published in ebook format as well as in physical format?

Hi, My favourite author is Robert rankin and his latest book (necrophenia) costs £7.99 in paperback.... to buy it as an ebook however I would have to pay £14.67! Are there any extra costs to produce ebooks or are the publishers just being plain greedy in this case?

The publishers are greedy and in this case want their cut for marketing the book as well as editing and the like. They think that the Ebook should cost more because it is essentially in their minds a hard cover book and NOT a soft cover book, like the price point should be.

I've been reading a lot about e-books and the Nook, both as an avid reader and aspiring author. I also work on web sites for a living so the slow print publishing world seems really outdated to me.

The fact that the publishing industry takes such a big chunk of price of a book really seems like an argument against it. If so much of the cost of a book pays for execs and marketing campaigns, then why have a publishing industry at all? The model seems very similar to the music, film and newspaper industries - all middlemen and gatekeepers that are being rendered irrelevant by the internet.

Without such high costs, books would be cheaper for readers and writers would make more money. For example, see this blog post by J.A. Konrath detailing what he makes off self-published e-books http://jakonrath.blogspot.com/2009/10/kindle-nu...

> And here’s why e-book readers should care: The choice of novels to download will only be as good as the writers
> and publishers make them to be. If you want a three dollar book, we’re going to put in the effort that equals that
> three dollars. You’ll get what you pay for. (Beverley BevenFlorez)

I understand where you're coming from and sympathize. But it sounds like you're assuming you're only going to make one sale. I assume that even with a printed book you're counting on selling at least 1000 copies. If the price is cut in half, and your share correspondingly cut to $1.50, but you sell 2000 copies, your income will be the same. And what if your share is cut to a quarter of that but sales go up tenfold?

No guarantee that this is going to happen, but likewise no guarantee that it won't.

publishers are still being greedy pricing them that high, they need to move into the digital age. It's the exact same thing record companies did when people stopped buying so many cds because they were grossly overpriced and they could easily pirate music. Pretty soon we will see a lot of pirated books on the internet. Get with the fucking times...

Hey, very nice blog!! I have bookmarked your site and have taken the feeds also.

I think anything over the cost of a MMP is a little ridiculous. Why would I want the e-book if I can go to the store and spend $7.99 for a MMP. Or wait until it comes out in a MMP edition and purchase it for less than $8.

I understand there is a long involved process, however, the cost difference between a MMP and a Hardcover is obscene as is the cost that some publishers expect people to pay an electronic edition.

I agree that they shouldn't be free.

Much as the music industry didn't catch on to eMusic, I think the traditional publishers haven't yet caught on to eBooks.

Big business thinks about their bottom line, not what represents a value for the consumer. Since I can't loan, sell, or donate an eBook, it has less value to me than a paperback. The savings, if any, to the publisher don't concern me at all.

On the other hand, as a micro-publisher, I have discovered that eBooks represent a tremendous opportunity. For several months I have been giving away Book I of a trilogy as a FREE eBook download. Giving away an eBook costs me nothing, and it's a great way to introduce readers to my work.

I make about $1 less on an eBook than I make on a trade paperback, but I'm convinced that, far from stealing sales, the eBooks increase sales of the paperback.

And I should add that the retail price of all my eBooks is $9.99, $6 less than the retail price of the paperbacks.

Catherine M. Wilson
http://www.whenwomenwerewarriors.com/
http://www.catherine-m-wilson.com/

With all due respects, the suggestion that e-books should only cost $2 less than hardcover books strikes me as "Hollywood accounting", which is to say that it makes no sense whatsoever. Can you really argue that a $26 hardcover should cost $24 dollars as an e-book and $12 as a trade paperback? You also seem to be assuming that while the cost of paper/printing/binding may be $2, that transportation, warehousing and other inventory costs are zero.

It may be comfortable to play these games with numbers, but it strikes me as symptomatic of the real problems within your industry. Making it easy for readers to get access to books in whatever form is good for both writers and publishers. It is past time that the publsihers wake up.

Machine Embroideries from www.bestmachineembroiderydesigns.blogspot.com: Fantasy etc. In our site. Quality embroidery designs, AFFILIATE program. With us advantageously, new designs every week.

bradley robb is lots smarter than bob miller.

yet bob miller runs the publishing company.

ironic, isn't it? :+)

-bowerbird

@quux -
When you buy a CD or DVD, you can make many more than just one copy. Like it or not, people are used to that now. You can watch TV commercial-free on the computer whenever you want. You can watch movies at home on online. Have you seen the recent figures about sky-high ticket sales for films? Apparently, the film industry is not being hurt.

With the advent of the kindle, if the publishers want to continue to sell hardbacks over the long term, this kind of thinking would be helpful to them.

Yeah, the music industry used to fear that, too, except now they realize that they have to move on. It takes less than 5 minutes to rip a CD to a computer. When the deed's done, the owner can certainly sell that CD. It's fact that it will happen. Music isn't dying because the mp3 was invented. The record companies are having to restructure. It's not a bad thing. It's just different.

