Why We Need $4.00 Books

The day has come for publishers to offer a $4.00 book.

Most books are too expensive. Compared to lower cost alternative media sources, books are becoming niche consumables like caviar.

The high cost of books jeopardizes not only the future of books, but the future of the book publishing industry.

Unless authors, publishers and booksellers cooperate to bring down the cost of books, book publishing faces a painful decline, much as we're now witnessing with newspaper and magazine publishing.

Here in the U.S., most consumers already think twice before shelling out $7.50, $15.00 or $30.00 for a good read. If a book at the current prices represents a big purchase for citizens of the world's most affluent economy, imagine the cost burden for the vast majority of the world's literate people.

The growth in worldwide literacy has created a massive affordability gap between those who want books, and those who can afford them. Therein lies both the threat and the opportunity facing publishers.

The publishing industry has successfully responded to the price issue in the past by releasing lower cost formats such as the mid-sized trade paperback and the small purse-sized mass market paperback. Each lower cost format dropped the price 30-50 percent.

By offering customers a cheaper, smaller and less expensive format, publishers expanded the available market for their books and enabled a larger number of readers to gain access to affordable reads.

Imagine if books were only available in hard cover today. How many current readers would have long ago abandoned print books due to the high price and large size of hardcover?

Ebooks are a lower cost format, and therefore may hold the key to the book industry's salvation.

Many publishers view ebooks with a skeptical eye. After all, won't cheap ebooks cannibalize expensive print books?

This is the wrong way to examine the situation. Lower cost ebooks help publishers retain customers who might otherwise abandon books altogether in favor of lower cost alternative media options.

Ebooks also hold the promise to expand the worldwide market for books. Hundreds of millions of new middle class and literate consumers have come online outside the US, especially in developing countries.

Ebooks offer significant economic advantages to authors and publishers as well.

From a production perspective, publishers can convert print books into digital books at very little cost. Once a book is liberated as digital bits, the production, duplication and distribution of the book requires no ink, paper, fossil fuels, shipping boxes, physical bookstores or cash registers. The entire process becomes one of automated online self-serve transactions.

Since it costs the author or publisher next to nil to "print" each copy of an ebook, ebooks are extremely profitable on a per-unit basis, even at a low selling price.

By offering consumers a low cost digital product, the economics of ebooks create a virtuous, self-reinforcing cycle. The low price expands the available market by making it affordable to more consumers; low production and distribution expenses allow the publisher to earn a healthy margin; and the larger addressable market allows publishers to sell more units at greater profit margins.

The advantages of ebook economics will become more apparent as ebooks grow to comprise a greater percentage of book industry sales.

Some might fear that $4.00 books will eviscerate the earnings of mass market authors and publishers. The likely outcome isn't so simple. For the mass market, if publishers don't quickly satisfy lower price points, they'll continue losing customers.

Customers who prefer ink on paper will continue purchasing more expensive formats.

Not all books should be priced at $4.00. Publishers should segment their markets to ensure they're delivering a range of products and formats that offer the target customer value that exceeds each price point.

Some might argue book publishing isn't in trouble, as evidenced by the industry's continued growth. True, the industry has grown in recent years at 1.6 percent annually between 2002 and 2008, according the Association of American Publishers. Yet this growth is a mirage. Publishers are maintaining the illusion of growth by increasing prices. If we adjust for inflation, unit book sales have been in decline for many years.

What do you think? Would you buy more books if they were only $4.00?

Mark Coker is founder of Smashwords, a publisher and distributor of ebooks. He's also co-author, along with his wife Lesleyann, of Boob Tube, a satire about the daytime television industry.

Follow Mark Coker on Twitter: www.twitter.com/markcoker

Comments

[S1m0n]

The price of paperback books is what it is because of US publishing's strip-cover return policy, which results in an average rate of 50% of all paperbacks being destroyed rather than sold.

To get books into drug stores and magazine stands, books are sold on a sale-or-return basis. Most books have a shelf-life on those spinner racks of about a month, unless it's a hit. At the end of the month, the covers of unsold titles are torn off and returned to the publisher for credit, and new titles stocked in their place. Another month later, the same thing happens.

The result is that the price charged for every book* has to be high enough to pay for printing another one just like it that won't be sold.

*Mass market paperback. Other formats and some pocketbooks aren't strippable.

[comradity]

No I would not buy more books if they were only $4.00. Think more strategically.

Yes I know that discounting has been an effective competitive tactic. It is true that established, commodity products have increased sales by lowering price and blocked "generics" from stealing share. An original story published in a book and a new interactive media capability are not commodities.

P&G is a good example of a company that used discounting tactics to protect its established business, but returned to its core strategy to create new products that deliver incremental revenues and profits.

The P&G core strategy – offer products that reduce time spent on housework and free up time to spend on more enjoyable activities (like reading books). The result: Swiffer.

