pound_signI missed participating in yesterday’s Futurechat Twitter hashtag chat fest, but the article that formed the basis of the discussion is interesting enough by itself. Porter Anderson poses the question that has been on many publishers’ lips ever since Amazon first started selling e-books: “Are we pricing books too low?”

The article does have more of a basis than the Amazon-is-devaluing-our-books nattering we usually get. Anderson looks (via a Philip Jones piece) at the opening sales of the new Harper Lee book, Go Set a Watchman. It hit record sales in its first week, including in e-book form. Jones observes that the book and e-book are significantly discounted in the UK. Amazon had the hardback for £10.82 and the e-book at £7.47 (at least at the time; checking today I find the prices are instead £9 and £7.45 respectively), whereas the recommended retail price of the hardcover is £18.99 and next year’s paperback is £12.99

Anderson adds:

In the States, some interesting price points, too:

The hardcover list price is $28.09 and the going price at Amazon.com is $16.07.

The Kindle edition, with a $15.99 list price, is set for now at $13.99 (and here’s that agency-pricing note: “This price was set by the publisher”). That price comes in below the paperbook ask, which is $16.79 on a list of $27.99 — just 10 cents, take note, behind the hardcover list price.

Anderson and Jones briefly discuss UK competition from the Waterstones bookstore, which opened at midnight on its release day to sell copies of the book, but don’t mention where they had the book priced for those sales. They also mention the perception that Amazon is “[driving] down the perceived value of books” and that cheap indie e-books make it hard for traditional authors to sell their titles.

But the interesting thing insofar as Watchman is concerned is that the e-book prices (in the USA, at least) were indeed set by the publisher (complete with the little notation below the price on Amazon’s page.). So Amazon can’t be blamed for the “low” e-book price, at least in the USA—and the UK prices seem to be roughly the same amount as the US (maybe a couple bucks lower) after currency conversion. So Anderson’s question isn’t really whether Amazon is setting the prices too low at this point, but whether publishers are.

Skimming through the scads of Twitter posts with the #futurechat hashtag, I find a lot of discussion but largely anecdotal information. Anderson will probably have a summary up Monday or Tuesday with any particular relevant bits. But to me, the overall question is more interesting.

We’ll leave aside the question of the hardcover prices. Hardcover is still a pure wholesale/retail operation, and publishers have no control over how Amazon (or Wal-Mart, or Waterstones, or Barnes & Noble) sets the retail price apart from where they set the wholesale price. Amazon has always chopped big discounts off of new release hardcovers, preferring to sell by the ton and make a profit on volume.

Now, if publishers are setting their e-book prices “too low” under their agency deals, their hand was basically forced. In a way, by selling so many new release and bestseller e-book titles at $9.99, Amazon did get consumers used to lower prices. The $13.99 price is within the “sensible” range Steve Jobs lured publishers down to when he embroiled them in the agency pricing conspiracy, and it’s where the market has largely stabilized for new releases now that the rigamarole of the settlements and trial is over. And there are still plenty of people who find that too high, given Amazon’s need to notify consumers that they’re not the ones who think they should pay that much.

Customers aren’t stupid. They know with e-books they’re paying for pixels, not solid atoms. There are no physical printing and shipping costs, and no need for returns. The reason Amazon’s $9.99 e-books went over so well was that they played to e-book readers’ pre-existing prejudice. And I’m certainly not going to argue against the idea that a medium with lower physical costs should cost less. That’s just part of how the business works.

But leaving all that aside—for crying out loud, is there nobody else out there who remembers the way things used to be back in the early adopter days of Fictionwise and eReader? Publishers actually couldn’t be bothered to adjust e-book prices downward after the print edition of the book had gone to paperback. They didn’t really care about a market that was less than 1% of the size of their print market. (And to be fair, at the time that probably made sense for them.)

The Pendergrasts who ran Fictionwise related stories of them having to buttonhole publishers to get them to drop prices, and they simply couldn’t do that for every book in their catalogs. The e-book stores were full of $20 to $24 e-books of novels that were currently available in $8 paperback editions. This was true even as late as 2010, when Macmillan made its move to impose agency pricing on Amazon. To prove a point, I went through and checked the prices on Macmillan titles at Fictionwise. Here’s what I wrote about it at the time:

Yesterday, to prove a point, I searched on different price ranges of Macmillan books at Fictionwise. I discovered that only 285 (about 15%) of the 2032 Macmillan titles on Fictionwise are priced at $9.99 or less. 857 (about 40%) are priced at $19.99 and up.

I then surveyed each of the 25 titles on the first page of $19.99+ search results, checking against print editions in on-line bookstores and determined that 7 out of those 25 were available as $7 to $9 mass market paperbacks. (See the link above for specific details.)

