Moderator’s note: Welcome to our latest TeleBlog contributor, Dr. Humayun Kabir of Kindle News! Humayun does not own a Kindle but will be getting one—and for the present article, he has much better qualifications, as a Senior Lecturer in Finance, at Massey University in New Zealand). Yes, I’ll be asking Amazon for its side. In fairness to Amazon, I have heard that the Kindle is making publishers more sensitive to geographically related copyright issues. Still, could that be used to justify the higher prices of Mobipocket e-books and fully explain the gap? I doubt it. Please note one other possible factor; publishers, too, not just retailers like Amazon, can influence the prices of p-books. But I still agree with Humayun’s main premise—that Amazon is forcing customers of its Mobi store to subsidize the Kindle. Also, how about independent retailers relying on the Mobi format and having to drop their e-book prices to compete? – D.R.
Amazon has no problem selling p-books around the world; does it have one in case of e-books? Not exactly. The company is selling e-books worldwide through its Mobipocket.com store. Then again, Amazon is reluctant to sell Kindle editions to people outside the States. If there were any issue with geographic copyright, that should equally apply to Mobipocket e-books. So what’s the story here, and what is the pricing angle?
In search of answers, I compiled some price records of a few New York Times best-sellers from Amazon and Mobipocket Web sites. You can see in the table that the Kindle-edition price is $9.99 for all 20 books. The print edition prices are the ones at which Amazon selling p-books word-wide.
Let’s first compare the Mobipocket and print prices. The Mobi prices are always higher except one, and the differences go as high as $15.75. For an e-book you’re paying more than for print? When comparing with Kindle-edition prices, the difference goes up as high as $25 more than for a p-book. If you want to buy all 20 books in Mobi format, it costs you $367.48, which is $88.60 higher than the cost of the print editions and $167.68 higher than the cost of the Kindle editions. As a Kindle owner you pay 40 percent less than what you pay for print 
edition. For Mobi you expect to pay low as well, though it might not be as low as what you pay for Kindle editions, but you actually end up paying 24 percent higher over the print edition, and 84 percent higher over the Kindle edition.
After knowing this, how do you feel as a Kindle owner or as any other e-book device owner that can read at least nonDRMed Mobipocket format? If you’re an e-book fan and own a Kindle you save 84 percent because you’re not using Mobi format [moderator’s note: the Kindle reads only nonDRMed Mobi – D.R.]. For that, you have to live in the States. If you read heavily and buy any other device, just give up, and start saving toward a $399 Kindle. If you’re not in the USA, go to hell!
With the Kindle, Amazon has segmented the e-book market world-wide. It’s unreasonable for U.S. buyers who are heavy readers to buy Mobi format anymore; meanwhile non-U.S, customers still must rely on Amazon-owned Mobipocket.com, which at least has a huge selection of 
e-books. Kindle’s .azw is essentially the Mobi .prc format with different DRM protection. Find any non-DRMed Kindle format, like the Kindle user manual from the Amazon site, change the file extension from .azw to .prc, and you will be able to open the file in Mobipocket desktop reader. So it’s clear Amazon has tried to screw up the readers with a new DRMed format with lower content prices leaving the old one (DRMed Mobi) for the rest of the world.
E-books, when DRMed, destroy the social value of books. Once you own a p-book you can read it without relying on a specific device, somebody can borrow it from you, or you can sell it as an used book. A DRMed book raises issues at the individual level. By paying 40 percent less for Kindle edition, you still can’t mitigate the social cost, but as an individual you’ll be satisfied enough to justify that. Still, how happy will you be with the Mobi format—when you have to pay 24 percent more over p-books, and 84 percent more over the Kindle?
Dear Kindle owners, you’re buying Kindle e-books cheap, but the rest of the world is paying the price.
(Adapted by permission from Kindle News.)
Additional moderator’s note: Here’s more evidence that copyright geography alone probably does not explain the price gap. Newsweek says in its Kindle cover story:
“Publishers are resisting the idea of charging less for e-books. ‘I’m not going along with it,’ says Penguin’s David Shanks of Amazon’s low price for best sellers. (He seemed startled when I told him that the Alan Greenspan book he publishes is for sale at that price, since he offered no special discount.) Amazon is clearly taking a loss on such books. But [Amazon CEO Jeff] Bezos says that he can sustain this scheme indefinitely. ‘We have a lot of experience in low-margin and high-volume sale—you just have to make sure the mix [between discounted and higher-priced items] works.'”
