One of my favorite stops on my recent paperback tour was Porter Square Books in Cambridge, MA. A book-seller there by the name of Josh Cook recently wrote a long blog-post about the economics of book-selling in 2012. I found it illuminating, and I recommend it to readers and authors alike.
I'll highlight one section. Concerning the costs of e-books, Josh writes:
To be honest, the persistence in the belief that ebooks should cost radically less than books is a little baffling, given that most of the articles that touch on the issue of ebooks point out that ebooks do not cost significantly less to produce than books. I'll read an article mentioning that the material overhead of production represents about 10% a books' overhead and sure enough someone in the comments field will argue that $9.99 ebooks are a publisher wide conspiracy. But what really baffles me about the persistence of this belief is how it also manages to fly directly in the face of conventional business wisdom.
No matter what a business does or sells the biggest chunk of its overhead is almost always going to be salaries for employees. This is practically a business axiom. And yet people seem to (or want to) believe that this axiom doesn't apply to ebooks. All of the people who produce an ebook are the same people who produce a book. Same staff, same amount of staff hours, same amount of employee overhead. Why should their prices be radically different? The problem is, of course, (I bet you can guess what I'm going to say) is that early in ebooks Amazon sold ebooks at dramatic, one might even say “predatory,” losses in order to encourage sales of their Kindle and “secure” ebooks market share. They created a price expectation completely disconnected from the actual cost of production. . . .
The thing is, the ebook price of a book should be able to come down over time. Once the overhead of the author's advance, editors' salaries, administrative assistants, janitors, publicity and the like, have been made back, the material cost difference becomes meaningful. Older ebooks, backlist ebooks, or even ebook editions of very popular books could end up in the price range people seem to want. And we already accept this idea of falling prices of books. The first hardcover edition of a book is more expensive, not just because of the cost of materials, but because it is the first opportunity for a publisher to make back all that people based overhead. When it comes out in paperback, the price difference (often about $10-12) doesn't just come from cheaper materials, but from having less of the initial overhead to cover. A fair ebook price would start out at 10-15% off the least expensive print edition (and most retailers would probably add an additional discount on top of that, given how little overhead they cost book stores), drop with each new cheaper print edition, and then, once the initial investment has been made up, drop a little bit further. In this model, they won't hit $.99, but this isn't a pack of gum we're talking about. This is the product of thousands and thousands of hours of work, that you can enjoy over and over again. For readers who put price first, it really isn't any different than waiting for the paperback or mass market edition, or, if you're really stingy, waiting for copies to enter the used book market, or, if you're really really stingy (or have run out of room in apartment), getting the book for free out of the library.
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