If I assume it’s a valid random sample and cross-multiply, 7/25 = 240/857. That would mean 240 of Macmillan’s titles—over 10% of their entire Fictionwise line—would be mispriced—or as I like to put it, “invariably priced”—in relation to their paper versions.

My gut feeling is that’s actually a lowball guess; some of the books on that first search were obviously just-added titles they were trying to push so I suspect there was a higher-than-average number of newer, hardcover books than usual—there’s no way that a publisher is going to keep 30% of its entire back catalog exclusively available in hardcover. And that does not take into account titles priced between $19.99 and paperback range, or ones from other publishers.

There are probably thousands of “invariably” priced books on Fictionwise now. And there always have been.

This apathy helped fertilize the fields for Amazon when they came along, and so it goes.

So, if publishers might be pricing their e-books “too low” now, at least they’re pricing them more reasonably at all. And, more importantly, when the books come out in paperback, the e-book price generally does drop accordingly now. I guess that’s one good thing about having a huge army of angry, “entitled” consumers ready to complain vociferously if they don’t, rather than just a relative handful of Palm Pilot-clutching early adopters.

Regardless, if publishers can’t remain competitive at these lower prices (especially with even-lower-priced indies breathing down their necks), they’ll either go out of business or they’ll figure out a way to get competitive. Or maybe some will do the former and some the latter. Regardless, the market is evolving and changing, and I personally think that’s a good thing. Either way, consumers aren’t going to let publishers get away with backing off on their lower prices now.


  1. It is the duty of every commercial enterprise to set prices for their products so as to maximize their profit. Books are a product. Claims that “books are special” and that they should not be bought and sold in the marketplace for whatever price the market will bear are just romantic BS.

    By now I would expect each and every publisher to have a general book-format-time-price model, which they would apply to each of their books, with possible adjustments for special cases.

    By this I mean something like the following:
    – release the hardcover on day 1 at a wholesale price of 50 arbitrary currency units (ACU) , and a suggested retail price of 100 ACU.
    – release the eBook on day 90 at a wholesale price of 35 ACU and a suggested retail price of 70 ACU.
    – release the paperback on day 365 at a wholesale price of 20 ACU and a suggested retail price of 40 ACU. At the same time sell any remaining hardcover copies in stock to a discounter for 20 ACU (or whatever we can get for them), and reduce the wholesale eBook price to 18 ACU.
    – cut the wholesale prices of the paperback and the eBook to 15 and 12 ACU, respectively, on day 900.

    If any publishing company does not have such a guideline in place by now, then the president and the CEO should be fired.

    Incidentally, the solution to retailers deep discounting books and selling them at prices lower than the publisher thinks they are “worth” is simple. Simply raise the wholesale price.

  2. I don’t think consumers would stand for a publisher waiting 90 days to release the e-book. Windowing has historically gone over pretty poorly when it’s been tried in e-books. (As came out during the anti-trust trials, even the publishers were fully cognizant that windowing simply led to anger among customers and increased piracy/lower sales of e-books. Scanners exist.) It doesn’t even necessarily work too great in other media.

    And if publishers raised the wholesale price, then they’d just screw brick-and-mortar bookstores even further, since they don’t have the ability to deep discount. Given how much of publishers’ treatment of e-books has been driven by their ham-handed attempts to “protect” bookstores, I don’t think that’s too likely either.

  3. You are arguing about the details of my proposed pricing scheme. This is fine, and we can agree to disagree about these details, but it misses my main point.

    The publishers should have developed their own pricing schemes/systems by now, and should be using them. They should not need any outside advice on how to price their goods, including my advice.


    On the topic of windowing – For all of my life I have waited for a year to buy a paperback copy of a new release; I can wait 90 days to get an ebook. What really irritated me about early attempts by publishers to try windowing was not the delay, but the uncertainty. Sometimes the ebook came out on the same day as the hardcover. Sometimes it was delayed a month. Sometimes it was delayed even longer or never came out at all. The price of an ebook, if there was one, also varied from book to book. None of the publishers, as far as I know, ever stated a firm corporate policy such as: ‘We will release every book we publish as an eBook, and we will release it 90 days after the hardcover release, and we will sell it at 85% of the hardcover price. If they had stated a policy, any policy, and then lived by it, windowing might have worked.

    I agree that publishers are unlikely to raise the wholesale price of their books, because they are trying to support the bricks-and-mortar supply chain. I also agree that their attempts are “ham-handed”. The goal of the publisher, however, should be to maximize the profit for the publishing house. If that means that traditional brick an mortar stores get wiped out by new internet-based business that can ship physical books to customers more cheaply, then so be it.

