I’ve found some good blog responses to John Sargent’s post about Macmillan’s agency pricing model, which we reprinted the other day.

In his Kindle Nation Daily blog, Stephen Windwalker praises Sargent for at last addressing the general public rather than just the industry insiders at whom his earlier entries were pitched—even as he remains critical of Sargent’s message.

I had been critical of Sargent previously for addressing his earlier comments only to authors and literary agents, and consequently trying to position them to speak up on his and his company’s behalf, and this new post is well worth reading. He has not changed my mind, and I doubt he will change the minds of many ebook readers, but we will see. There are dozens of comments that give a good sense of the range of views generally in the ebook pricing controversy, and you may want to add your voice to those of other readers.

Over on GigaOm, Matthew Ingram casts Sargent’s post as an attempt to protect the print publishing model from e-books’ disruption. As an example, he holds up Sargent’s statement that the agency model will allow them to publish e-books simultaneously with the release of the print books, thus “[solving] the problem” of windowing.

Here’s the thing: This “problem,” as Sargent calls it, has been wholly created by publishers like Macmillan, who hold back the release of e-books in order to try and milk traditional hardcover and paperback sales for as long as they can. So now, in response to Amazon and others acceding to their demands on price, Macmillan is going to be good enough to stop doing that. This is the retailing equivalent of the serial killer who scrawls “Stop me before I kill again” on a mirror in lipstick. Could not the publishers themselves have stopped this practice at any time and avoided frustrating readers?

He further points out (as Windwalker did in a later portion of his own blog) that comparing $12-$15 e-books with $24-$28 hardcovers ignores the fact that those hardcovers are frequently discounted considerably when they aren’t moving, or by on-line retailers such as Amazon. A $15 e-book vs. a $25 hardcover is one thing, but what about a $15 e-book vs. a $15 hardcover?

Mike Masnick of TechDirt links to and agrees with Ingram’s post, and adds that Sargent’s segmentation of e-books into hardcover and paperback prices seems to show Sargent’s misunderstanding of market forces.

One of the reasons why economic forces work the way that they do, and the reason why infinite goods with zero marginal cost get pushed in price towards zero, is that buyers implicitly understand the difference between scarce goods and abundant goods. They implicitly recognize the marginal cost of making another good, and they mentally price products accordingly. Pretending that consumers don’t do that is assuming that consumers are stupid. And that’s an even bigger mistake than looking backwards instead of forward.

A Premium on Impatience

There’s just one place where I feel these blog posts are missing the point slightly.

The point of hardcover vs. paperback pricing is not to scale to the expense of production costs. It never has been. Hardcovers only cost a buck or so more per unit to manufacture than paperbacks. But they sell for three times as much. Why is that?

Partly it’s the perception of sturdier construction—reading a hardcover does not cause as much wear on the book as reading a paperback. But largely it’s the impatience factor. In the days before e-books, someone would buy a hardcover instead of waiting for a paperback because he wants to read that book right away. And he pays a premium for that impatience.

E-ARCs: Baen’s Hardcover E-books

It’s the same with Baen’s E-ARCs, the electronic advance copies of a book that Baen sells for $15 for several months prior to publishing the “fully-proofed” e-book version for $6. Nobody accuses Baen of price-gouging on electrons, right?

Well, all right, I have said in the past that E-ARCs were largely a waste of money: why pay two and a half times the cost to buy an unproofed e-book? But a lot of people buy them because not having to wait three more months to read the whole book is worth $15 to them.

I swore I would never buy an E-ARC, and stuck to it—until P.C. Hodgell’s latest Kencyr book, Bound in Blood came out, and like a fool I read the sample chapters. Suddenly, I had to know what happened next, and shortly afterward that E-ARC was mine. It’s a little embarrassing…but in my defense, it was a P.C. Hodgell book!

What’s Sauce for the Goose…

So yes, that is why hardcovers cost so much more to buy when they cost so little more to print: it’s a premium on impatience, and the greater revenue the hardcover version brings in lets the book earn out its fixed costs so that the paperback being cheaper doesn’t hurt so much.

I don’t see why publishers shouldn’t be able to charge the same impatience premium for e-books, if they can be trusted to reduce the price commensurately at the same time they bring out the paperback.

Some e-book fans may have a hard time understanding that time should be a factor, but the average person Ficbot spoke to on the bus didn’t see any problem with it. I suspect a lot of other consumers will feel the same way. If they don’t, then the publishing companies will figure out they need to lower their prices. Either way, as Mike Masnick says, the market will decide.