If you own a kindle, there's no option to "rip" your book to the kindle. That makes it much less likely for me to buy a hardcover. I want to be able to read on my kindle also. Given the time that I hang on to my hardcovers, and the number of times I reread them, the industry isn't losing money on me. What they *are* losing is my patience.

What this move would be is savvy. You're catering to the newer buyers, the electronic buyers, and AND the die-hard book lovers. The person who bought the hardcover paid 2-3 times the amount of the kindle ebook price. They still only have 2 copies (one hardcover, one kindle), and the money made from that is still more than selling 2 ebooks or 3 paperbacks. Even if the customer does give the hardcover away, where's the problem? The publisher has made its hardcover profit, and the HC book is out there collecting new fans for the author. Hell, charge me two bucks EXTRA for the special edition hardcover that comes with the download link. I want both!

There's plenty of waste and fat that could be trimmed in publishing. There's absolutely zero reason for old techniques, time-wasters, and some of those inflated costs. There's every reason to try to gain the next generation of customers.

Things are changing. Time for publishing to catch up.

I really wish the current policy of returns didn't exist, since that would alleviate some of the finance woes. That's where the bookseller needs to catch up with the times. That type of policy isn't sustainable (both in terms of our forests and as a business model).

I stand by my suggestion. It's working for other media moving into the 21st century. Books should give it a go, too.

@project gutenberg - Thanks! :D So happy now...

Beverly BevenFlorez's comments and questions are the only ones in this conversation that are pertinent to me as a bookseller. The value of a book lies in the content and quality of the writing. Creative writers and engaged readers ultimately determine what a book is worth, not "the market" or "the consumer." I hope authors like Beverly, and the few literary publishers committed to bringing good literature to readers who care enough to pay for it, continue to keep that principle foremost in the work they do. Otherwise, what's the point?

As an aside for Jenna, Charlotte Bronte's works are available at Project Gutenberg.

http://www.gutenberg.org/etext/1260

Hm, speaking as an author, my experience of the publishing process was that it was hugely wasteful. It was a tremendous amount of trouble for everyone involved, because we were all using different tools, and because we didn't entirely agree on our goals. Every time I got back edits, whether they were technical edits from technical reviewers, or copyedits, it was a long and painful process to go through the edits. And because the data kept getting transferred between applications, frequently edits would get lost. I couldn't easily revert incorrect changes. When the time came to look at page proofs, the many mistakes that were made in the copy editing process were impossible to correct.

As for marketing, most of the marketing was marketing we (the authors - I had a co-author) did ourselves. True, the publisher got the book on the shelf, and that was probably no small feat, but I have trouble seeing this as a substantial outlay. I don't mean to minimize the work that was done - I know for a fact that the people the publisher employed did more work on the book in terms of hours than I or my co-author. But the main impression I got coming out of the process was how much waste there was.

And of course, after all that, I didn't get much money for the book, although the fact that I wrote it certainly has been good for my career. But the bottom line is that I am quite sure that the costs involved in producing a book could be reduced substantially with no loss of quality, simply by improving the process. This would also substantially shorten the turn-around time for producing a book once it's been written - the amount of time we took producing the book was astonishing.

Speaking as a reader, here's what I value:

- the author getting good compensation for their work
- ready access
- minimal waste
- searchability (for technical books and to a lesser degree fiction)

In the paper world, I don't get to choose all four of these at once. To get the first, I need to buy the hardcover. But then I have a hardcover, which takes up space, and which I will probably never read again. So it gets tossed, or it sits on a shelf, or it's given away (which tends to work against the author getting compensation).

And if I buy the hardcover, I've used up that much paper for a product that is, from my perspective, essentially ephemeral. Furthermore, a lot of times I buy a technical book hoping it will be useful, then after trying to use it for a while, realize that it's not suitable, and never finish it. At an average of probably $30 per book, that's a really expensive mistake, and consequently I don't buy a lot of technical books, because my presumption is that they are going to suck.

So basically the current book publishing industry is doing nearly everything it can to sabotage its sales to me. The hardcover isn't what I want, so I have to wait, but by the time the paperback comes out, there's a good chance I'll have forgotten about wanting the book. I can't buy technical books speculatively, because they're so expensive, so I don't buy many of them, which means from the publisher's perspective that they have to charge more to make back their investment.

To give me immediacy without forcing me to take a chance, I'll get the book out of the library instead of buying it. So now you've lost a sale. I would have paid something more than $0 for the book if it'd been available in the form I wanted it, when I wanted it, but because it wasn't, I paid $0 for it.

Searchability typically just isn't an option for fiction - nobody bothers to index fiction, for obvious reasons. So if I want to find something in a fictional book, I pretty much have to reread it, or at least skim it very closely hoping to stumble across the passage I'm looking for. This reduces the value of the book to me - there's no point in keeping a book unless it was truly exceptional.

