An often but ill-cited reason by anyone but the publisher really is that eBooks don't have print costs, hence they should be cheaper. This has been debunked numerous times by various publishers, claiming that the actual printing of the book only costs somewhere between 10% ~ 20% of the retail price, but no matter how many times this is repeated, no one seems to listen--or better yet, there is a cognitive dissonance between this fact and how much we value print. A better example is a query from the 90's that I read in a video game magazine: the inteprid fan was asking that because video games were now delivered via CD-ROM (as opposed to cartridges), why did video games cost $50.00 unlike music CDs which cost $10.00 (at the time). There are, of course, many answers to that question, from production costs (theoretically harder and longer to create a game) to marketing (music arguably gets free publicity from radios and MTVs) to economies of scale (music sells more than games). CDs might be dirt cheap (currently $0.15 here), but what you're buying, whether it's software, an album, or a movie, or simply art, is the content. No one is claiming that you should buy Adobe Photoshop for $0.99 because the DVD it's copied into costs $0.20.
"Content is king," however, can be a difficult concept to grasp at times. We're creatures of the physical world and content is intangible. It's easier, for example, to adjucate theft of physical property as opposed to intellectual property. In the case of the former, they either stole your bike or they didn't. With the latter, your "property" needs to be established (i.e. what are its unique characteristics), and then prove that the other party attempted to replicate it. Sometimes, it's clear-cut to experts (but not to the public in general). At other times, there's room for argument and debate.
To be fair, when it comes to the publishing industry, it's not simply a matter of ignorance on the consumer's part. Publishers, over the decades, have fostered the idea that hardcovers should be more expensive than mass-market paperbacks. They've been selling to readers that hey, because this book is larger and printed on better paper, this is significantly more expensive than the mass market paperback (they haven't explicitly stated this but insinuated it). The reality, however, is that a hardcover isn't that significantly more expensive than a mass market paperback to manufacture. The real reason why hardcovers are expensive is that it's being sold at a price than the publisher thinks the public is willing to pay for. Part of this psychological trick is that for certain titles, a publisher will release the hardcover format initially, and then a mass-market paperback one year later (to theoretically entice readers who couldn't afford the hardcover to buy copies of the book). They know that the early adopters--those who buy the hardcovers--are paying for the privilege of reading the book first (or at least before it gets sold as a mass-market paperback). Unfortunately, this fact isn't immediately apparent to most consumers (although it's observable if you notice the publishing patterns). Hence when eBooks started becoming lucrative as a business, publisher expectations were at odds with consumer expectations. Here's one of my favorite quotes from author Paul Cornell:
"Publishers have always thought that when you buy a hardback, what you're paying more for is the chance to own it on the day of publication. Paperbacks are cheaper because they come out a year later. The reading public, on the other hand, always thought what they were paying more for was the extra physical mass and quality. (Actually, a hardback costs, one publisher told me, only from 50p to a couple of pounds more to make.) So obviously publishers think an e-book, out on the day of publication, should cost the same as a hardback. And obviously the reading public think it should cost less than a paperback. From this difference in perception stem all subsequent horrors."Having said that, there are other cultures wherein it's acceptable of eBooks to be more expensive than print. Japan for example (see slide 12).
Still, you might not be convinced about the price of eBooks, at least in relation to print. Here are some examples of the advantages of each format.
eBooks (or to be more specific, ePub, and I'm assuming they're DRM-free):
Instant Delivery: When you purchase an eBook, you download it in a short period of time (i.e. less than an hour). Delivery time is actually a premium. That's why you pay Amazon an additional fee if you want to receive your shipment faster.
Durability: eBooks don't suffer from wear and tear. That's why HarperCollins is imposing a 26-checkout limit on eBooks for libraries, because they're sturdier compared to print.
Portability: You can store your entire library in your eBook reading device. Or a flash drive. Or email it to yourself. You don't need a suitcase to carry all your books.
Searchability: You can easily look-up words, search for specific passages, etc.
Bookmarks and Notes: While not exclusive to eBooks, it's easier to just bookmark a page or add a note to an eBook.
Free of Organisms and Certain Allergens: I have a special condition--I'm allergic to dust. This makes reading old books difficult. eBooks don't accumulate dust or harmful organisms (your eBook reader though emits radiation so there is that...).
Tangible: A book is tactile. You can touch it, turn the pages, etc. One would argue this is the biggest assest of print.
Flexibility: A lot of creative content can be conveyed in print. You can produce a footnote-heavy book. Or you can create pop-out books. You aren't hampered by technical limitations of code.
Reliability: You don't need an eBook reading device to read a book. As long as you have it, you can read it.
Loanable: You can loan the book to someone else or re-sell it.
Visibility: In the same way that I have allergies which prevent me from enjoying print, there are some people who, for various visual reasons, cannot stand reading eBooks. You can't sell a book to someone who can't read them.