Obviously it’s working a lot better for Amazon and Kindle customers than those using the Mobi format—no small injustice to non-U.S. customers who cannot enjoy the full benefits of the Kindle, even if they do manage to get one. Although publishers do influence prices via what they charge retailers, Amazon must have tried a lot harder to get good deals for Kindle owners than for Mobi users. Either that or publishers felt they could be more flexible toward the Kindle editions since Kindle owners are not as numerous as Mobipocket owners.
Now, what about the future? Will Amazon jack up Kindle-edition prices if/when the Kindle catches on? I’d hope not. But with Amazon, you never know.
One other detail. Beyond other possible reasons for limiting the Kindle to the U.S., keep in mind that its wireless system for downloading books does not work everywhere on earth, including some places in the States. – DR
Humayan’s bio: “I live in New Zealand. I’m a Senior Lecturer in Finance here at Massey University. I moved to New Zealand after finishing my Ph.D. in the U.S.A. in Financial Economics in 2004. I used to own all early-generation e-book devices, like the Rocket eBook, Softbook, eBookman, and Hiebook, when I was in the USA. Currently I have Sony Reader, the iRex iLiad, and an ipodTouch. I’m in the process of getting a Kindle. My e-book interest is in the area of literature, politics, philosophy, sociology, etc. I also hate DRMed e-book. However, my interest in the Kindle is related to having the opportunity to do some research on readers and publishers in relation to e-books. The Amazon Kindle web store is designed uniquely; and that generates some publicly usable information in that direction, although not enough. The Kindle situation might give us some direction regarding the future of e-books. To keep things rolling, I try to post useful information for the current and prospective Kindle owners almost daily.”
Technorati Tags: Amazon Kindle,Kindle,Mobi,Mobipocket,Humayun Kabir
One thing unmentioned is that unencrypted mobipocket could still be sold and distributed for free at any price. Also, my bet is that prices on other mobipocket stores will come down as well eventually.
There are always discrepencies and inequities in pricing; I expect the market to correct that. From a self-publisher’s point of point of view, all I care about is more people will have a device that can read unencrypted mobipocket books. Now, if the kindle didn’t have an SD slot, that would be another matter.
Why should the consumer care that Amazon is cutting deals with publishers to bring lower prices? So they intend to raise the price later? That’s standard business practice.
One thing I haven’t seen an analysis of is how well Kindle reads mobipocket files. If there are other compatibilities, that would be a real problem.
I’m not sure the assumption that Amazon is cutting special deals with publishers for the Kindle is correct. I believe that most, if not all, of Kindle’s books come from MobiPocket, where publishers already have contracts and no special deals are required.
With MobiPocket direct, prices are what the publisher states as the list price (less any special discounts the publisher determines). But MobiPocket retailers are not required to charge MobiPocket’s prices. They can charge whatever they want. Of course, if they charge too little, they’ll lose money on the deal. It seems to me that Amazon is treating Kindle as a special form of MobiPocket retailers.
I certainly haven’t cut any special deals with Amazon, but I note that Kindle offers BooksForABuck.com books at below our list price (in general, it’s the cheapest place on the net to buy our books, including BooksForABuck.com itself (once our introductory pricing is over) but there’s the thing. If they sell one of our books, under our existing contract, MobiPocket treats it as a sale and we get the full 50% of list that we’d be due if it sold from Mobipocket. The retailer, in this case Amazon, eats the difference. (By the way, Amazon does something similar with paper books. Publishers set a price. Amazon sets its payout (only 45% of list if you’re a small publisher–ouch) but Amazon may sell for less than list–it’s payout to publishers won’t be cut just because it choses to price at below list).
I’m not sure Amazon will maintain this Kindle discount pricing structure forever and would advise any potential Kindle buyer not to assume that Amazon will forever offer prices that result in it losing money on best-seller books. This isn’t to say they won’t, just that I don’t think they promise they will.
Rob Preece
Publisher, http://www.BooksForABuck.com
The Kindle software can read DRMed MOBI e-books, but Amazon has chosen to disallow this option. This is a marketing decision, that could be changed tomorrow (or never). It is particularly onerous because there are many library e-books in MobiPocket format, and none of them can be read on the Kindle.
I suppose mobipocket.com is the obvious place to look for MobiPocket books, but it is almost never the cheapest option. There are plenty of sites offering at least some discount off of MobiPocket’s list price.