  1. Amazon conceded eBook pricing not hardcover pricing. I am sure the hidden gotcha might be that Amazon figures they will still make a buck and start dropping hardcovers prices for even more offerings. So the Big Six get their wish but end up on the wrong end anyway.

    That will be strange if the hardcover price at Amazon are $10 and the eBook is $15 or more. Amazon can then turn around to all it’s Kindle customers and say it was not their fault and they will have things like this to point to. While still making a profit either way.

  2. Nice synthesis, Chris, and I like your phrasing with the ‘impatience premium.’ I agree that this is what’s right at the heart of any hope that the publishers may have of sustaining their new pricing model for the long haul, but it seems like a double-edged sword. It may drive sales on highly-buzzed bestsellers, but it could fall flat for a lot of second-tier new releases.

  3. I personally am feeling a lot more affectionate toward Random House who stated it was NOT joining the High Price Consortium or whatever you want to call it. Helen Simonson’s delightful Major Pettigrew’s Last Stand was published by Random House on March 2nd for Kindle at 9.99. I was happy to buy it. This was the same release date as the hard cover. Likely there will be enough of these to keep me from being hurt by the “impatience premium” of the High Price Consortium. If I am impatient, I will get those from the library. I already have 4 pre-publication requests entered at my library system for books which will soon release for Kindle in the $14-$15 range. Some will pay that; most will not. I’d rather read it on the Kindle but still know how to turn actual pages.

  4. Random House is not any better than the rest. For example, because they only have the rights to Stephen King’s books in hardcover (Pocket/Simon & Schuster has the paperback rights), the MSRP of the ebooks are the same as the hardcovers. Amazon is discounting them to MMPB prices, and B&N just price matched today.

  5. It’s not unreasonable to charge an impatience premium. My concern is that publishers don’t understand readers. Amazon, for good or for ill, understands my buying habits intimately; they have all sorts of data on what that impatience premium is worth to me, and how long they can maintain it before I lose interest in the book and simply decide I didn’t really want it after all. Publishers have no clue about me. If they try to maintain the impatience premium as long as they have for the paperback release, they’ll continue to lose sales.

  6. Ultimately, the impatience premium is an example of the old school practices that publishers have been using for years. The problem is that electronic publishing changes the equation.

    Lets consider for a moment the music industry. For the longest time music commonly sold as both full length albums and as singles. With debut of the CD, singles started becoming less common as they cost as much to make as a full length CD, but had to cost less. In other words, the Music industry was built around the premium pricing of the full length CD. Ultimately though people tended to only want one or two songs on most CDs but were forced to pay the full price for a full CD. The music industry tried to hold on to the CD model for years after it became clear that people were tired of paying $15 for the two good songs they wanted. The ultimate result is that their customers turned to Napstar, Kazaa and ultimately the darknet to get the music they wanted. Only the introduction of iTunes has even slowed this erosion of the customer base… and they did it by allowing the customer to buy what they wanted cheaply.

    Now how does this relate to e-books? Its simple really; e-books are going to end up on the darknet. There is nothing publishers can do to stop that. If consumers don’t see e-books as being a good value, they are going to get their books from there rather than pay the premium that publishers might want.

  7. People complaining now about variable pricing over time for good that are just patterns of bits are a little bit late to the party. Computer and console games and movies have been priced in this way for years.

    And if you want something more cheaply, this pricing scheme is to your advantage. Those who want something immediately after release are, to some degree, subsidising those who are willing to wait a few months. I would expect that, in general, the more quickly an item recovers its fixed costs, the more quickly the price will move towards the marginal cost.

  8. I think publishers are missing a big boat here. The e-book can be released before the hard back book. So release it at say 10% over the price of the hard back, then when the hard back is released, lower the e-book to the discounted price of the hard back, say that which Amazon sells it for, then once again to the price of the paperback when that comes out and finally to an even lower price when the book either goes out of print or the sales slow down significantly. This way they collect on the “impatience factor” and also enjoy the long tail and no returns.

  9. Al, if you’re going to start spouting crazy ideas, why not get really crazy and not only charge more for that initial e-edition, but make it the advance readers’ copy, before the final edit? Then they can pay extra for typos! And then sell it, and all your other e-editions, without DRM? Now we can go out of business really quickly!

    Oh. Except that Baen has been doing this for close to a decade, and doing pretty well off of it.

    Well, we’re just consumers. How would we know what we want?

  10. Seems to me I have bought some of those packages where they release part of the book each month. You either pay $15 for the book and get another 6 free or you pay $15 for 7 books, either way it is a heck of a price. I think a fair price for a book is $6 as established by Baen a long time ago. There are lots of books in their library I do not yet have and am looking forward to them. Am still reading the Honor Harrington series at the moment.

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