    In my opinion, however, raising the wholesale price of hardcovers, ebooks, and paperbacks across the board, affecting all suppliers equally, would not change the relative competitiveness of bricks and mortar vs internet based retailers. It would simply increase the publisher’s profit per book sold while reducing the total number of copies sold. Depending on how readers respond to higher prices this could lead to an increase or a decrease in profit to the publisher. If the publisher’s profit increases, then raising the wholesale price was the right move.

  4. The thing about windowing an e-book is that if someone wants an e-book enough to be willing to pay for it right now, the odds are good that unless this person is exceedingly moral, he will happily turn to his computer and type in “[name of book] torrent” and there it will be, courtesy of the people who bought the print version and a scanner. That’s not going to be the case for someone who wants a paperback. You can’t torrent a paperback. (You can check it out at the library, granted, but that requires putting in a lot more effort than sitting down at your keyboard.)

    This is partly why publishers were so eager to throw in with Apple to raise e-book prices across the board—they were fully aware that windowing e-books only drives many of your customers to the pirates when scanners and the Internet are involved.

    As for raising the prices of paper books, well, as you say, that’s up to the publishers, and in actuality raising the price could be either a good or a bad idea depending on the demand curve. My suspicion is that it would not help profitability, given how few people are willing to read anymore already, but I don’t have any basis for that beyond my gut feelings.

  5. As regards “windowing”, are there any statistics on how sales of eBooks influence sales of Hardcovers? I would guess that these are aimed at two entirely different audiences. Those who buy the Hardcover are for the most part interested in having a physical object. Ebooks would be more likely to compete with paperbacks.

  6. Consumers are under no obligation to subsidize the inefficiencies of any non-competitive business. Publishers have been slow to improve their efficiency and have clung dearly to an antiquated business model.

    It is no surprise that traditional publishers are facing stiff competition in the e-book market from more nimble competitors.

    With a huge number of book titles to choose from, price does matter for all but a few books. With full bookshelves, most of my book purchases are now e-books and I can afford to wait until overpriced books come down in price or can read something else.

  7. As someone who not only remembers that early period but was on the front lines, I don’t think what the publishers did then indicated their future behavior or was part of their selling strategy. The high prices, etc., were publishing’s holding action against the rise of ebooks.

    They hoped to either stop adaption of the media or slow it down enough to figure out what the heck their strategy was in this dangerous new media.

    A very telling story from this period was the president of a writer’s organization. She wrote for a major publisher, and she did everything she could to discredit ebooks and the authors who wrote for that media. The organization, through her, made life hell for these writers, and I still have arrows in my back from some of the successful writers there.

    When ebooks became a done deal and her publisher entered the market, this president was the very first author published and featured as an ebook author. (Insert your paranoid theory here. I sure did.)

    @Chris. Most of my reading friends would wait for the ebook to come out or get it in paper at the library. They wouldn’t upload an illegal book. I obviously have more honest friends than you do.

  8. Quote: They also mention the perception that Amazon is “[driving] down the perceived value of books” and that cheap indie e-books make it hard for traditional authors to sell their titles.

    I take a slightly different spin on what’s been happening in recent years. It matters less that Amazon has driven down either the real or “perceived value of books,” than that Amazon has turned an unhealthy amount of attention toward a book’s price as opposed to the benefits to be derived from reading it. Amazon’s attitude that books are mere commodities is what’s doing the harm. For prove, I point to the endlessless discussions, debates, and so forth we’re having over the “right” price for books and ebooks.

    I suspect that explains much of the Authors Guild hostility toward Amazon.

    Another harmful trend is the NYT bestseller mindset. Apart from those who read genres such as scifi or romance, I suspect too many present-day readers are playing ‘follow the crowd’ and reading bestsellers simply because they are bestsellers. It’s a bit like celebrities who’re famous for being famous. Bestsellers sell well because they sell well (due to publicity) not necessarily because they’re worth reading.

    Contrast that to when people bought a book recommended by someone at their local bookstore who knew their taste in books.

    Talking about the price of books is ridiculous anyway. A book that costs $20 in hardback, may take 20 hours to read, for an entertainment cost of $1 an hour, and you can pass that book along to friends. In contrast, this year, the average price of a movie is just over $8, or $4 an hour, which is four times as much and your friends with have to buy their own tickets. The contrast is even greater with Disney theme parks, which are now about $100 a day, and you’ll spend most of that day waiting in lines.

    In short, a good book is perhaps the best entertainment or informational value in today’s marketplace. Debating its price is absurd.

    –Michael W. Perry, co-author of Lily’s Ride, based on an 1879 bestseller.

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