What all this boils down to is that I don't buy your argument. First of all, you can produce a book more cheaply than you do. Secondly, if you didn't put up so many barriers to a successful sale, you'd have more sales, and thus could amortize the cost of producing the book over more customers. If a typical technical book were $5 in its electronic edition, I'd just buy it to see if it was any good. If a typical fiction release came out at hardcover-time for $5 in its electronic edition, I'd buy it instead of going to the library to check it out. I WANT TO PAY for my books. It's only fair. Make it easy for me, or get used to losing more and more market share to competing products that do.

Okay, given that the cost of ebook publishing isn't much less than the cost of print publishing, this STILL doesn't address the central difference for a consumer. That is, I can sell, lend, or give away a print book when I'm done with it, but not so an ebook. So comparing 100 print consumers to 100 ebook consumers, a publisher clearly sells a higher percentage of copies to the ebook consumers, which means they make more money on the product. That HAS to be factored into the publishing-cost equation. Either drop the price or drop the DRM, I don't care which.

Here's the big error in Miller's logic: "So, using the $25.00 list price in your example, assume about $12.00 going to the publisher from the bookseller." Physical product is the reason for that kind of retailer discount. Stocking, shipping, inventory control, and the employees to handle it all. Online retailers who deal only in e-product take a much smaller cut. Using his profit and royalty numbers, even an "iBook" clone of iTunes would list his hypothetical book for around $10.00 (and probably a lot less because the retailer would be making more money per unit on a smaller download size). Miller also seems unaware that he could sell e-books directly from his own servers.

Bob's example of eliminating $2/copy on printing costs is irrelevant and poorly thought out because ebooks do not exist as physical copies and should not be treated like they do. The savings on printing and distribution costs that ebooks offer is a total savings that should affect your ebook pricing, which should not be based on physical book pricing--in part because rarely if ever are all physical copies sold, so any books that DO sell have to cost more because the others are going to be remaindered or destroyed. Not only do ebooks lack this built-in markup cost since they don't exist as copies, ebooks are going to sell better the cheaper they are (to a point). Pricing them too high, based on the cost of a physical object that has nothing to do with an ebook, is just creating a barrier to entry that has more potential to eliminate ALL sales rather than just reduce total revenue. I think Bob is really looking at this backwards--which is to say, from a traditional publishing perspective.

Exactly.

I am a classic free market advocate on the question of ebook prices.

The price should be what the market should bear -- and frankly the market won't tolerate parity (or anything close) between printed books and ebooks. Having an ebook buyer pay to keep the lights at your warehouse -- filled with printed books -- is a nice idea from a publishers perspective, but it is a ripoff from a customer's perspective.

I am not going to pay more for a classified ad to subsidize the printed newspaper.
I am not going to pay more for a yellowpages ad to subsididize the printed phonebook.
I am not going to pay more at Jcrew to subsididize the printed catalog.
I am not going to pay book publishers to have bloated infrastructure, a national sales staff, and an out of date supply-chain.

Pricing justification for ebooks is like the pricing justification for $25 CDs circa 1996.
Lower your prices on ebooks or some other company/industry will take your customers' time, attention, and $$$ away from you.

I can't really comment objectively on the economics of ebooks by mainstream publishers other than to say that if the books were only discounted roughly $2 off the print price as Bob's analysis suggests, I suspect that the ebook market wouldn't be anything like what it is today. It's still small, relatively speaking, but growing rapidly, and I think will continue to accelerate.

As Madison noted, I think the real issue is how (or if) publishers will adapt to this emerging market, changing to a proactive strategy to create and seize opportunities, rather than remain mired in a "we can't" model. Those that continue to say "we can't" are going to start losing market share, and as the technology revolution continues - with one major effect being a radical increase in available choices for buyers - they'll likely eventually go out of business.

Speaking as a reader of ebooks (I own a Kindle), I don't even look at anything priced above what I'd consider reasonable for a paperback. I've bought a few novels at $9.99 from my favorite authors, but those are few and far between. There are a lot of good books out there begging to be read for very reasonable prices, and many public domain books - including many classics - are available for free (or a buck). Put out a Kindle book that's priced $2 or so below the hardcover price, and you definitely won't be getting any business from me (and I think I'm pretty typical in that regard).

From my perspective as an author, at the end of the day it boils down to the number typed in the royalty payment, and that's a factor of sales times the percentage of retail you get as royalty. I'd rather have a modestly-priced ebook that I make a small royalty from and that sells lots of copies, than a high-priced ebook that sells hardly any.

For independent authors, ebooks are a boon: even on a modestly priced ebook, the 35% royalty from Amazon and Mobipocket (among others) isn't bad at all, and certainly better than what most authors at major houses can expect to receive. Unfortunately, as Jon Merz pointed out at the top of this thread, much of what comes out of the self-published world is garbage. But an increasing number of authors and small press publishers are taking the time and making the effort to produce commercial quality work (both for print and electronic distribution) that's indistinguishable from what you'd find from the major houses, which - I'm sorry to say from my own reading experience - produce their own share of trash (for which they want you to pay a premium).