I think it is more likely that the selling price of the Kindle itself includes a markup that allows a profit even when selling some e-books below cost. The e-books are loss leaders that encourage the buying of the high-margin Kindle.
I’d expect Amazon’s prices for Kindle books to go up a bit in January, once the initial selling push is over. They will probably continue to offer a discount from list price; that’s standard Amazon practice for printed books.
This is all making buying ebooks more interesting. I usually buy from Fictionwise, so I thought I’d take Humayan’s list and see how it worked out over there.
First, Fictionwise’s list prices are all the same as Mobipocket’s prices. However, Fictionwise is giving discounts by crediting the purchaser’s Micropay account. For those of you who are not familiar with this, you set up an account with your credit card which you “fund” with however much money you want. When you buy a book you can either pay for it, or you can have the price taken out of your Micropay account. Here is the listing of Humayan’s books and the percentage discount that Fictionwise is giving the buyer by adding that percentage to the buyer’s Micropay account. The percentage is off the “list” price, which, as I mentioned, is the same as the Mobipocket price:
Double Cross
Somehow I posted the comment without the percentages. I’ll try again:
Double Cross 42%
The Choice 32%
Stone Cold 39%
A Thousand Splendid Suns 20%
World Without End 67%
Book of the Dead 57%
Protect and Defend 32%
An Inconvenient Book 32%
I am America 39%
Boom 36%
Good Dog. Stay 10%
God is Not Great 15%
Clapton 36%
Age of Turbulence 67%
The Kite Runner 15%
Halo: Contact Harvest – couldn’t find it
The Road 10%
No Country for Old Men 100%
Memory Keeper’s Daughter 15%
The Emperor’s Children 15%
Life is getting compicated
The reason MobiPocket.com’s prices are higher is simple – they are primarily a WHOLESALER of books, and so they sell eBooks at “list price” to avoid undercutting their many retails. To do a fair comparison, don’t compare the price of books at the Kindle store and MobiPocket, compare between the Kindle store and a MobiPocket retailer such as Fictionwise. That would be a fair comparison. This is just meaningless.
[…] The pricing of e-books has recently become an important issue of discussion. Over amazon’s kindle forum, readers are trying to pursue others to ‘boycott anything over $9.99‘. In one of my recent posts I have already discussed on some concerns regarding amazon’s pricing anomaly. What should be the optimal price of a standard e-book? Should it be half of the hardcover, half of the softcover, or even lower than that? I definitely believe that the price of an e-book must be always lower than any other formats; but in reality, that’s not the case. A lot of people discovered that some e-books are priced even higher than the softcover on amazon. If you compare the prices of e-books on mobipocket.com, which is owned by amazon, such anomaly is even severe. […]
What I find more interesting than prices, and not nearly as frequently commented upon, is the number of books that appear to be exclusive to the Kindle. Check out listings at MobiPocket or Fictionwise or Books on Board for William Goldman, Stewart O’Nan, P.J. O’Rourke, Thomas Sowell, & Ramsey Campbell. Each of these writers has titles out there as ebooks, but a number of them are available only on the Kindle. Check some other writers for yourself & I’ll bet that you’ll soon find a number of ebooks on Kindle that you don’t find elsewhere.
Anyone know why publishers would go for that notion — Kindle only ebook releases — rather than having their books available on a larger number of platforms in a wider market? Or are there publishers out there who think that ebook=Kindle, and won’t that make it even easier for Amazon to rule the ebook market by and by?
Bests to all,
–tr
Tony: These appear to be TOPAZ ebooks, which are specific to the Kindle and are created by Amazon using a scan and OCR process. Many standard ebooks are generated from paper copies, but what is unique about TOPAZ is that it actually has bitmaps of the scanned fonts in the document.
My description of TOPAZ may not be exactly correct, because no one outside Amazon knows the details. We also don’t know how many TOPAZ ebooks there are, although for fiction it is probably less than 1% of the total. The bottom line is that TOPAZ ebooks are usually very poor quality, but on the other hand the alternative is no ebook at all.
I have one TOPAZ ebook that is no longer available because it has been replaced by a standard MOBI/AZW. So ebooks can come back from TOPAZ purgatory. I don’t get a free upgrade to the AZW version by the way. The TOPAZ is still available to those who bought it, just not to new customers.
[…] on amazon. If you compare the prices of e-books on mobipocket.com, which is owned by amazon, such anomaly is even severe. In any way, here is the break-down of percentage of e-books by price brackets available from […]