Comments on: Maya Reynolds on cognitive bias

By: Garson O'Toole

Garson O'Toole — Wed, 18 Feb 2009 02:45:47 +0000

Much thanks to Maya Reynolds for pointing out remarks from the publishing world that I agree do display a deadly cognitive bias. The printing of a physical book may only cost a couple dollars, but that does not mean that e-books should be priced within 2 or 3 dollars of the price of hardback books.

The history of another industry shows that the rationale offered for setting high e-book prices is dramatically wrongheaded. A few years ago a music company executive could have made the exact same self-deceiving and self-defeating argument. The cost of manufacturing a cheap plastic music disk together with a square plastic container and a paper insert is quite small. Therefore the cost of music MP3s should be very similar to the cost of music CDs at their peak according to this type of dubious reasoning. The misguided music executive would then happily set prices for MP3 downloads rather high.

But what is actually happening now? The music CD market is imploding. Sales are dropping sharply each year. The revenues from digital music are growing but they replace only a small fraction of the lost revenues from declining CD sales. In addition music piracy is rampant and a generation of music listeners has been socialized to share and download music without constraint.

I hope that book publishers will think more carefully about the future.

By: Prest0

Prest0 — Mon, 16 Feb 2009 21:03:07 +0000

It’s not as far fetched as one would think. For our upcoming horror anthology, the number one expense–by far–are author royalties. In looking at my spreadsheet, printing accounts for less than 20% of the MSRP. Sure, you can add in shipping and warehousing, but on the flipside you could add in the cost of format conversion and data warehousing for e-books. We may very well drop the price for e-editions by 15%. However, since online p-book retailers routinely shave off 15% of the MSRP just to entice buyers, the end result is that you may very well find p-book and e-books for the same price.

By: Rob Preece, Publisher

Rob Preece, Publisher — Mon, 16 Feb 2009 16:24:07 +0000

Let’s take a step backwards. Hardback books cost, maybe, a buck more to produce than do trade paperbacks which, in turn, cost a few pennies more than mass market paperbacks. Why the price difference, then? The reason–publishers segment the market. Binding types are used as proxies for willingness to pay. If you’ve got a favorite author whose books you can’t wait to read, you’re willing to pay extra–and buy the hardback. It’s not the firm cardboard you’re paying extra for, it’s the ability to get the book early.

Now, add eBooks into the equation. eBooks don’t have firm cardboard, but they do have early reading. So, you get a choice–you can either have eBooks at near-hardback prices (dropping to paperback prices when the paperbacks are available) or you can wait to get your eBook. Personally, I’d choose not waiting.

Is this pricing model optimal? Probably not–and it’s not a model I’ve adopted at BooksForABuck.com. But I do think it’s a rational pricing model. The bottom line is, you can’t price eBooks in isolation to the rest of the portfolio. The market for books is a system that needs to be managed in totality.

Because my emphasis at BooksForABuck.com is eBooks, I price eBooks significantly below paper books. But that’s just one business model.

Rob Preece
Publisher, http://www.BooksForABuck.com