And that's one thing that the electronic book revolution is really doing: giving readers unprecedented choices with unheard-of convenience. I can get a free sample of any of the 230,000+ books in the Kindle store, trying out work by different authors totally risk-free, and buying the books I like - and that are in my price comfort zone - without moving off of the couch. Sure, I like going to bookstores and I still love books, but the only ones I've actually bought since I got my Kindle a year ago are specialty books that aren't available on Kindle, or that had graphics that are best seen (today) in print...

Didn't really know all that .. thnaks for sharing

Jenna:

If I buy a hardbound book and it includes a download link, then I have TWO copies of the book, for the price of ONE. So maybe I give away or sell the hardbound copy very cheap. It's brand new! The publisher's fear is that this cuts into their sales of the same book. That's why one purchase gets you one copy.

Thank you, Bob, for your explaining the costs associated with publishing a novel regardless of whether it's an e-book or a hardback. I've read through the many comments, and while some of them bring up excellent points, I am concerned about the views regarding the value of a book. I am a writer and have spent three years working diligently on my first novel. I am at the end stages now--just polishing up a revision for an agent who expressed interest. I will say emphatically here that the only reason I would have put so much sweat and work into making it the best manuscript possible is the intense competition in publishing a work today. If we cheapen the novel so that it is commonplace and worth a mere three dollars a book what incentive do I have as a writer to perfect my craft? None. That's how much. I would have called it done a year ago when it was in a decent form--good enough to allow my writing friends to read, anyway. But the novel now after another year of careful revision is worth much more than three dollars a copy. I do see the benefits of e-books. I happen to love the convenience of downloading a book from anywhere. But let's be fair, here. Where is the value in a book? Is it in the printing process or is it in the intellectual processing--the writing, editing, art directing, and marketing? The answer is so obvious the question seems rhetorical. Of course it's the intellectual processing.

And here's why e-book readers should care: The choice of novels to download will only be as good as the writers and publishers make them to be. If you want a three dollar book, we're going to put in the effort that equals that three dollars. You'll get what you pay for.

Beverly,
Your last statement is CRAP!!! If the author writes a book and sells it and it is good, good enough to make the NYT or even just as a great book like the hobbit or harry potter, even if it does not make the list. If they are good enough.. then their sales will reflect that and they WILL make a profit on the so called 3 dollar book!! Might want to do some research on marketing before you make a statement like that.

Hi there!

I'm having a hard time following your math. To me, since I get no tangible copy of a bare-bones version of a work, as a reader, I feel I am purchasing less than a paperback. Your pricing example is listed as $24 after a $2 savings on printing costs - I disagree. My thought is more of paperback pricing - $7.99 saving $2 brings the price to $5.99. Savings on distribution, lack of returns, etc. makes that much more feasible.

While I know that this is not completely accurate, I agree with the poster who stated that she would feel ripped off if she paid more for the download than for the paperback. I can get a good used paperback at half off cover at a shop near me. I can also get books lent from friends. Those are ways that I can beat e-book prices. However, those have always been there, and will continue to be. And I still buy books. I know how to use a library. My boyfriend is a frigging librarian! (Yes, it's very sexy, too!) We both still buy a ton of books.

In the current publishing method, we must assume that the $100K (example number from above) is already being spent on the book, and that formatting the same electronic text before print simply does NOT cost that much more to do. Formatting an e-book text and hiring people to work e-book contract issues does cost money, yes, but it is certainly not the biggest tab a publisher pays. Right now, the ebook is just adding functionality to an existing product and answering consumer demand. It is in a publisher's best interest to have its books available in various ebook formats and position themselves well in the changing marketplace. Since the work is being done already, publishers would be fools not to use it.

As for the whole copyright expiration argument, if you can't make money in 75 years after the death of the writer, you made a bad deal. Face it. Besides, not much is completely available as public domain, otherwise I would be able to find PD books by Charlotte Bronte. Still gotta buy those, and she's been dead a LOOOONG time!

When I moved cross-country, I had to ditch most of my books, and I had a LOT. Even after two years, damned if I can remember whether or not I still have this certain book or that one. I look for one to read it only to realize that I don't have it anymore. I buy one thinking I'm replacing my old copy, only to realize that I still have my old copy. It's demoralizing and I feel like an alien in my own abode. It sucks. An e-book reader would eliminate that.

You know what would REALLY make me happy when I buy a hardback? A one-time-use download code in the book that could be linked to my Amazon account so I can put that ebook on a kindle for free. My new copy of Iron Man has a free mp4 movie download credit. Some of my favorite albums come with mp3 copies. Music has cemented emusic into the purchasing requirements of the buyer. This will only continue. Considering the losses and thefts in my life, I'd feel much better knowing that I can not only re-download my music, but also my books.

Someone commented that they wanted to hear from writers on here. Now you've got one. I will say this loud and clear: I am completely willing to give free .pdf copies of my work for people to pass around as samples. Do you know why? Because I think like a dandelion and not a lion (Cory Doctorow). I want to grow out of every crack in the human consciousness and be indelible. To do that, I can't obsess over every single sale.