Now the point of that list isn't to say eBooks are superior to print, but each medium has its own advantages. What consumers find value in, however, is relative. Most people right now will probably shell out $9.00 for a book simply because it's tactile and that more than outweighs any of the possible benefits of eBooks. And it's a perfectly valid reason: the previous generation, after all, was raised in a culture that prefers--and understands--physical property. That's not a condemnation of people who aren't willing to pay a lot for eBooks, but it explains their failure to articulate why they're not willing to purchase an eBook when it costs the same as the print version. When they use phrases like "I don't care" or "I just won't", what they really mean is "I'm attached to the tactile element of print and I'm willing to pay a premium price for it." That's why no matter how much logic publishers and critics might throw at readers (see my previous paragraphs for example), a lot of consumers won't budge because they're reacting from gut feelings. Combating emotions with logical arguments doesn't work all the time.
eBooks as a format, however, is only part of the story. The bigger issue here is how much eBooks should cost. Magic numbers have been mentioned: $9.99. $0.99. I dislike "universal advice" because it doesn't take into consideration the unique situation of publishers, authors, or simply of the business. Jennifer Mattern, who writes nonfiction, has books priced at $9.97, $17.00, and $37.00. You'd think that no one would buy her books but it all comes down to her game plan.
In genre, a better example is Clarkesworld. Its eBook editions cost $2.99 on Amazon and Barnes & Noble. They're currently experimenting with selling them at $0.99. Is that the right move? Well, here's one problem they have to overcome:
"The logical/mathematical side of my brain is screaming, NO, NO, NO, we would have to sell nearly 6 times as many books at Amazon and 5 times as many at B&N.com to maintain our current income."This is basic Supply and Demand. At $2.99, Clarkesworld is selling X number of copies of the magazine. In order for them to match the former at $0.99, Clarkesworld needs to sell 6X. Let's assume (for those who find variables too abstract) X is 100. To match the current income, Clarkesworld would need to sell 600 copies at $0.99.
The question--and why publishers and authors are experimenting--is discovering whether lowering the price will indeed give them those numbers (or exceed them). If it does, then lowering the price was a smart move. If it didn't, then reverting to the previous price is the right decision. (And then there is also the question whether this is a one-time deal [i.e. those numbers are valid only for one month] or if it can be sustained.)
And that's what most pundits don't realize: just because you lower your price doesn't mean you'll automatically get more readers--or at least enough readers to match your desired income. Let's say you first priced your book at $9.99 and you get 10 buyers each month. At $0.99, you get 100 buyers each month. Obviously the latter isn't significantly as advantageous, so you try somewhere in the middle, $4.99, and you get 50 buyers each month. Now at $4.99, you don't get as much readers as $0.99, but you are making more money than either $9.99 or $0.99 models. This should be the heart of the argument, at least if what you're interested in is profit and sustainability. It's possible that all you're interested in is gathering a large base of readers, profits be damned. That's certainly a viable long-term business model, and for the record, Amazon was a loss-leader until 2001 so that strategy paid off for them eventually. But if you're solely interested in acquiring a huge following, why not just give your book away for free using the Creative Commons model?
Speaking of the Creative Commons, there's also something we can learn from that particular model in relation to pricing eBooks. Not all books that are released under the Creative Commons license, or even pirated books, acquire a huge following. That's also the case with $0.99-priced eBooks.
If you genuinely think you can sell thousands of eBooks per month (factoring in your production expenses of course) with the $0.99 price, then go ahead. If not, then you might want to rethink your pricing strategy (again, taking into consideration your production expenses; The Blair Witch Project was a financial success after all because of the amount it grossed in relation to how much it took to produce the movie). Also do not confuse $0.99 with marketing. It's honestly hard to sell tens of thousands of copies of an eBook if you don't know how to spread the word that you exist (or if your reader base is less than that number).
Distributor/Retailer Business Models
Related to price points are the models used by distributors/retailers, specifically the initial ire the Agency Pricing drew. Honestly, Agency Pricing is just one method, and it is not inherently right or wrong. Individual prices--and publishers--can be blamed (i.e. when they set the price too high) but the model itself is not broken as some would like to claim. It's like saying Democracy is a system that is broken (and while there are certainly those who genuinely believe that, a lot of complaints are usually targeted at specific politicians and regimes).
Consumers, at the end of the day, don't care what business model is used for pricing books, as long as they end up paying the amount they think is right for books. If Amazon and Apple were to suddenly dictate that eBooks should cost $25.00, consumers would similarly be up in arms against them.
What Agency Pricing does, however, is shift the power from retailers to publishers. Now when Amazon was still dictating the price of eBooks (and it had good incentive to make eBooks a loss leader since they didn't need them to profit; they were selling Kindles), it wasn't a free market economy. Neither is Agency Pricing (Amazon for example can't suddenly provide discounts for eBooks). And I'm not saying the business should be a completely free market economy. In other parts of the world, there are other bodies that regulate the pricing of books (eBooks or otherwise), such as the government and whatever taxes they impose.
What's beneficial with Agency Pricing is that publishers can dictate the price of their books as represented by the market. Book A might be sold at $4.99 because it's selling briskly. Book B might be sold at $11.99 because it's not projected to sell as much. And sometimes, it's not about the quantities sold but production costs (i.e. Book B was more expensive to make than Book A when they're expected to sell the same quantities). A retailer won't care about these individual factors, as long as they get to sell books, since they're receiving a percentage of the sales anyway no matter which book sells. But that's just my side as a publisher-author.
One Size Fits All
It's not. If there's anything I hope readers take away from this, it's to understand the relativeness of everything. That's why it's possible for eBooks to be priced higher than print. Or why not all eBooks should be priced at either $9.99 or $0.99. Or why some consumers simply won't pay as much for eBooks (or print for that matter). Or what model is best for the industry.