I found a blog that had some 50 novels on it in one downloadable chunk. I wasn't interested in most of them, but I read two - the first two Sookie Stackhouse novels by Charlaine Harris. I read them. I loved them. I went out and bought the first 7 paperbacks and the 8th in hardback. I've started working on Harris' other series. She's made money off me, and will continue to. And since all her Sookie Stackhouse novels have been on the NYT bestseller list constantly for the past 6 months, I'd say she ain't being hurt too bad by some jerk posting her work for free on the web. It bought her a new fan. I've suggested her to 7 girlfriends in the past 3 months who have gone on to do EXACTLY what I did - buy all 8 novels. That's 8 women buying 7 paperbacks and 1 hardback each. That's $45 in paperback royalties (at $.80/paperback, kind of industry standardish for mass-market) and and additional $16 for hardback (at $2/hardback, a bit lowish for someone of her standing). That's not counting when we rate the books on Virtual bookshelf, post about them on Facebook, or suggest them to other pals. The jerk who had the free .pdf's available on the blog just made Charlaine Harris $50, her agent $10, the bookstores probably a few hundred dollars, and the publishers didn't come out so bad, either.

This is not the only example from my life that has led me to believe that "free" isn't necessarily free, but "free" as bait works like a charm!

Today: Godiva chocolate store sends me emails with voucher for free truffles. I go in to try them, I spend more than the free. Always. It's Godiva chocolate! Can't stop!

My favorite restaurant sends me free birthday dinner vouchers. I can go in by myself, but I don't. I take friends who spend money. And I buy drinks, too, not covered under the voucher.

A certain well-known restaurant sent free dinner cards out for their new menu. There were no restrictions. You could come in, get a free $22 NY Strip and a water, stiff the server for a tip, and not pay a dime. I'm a server there. Know what? I made MORE money in the middle of the economic downturn. We're the only restaurant locally that isn't down 40% or more. We're UP in sales for the year! And no one ever stiffed me. We had a cheapskate or two, sure. But those people are coming back for more in a time when fewer people are eating out.

Free can work when done well. And e-books need to be done well.

If publishers want to gripe about not wanting to give books away for free, then it's time the publishers' interns bitched about not getting paid. Fair is fair. You don't want to give for free? Then don't expect free. The interns do expect something else for working for free - word of mouth, and maybe a sale in the form of a job. Maybe publishers ought to start thinking like interns again.

Bob: I generally enjoy reading your posts, but was frankly amazed by this one.

The cost of the physical book goes far beyond your $2 paper/printing/binding cost. There is the cost of distribution, warehousing, returns and pulping.

You were the one who pointed out that the industry was strangling on the return system. How you can make an argument now for a $2 difference in price between the physical book and the electronic book astounds me.

Bradley Robb,

I am not so sure you can just banish what you're calling 'scarcity economics' onto the rubbish heap of history.

Let's look at your assumption again. $100k produce the book. We can stay with you infinite number of customers, but there is still the question of *when* these customers will appear. What if they all wait 12 years, then start buying like mad?

Remember that every $100k production effort requires some speculative capital. Someone puts up the original $100k, whether in sweat or in cold hard cash. Every minute/dollar spent producing the book is a minute/dollar *not* spent persuing other profitable activities. The investor will need to have some sort of repayment schedule. If the book fails to earn out the $100k investment within 3 years, should the investor write it off as a loss? What happens if that book sells $500k in the 4th year? What if it waits 10 years?

We also know that some books will be stinkers - they will NEVER earn back their production costs. How do you divide that by infinity?

Those who would discard scarcity economics never seem to think of these things. They also don't seem to understand that this is an attention market we're talking about, and our attention is not infinite. Sure, I could write a book and price it 'so low it feels like stealing' - and people would brag about it - but it wouldn't scale. If all authors priced their works equally low, the amount of attention in the market would not simply expand to infinity. What would really happen is, all authors would be lowering their labor rate. And only the best of the bestselling authors would be able to continue being authors - the rest would have to get other jobs. We'd end up with a book market consisting of only the Steven King, Michael Crichton, and Dan Brown type authors found at the supermarket.

The infinite market concept is flawed in another way was well - the lifespan of the copyright. Once copyright expires, the work is public domain and profits are slashed deeply - to zero in a world of electronic distribution.

To me, those who wish to completely discard 'scarcity economics' seem to have divide by zero errors throughout their theories. I don't mean to be harsh about this. But there are realities to be considered, as long as the people who produce the works still have to pay real money to feed, clothe, and house themselves and their families.

I have been a Kindle owner for a year now. I did not buy NYT bestsellers when they came out, because they were expensive, heavy, and large. I would try to remember to watch for them to come out in paperback, and buy them then if the topic was still interesting. That did not happen all that often. I am willing to pay $9.99 to read them on my Kindle. I am not willing to pay more than that for an e-book, especially one that can only be read on one device - except in the case of specialty books, like technical material. I am also willing and eager to buy other books that I have meant to read over the years and never got around to, but I am NOT willing to pay more for those than the available paperback price. When I see that it is priced higher than the paperback, I feel like someone is trying to rip me off. If I buy the paperback, I have an actual book in my possession. I can loan it out, or give it away, or have it on my coffee table as a conversation starter. My ebook version can ONLY be read on MY Kindle. I love my Kindle, and the fact that it is always in my purse makes my whole collection instantly available whenever I can grab a few minutes of reading, and the adjustable font allows me to read longer, and the sample chapter lets me try before I buy - so for many reasons I am buying more books now than I ever have in the past. But when I see the paperback priced lower than the Kindle price, I am inclined to buy a used copy of the book (easily available from MANY sources), and when I am done I can pass it on, or leave it in the free book pile in the break room at work.

David Crotty said: "But every e-book copy sold means one fewer print copy sold, and the total cost must be amortized out across all versions, both print and electronic."

You're kidding, right? You know what happens to 'real' books? They get passed around. My neighbor bought Eat Pray Love and it went through 4 other women before it came to my hands, and I've since passed it on. What's the return on that?

The Kindle book is a convenient buy. And the cheaper the book is, the more likely I am to buy it. Random House did a great service to their readers/authors by offering free Kindle books by best selling authors. I downloaded them all, and now I will buy 3 books by authors I probably wouldn't have read had it not been for the 'give aways.'

As one poster on our Kindle Price discussion board mentioned; "It' like renting a movie @ Block Buster."

If it's a great movie, you go out and buy it.

I think Bradley Robb kicked the marketing genius of Kindle out of the publishing park.

Yet editors and publishers are whining 'we can't we can't we can't' instead of asking 'how can we' and creating massive opportunity for growth.

Publishers are collapsing like Oprah Winfrey's willpower around red velvet cake.

There is great opportunity to be had for those that care more about finding readers for their authors than lining their pockets with money.

If a publisher truly cares about their author, truly cares about readers (consumers), it will show, and the consumers will respond.

2009/2010 will mark the rising of the consumer. Consumers are fed up with greed and excuses made for the greed. Consumers want to count, and those that compaines that don't listen to what consumers are asking for, will find themselves putting in resumes at those companies that actually care enough to listen.

Agree that the process is certainly not a zero sum game. But that's assuming the costs in that process are fixed as indeed the process itself. Innovation in the life cycle of the book processes (via online tools for editing for example, social media marketing, online sales) would cut costs within this process.

Also there is a question of warehousing / distribution as an overhead of a printed copy as well as an additional overhead in the ordering process (i.e. physically going to get a book from inventory, keying in data) as well as bookstore returns and subsequent pulping. All these costs then need to factored based on a finite print run - there are no stock issues in digital (apart from hosting/delivery - but that's really quite cheap, $0.180 per GB on Amazon AWS).

And one final point, although slightly glib, music albums can cost huge amounts of money to produce but the digital singles are still only 99c each.

I think Bradley Robb is the only one here thinking about this in the right way. It's all about the impulse buy. It's about using new technology to make books as ubiquitous as music, something that's passed around, talked about, part of our daily lives (because it's so convenient to both read and buy books).

Publishers need to start seeing themselves as brands. They need to find efficient ways to filter the slushpiles (and cut out the agents), find new and talented authors, and start acting like the marketers that they really are.

yes there are costs associated with ebook production, but these costs are fixed, whereas the inventory that results is not. So, as Bradley says, the focus needs to be on finding ways to enlarge the audience and serve craploads of books.

I think the big mistake most folks make when thinking about e-book pricing is that they look at the e-book production process as gravy on top of the print process. The approach being that you've already paid for everything in making the print book, the e-book costs very little to produce/distribute from there, so it should thus cost very little. But every e-book copy sold means one fewer print copy sold, and the total cost must be amortized out across all versions, both print and electronic.

And yet if they priced the ebooks much lower one thinks they would sell more, thereby making up the difference they lost in the sale of a hardcover.

Look. Readers don't give a shit about "amortizing." They view it as this: I'm paying the same price for wood pulp as I am for electrons...except I can loan the wood pulp to my friends and help turn them on to new writers. But I have to keep the electrons to myself on my expensive proprietary software.

And, no, they're not going for it and they're not going to. You have to make them believe they are getting some deeper value for their money. Like it or not, reality or not, they believe the are getting a bigger bang for their buck with wood pulp than they are with electrons.

I think Bob hit on the exact reason for adopting low prices for eBooks, "[Amazon is] trying to establish the market. "

However, Bob, you're still getting hung up on scarcity economics. When the total cost to develop and publish a book is viewed as X, and then X is divided down to equal out the entire first run of the book, then yes, you're going to get a solid definite number.

For the sake of the argument, let's assume every book costs $100,000 to produce with all the back-end expenses (save actual printing) factored in. If the first run is a modest 10,000 books, that makes the break even price $10+2, or $12. Using that math to price the eBook at $10 would make some sense.

However, it would be misguided. Why? Because for an eBook, there size of the print run is infinite. There is no sense of scarcity in the supply and demand equation. Any number divided by infinity is the closest number to zero possible.

The argument might seem academic, but it's not. True, there are not an infinite number of potential shoppers for any single eBook. The actual number is one which is conservatively measured in the millions. Think, for instance, the number of people with a smart phone in their pocket right now.

Thus, the question isn't how much to discount the price from the physical and scarce commodity, but how low to price the book to encourage the potential audience of millions to make the purchase. In this respect, you want to set a price that's low enough where it almost feels like the customer is stealing - something so low that they'll brag about it. The iphone's App Store is a prime example of how to create a paid-viral success story.

And eBook's have the ultimate potential to become viral products. They can exist indefinitely on a server, and with a low price-barrier, they can be had instantly. If I see an author on the Daily Show, and he mentions I can grab his book for something like $3 (or better yet, $2.99) without having to get off the couch, guess who's reaching for his iphone?

Or to put it another way - a low price on an eBook, one which is easy to purchase - turns a book into an impulse buy.

Reading ebooks is a habit forming act. You start with just one, catching up on it in the elevator, while out at a restaurant, in the subway. Before you know it, you're reading killing a book a week or more. When the spending bar is set low enough, you're suddenly buying more, not less. When your potential audience is measured in millions, and not thousands, the numbers are favorable for both consumer and publisher.

Stop thinking of eBooks as a digital version of a physical and scarce produce, and instead think of them as potentially viral creations. Create the eBook market before someone else does it for you.

Look at it from a consumer scenario -

"Whatcha looking at on your phone?"

"Reading this book about Mark Twain."

"Any good?"

"Yeah, it's pretty good, you should check it out."

"Great, let me borrow your phone when you're done."

"Dude, get your own copy, it's just three bucks."

True, the cost of the actual book's manufacture is relatively low, around $2. But that's not the only cost you eliminate with ebooks. You also eliminate: the distributor's share; the brick-and-mortar retailer's share; the huge cost of returns; and the massive costs of distribution and warehousing (only part of which comes in the distributor's share). That's a lot more than $2.

On the other hand, true, you create a new share for Amazon or whoever the ebook seller is. But whatever that amount is, it is far, far, far smaller than all the other stuff above *beyond* manufacturing costs.

I was talking to a friend of mine a while back and I told him that another friend had authored an ebook and he stopped me mid sentence to say, "Joshua, someone who writes an ebook is NOT an author!" I thought he was a bit old fashioned at the time. But still, I've seen a lot of bullsh*t "ebook" products. I really think he was being a bit overzealous with it. But what do you think?

And Joan: Amazon sells their products through affiliate commission. I have a few friends who are super affiliates and they can literally take you product (book, diaper, tire iron, whatever) and put it on the computers of EVERY SINGLE PERSON on the internet without spamming. They do a LOT of work to make that happen and they spend a lot of money to set up each campaign. An affiliate commission is usually around 50%. Amazon may be less, maybe more. But it's worth it to sell more of your product and get it out in front of more people. So if Amazon is selling an ebook for $9.99, assume that the publisher or creator is only receiving around $5 for it. Factor that into your equation and start the deductions.

Bottom line: Amazon and other affiliates want to make at least a fiver on their sales because that helps process their transactions.

So everyone is getting less in this process. It's just a matter of making the adjustment to the digital world. Maybe books that have already been in (analog) print could be cheaper because the format has already been paid for by hard sales of the physical product. But new books, especially those ONLY released in digital format, will cost more. That's just the way it is. Start charging nothing for a digital book and you can say you lived to see the death of the Great American Novel.

Either way, good information or entertainment is worth paying for, imo.

In response to Joan's comment: While you'd have to ask Amazon why they are pricing some e-books for $9.99, I'd guess it is because they are trying to establish the market. These books are being sold to Amazon by publishers at standard hardcover discounts, so Amazon is paying roughly half the retail price, which means that on a $26.00 hardcover they are losing money for each e-book sold at $9.99. Meanwhile, on the very rough p + l discussion: the cost of shipping a physical book is usually about 20-25 cents per copy. So, using the $25.00 list price in your example, assume about $12.00 going to the publisher from the bookseller. Then deduct $3.75 for the author's royalty (15% of retail price) and you're down to $8.25. Deduct another $2.00 for the production cost and you're down to $6.25. Deduct another 50 cents for returns and another 25 cents for freight and you're down to $5.50. Deduct another $1.00 per book for direct marketing/publicity costs and the publisher's profit would be $4.50. (We're assuming that there is no unearned advance here, which would be wonderful but unusual.) Compare to the e-book model: the publisher would make $2.50 more per copy, since we don't have the cost of printing/paper/binding ($1.75--because we still have the plant cost of 25 cents per copy for design/typesetting/proofreading/copyediting/etc.) and we don't have returns (50 cents) or freight (25 cents). So it makes sense that the publisher would charge about $2.50 less for the e-book than the physical book...no?
(And before you get excited about the publisher's "profit" of either $4.50 for a physical book or $7.00 for the e-book, pls remember that we haven't deducted anything for the overhead of staff, rent, equipment, etc...)

Bob,
I agree that everyone should get their cut and the like. The MAIN problem I have with your reasoning is the hardcover pricing for an ebook. Your costs do not translate well to the softcover price point. Hard cover books vs soft cover books: Soft covers cost considerably less then a hard cover, both are printed on paper. The Author gets the same cut, the publisher gets the same cut as well as the brick and mortar and printing company get their same cuts. but in smaller portions. the main difference is that the soft covers sell considerably MORE then the hard covers in the long run. So there is more profit with the soft covers in the long run. In the short run there is potentially more profit because of the higher price point but in the long run it is not cost effective.

What would be the reason to make the Ebook reflect the hard cover book price and NOT the soft cover book price. It is ludicrous not to do so in the first place when the increased sales would more then make up for the so called loss in lowering the price point on ebooks. Just like they do with the soft covers. The price will be what the market will bear... this is a statement that is stupid in my opinion. If someone feels ok with 25.00 for an electronic ebook vs a hard cover needs to reevaluate their budgets. hard cover is something substantial, collectible and in some areas if it is a first print becomes valuable later on. An electronic file does not have this longevity. If an Ebook was the same cost discounted for NOT being paperback then that would be MORE then reasonable and the sales would increase considerably and make the ebook a more viable product vs the hard cover price point for an ebook, which is ludicrous!

WHat a load of BS. If what you are saying is true, then why does Amazon choose to sell e-books for 9.99? A book that sells for 25 dollars in most cases less than 50 percent of that price goes to the publisher, so the publisher only needs half of the jacket price to make money per book. But with an e-Book such costs such as shipping and paying for high cost of a brick and mortar biz are gone, so they should be cheaper. Bob, I think you need a few lessons in basic economics.

E books with illustrations? Is a graphic novel, with print quality illustrations, in ebook format possible? Or perhaps a Middle Grape novella complete with illustrations. Why? I write and illustrate!
See http://www.jacketflap.com/profile.asp?member=PYXX

Robert Wahl

Haste yee back ;-)

I think many of those thinking that eBooks should be free see eBooks as a byproduct of the book-making process, with "real" books (i.e., books printed on paper) as the actual product. Some authors and publishers have been successful with a model treating eBooks as promotional material, encouraging customers to buy the paper versions of the books for their actual income (Eric Flint and Cory Doctorow are two well-known names in this group). What some readers fail to recognize is that this is merely one business model--and one which, I think, will not scale well as eBooks transition from novelties to a mainstream means of reading.

But let's get real for a moment. Consider the price difference between a hardback and a trade paperback. The content is the same, the editing, formatting, etc. is the same. And the cost of the binding is maybe another buck or two. Clearly hardback pricing is designed to segment the market, attracting those who are willing to pay extra to get the book early, as well as librariies who buy mostly hardbacks and those for whom a larger font size is important. eBook pricing in the range of the hardback price can't be justified as recovering costs, it's simply a matter of not wanting to compete with hardback prices before the paperback version comes out. I don't have a problem with publishers charging what they have to to recover their costs--and a pricing model that segments the market can be beneficial for everyone. Still, $20 for an eBook needs to be seen as protection for the hardback, not a cost recovery for the eBook.

Rob Preece
Publisher, www.BooksForABuck.com

I totally understand all the costs prior to actual printing of the book. You mentioned that it is only $2 extra to print. What about shipping and inventory costs associated with the hardback books? Does $2 include all of the extra costs? Seems like ebook should be discounted more than just $2!

Nice explanation! Thanks.

Mark G--I'm a writer, and I've spent a few years penning a few novels, still unpubbed as of yet, but when/if it happens, I'd love to say, "yeah, but I spent __ years penning these novels, doesn't that count for something?

Well, in my head I'd say yes. BUT, a writer goes through all that blood, sweat, and tears to get to publication, to hone their craft...yadda yadda. It's just all part of the process. If all is done well, then he/she will get compensated through sales. If not.....well, I don't wanna go there quite yet. **smile**

Great post, very helpful.

Well done, Bob. There is only one thing that I would add: where are the authors in all these blogs. I never see the writers raising their hands to say: "Excuse me but I spent X years on my book; shouldn't i be compensated for my work?"

I think a lot of this "e-books should be cheaper" philosophy stems from fly-by-night small presses that have churned out gobs of crappy .pdf files and called them e-books. Obviously, anyone can convert a Word .doc into a .pdf and call it a day, which is what a lot of people and places do. Putting care into the project from the start would obviously enhance both the end product and the price, but these places don't do either. Now, with Kindle and Stanza formats and the other content delivery platforms available, a lot more needs to be done than simply clicking "save as" and putting it out there with a PayPal button.