The solution is not to throw the “babies out with the bathwater.” The solution is for leaders to engage and stakeholders to respond to the challenge of recognizing what is good about their current products and how other media could add incremental value.

Katherine Warman Kern
@comradity

[CyberRead - Clint Brauer]

While ebooks are likely overpriced in their current incarnation, I disagree with the thought that pricing should be driven by "what the world's literate market can afford".

Maybe it makes business sense to pursue that pricing model and maybe it cannot. I would love to see some statistics and market tests to "back-up" that argument.

I also disagree that books sales are going the way of caviar because of price. Has someone conducted a survey or test with factor analysis to prove that theory?

My guess is book sales are increasing slowly for many reasons, not just price. In fact, I think most folks recognize that there is much more value in a book than any other form of media. It takes years to "produce" a book for most authors.

Albums can be written in a matter of weeks. They are $9.99.

Television news programs take a day or few days....some of them don't plan much at all. My DirecTV bill is monthly and is considerable. (and I question the value every single month)

Movies can take more than a year because the financiers behind the movies spend an inordinate amount on technology. Movie tickets are $10 or more from what I've seen on the coasts.

I've never written a book but am in awe of those that do write them. They are worth at least the amount that I pay to see a new movie that's out.

Clint Brauer
General Manager
www.cyberread.com

[Mark Coker - Huffpost Blogger]

Hi Clint. You make some fair points. I approach this from the the standpoint of both an author and a publisher/­bookseller­/distribut­or. From the author perspective, my wife and I invested thousands of hours and many more dollars to complete our book, so IMHO it's easily worth $100 a copy, which only works out to one one thousandth of a penny for each of its 100,000 words. From a bookseller­/publisher perspective, I see how much more popular free ebooks are compared to paid ebooks. It tells me affordability is an issue. I'm not advocating all ebooks go for $4.00. The main purpose of my post here is to challenge publishers to consider the advantages of a new, lower cost format.

[Jeanette McLeod]

Great discussion going on here, Mark. As a publisher of children's e-books [http://www.wizz-e.com ] we strive to add value to our ebooks not found in paper versions, such as read along to the audio as the words highlight, animated illustrations, click on unfamiliar words to hear them spoken, comprehens­ion/recall quizzes. For us the price reflects the additional benefits. However, to simply reproduce an electronic version of an existing hard copy book with no interactivity is incredibly cheap and should be refelcted in the price. Without added value why should a customer pay the same as a hard copy book?

[boballab]

To all those looking for DRM free, low cost ebooks there is already a publisher that does that, but only if you are a scifi or fantasy fan. That publisher is Baen Books, publisher of such authors as David Weber, Eric Flint, Lois Bujold and Robert Heinlein (yes that Heinlein). Baen offers ebooks in several formats, all DRM free and they do it in unique ways. The first way is something called the electronic advanced reader copy (eARC). What this is, is the final version turned into Baen by the author and they sell it 3 to 5 months in advance of the Hardcover comming out. After the book is released in paper format the price of the ebook drops from anywhere from $3 to $6. They also sell the ebooks in a bundle service called webscriptions. What this is, is that for $15 you get 5 books that they send in serialized parts. Baen also has a Free Library where you can download ebooks for free. Typically it is the first books in a series. For example On Basilisk Station the first book of the Honorverse books is on there. Baen has also had inbound CD'sin some of there Hardcover books that they allow to be copied and even be spread over the internet. Matter of fact you can download the entire Honorverse (except for Storm From the Shadows and the next book Torch of Freedom) from one website, as well as entire other series.

[Tricia Roth]

Couldn't agree more with you Mark. The publishing industry has been resisting a huge change that is good for the business, good for expanding the market of readers,good for keeping people reading as they age and good for the growth of world wide literacy. Readers should be able to choose the format of their choice be whether it is printed or provided electronically. Prices should reflect the cost of producing that format- which for e-books is clearly a lot less than a printed book. My company ReadHowYouWant http://www.readhowyouwant.com works with publishers to provide their content in multiple formats including 5 sizes of LP print (one size truly does not fit all, particularly as the population ages), electronic braille (so few books are made for braille readers),DAISY and e-books. I am happy to report that we currently have 70 publishing partners who are working with us to make their content accessible for all kinds of readers.

[buriedbybooks]

My issue with ebooks is not price but DRM. Digital Rights Management is the primary reason I won't switch formats. If I buy a paperback book (or a hardcover) I am free to sell, loan, donate my copy in whatever manner I wish. If I download an ebook, however, it is currently considered a digital product--not a book. Which means you are in essence 'renting' a book. You don't own it.

Adding to the concerns regarding DRM is Amazon's Terms of Service for their Kindle. And the recent dust up over their remote deletion of purchased books is even more alarming. With the increasing trend of geo-restrictions (similar to region coding for DVDs), publishers are discouraging the spread of ebooks globally by denying those outside of North America access to them.

While there are a few ebook publishers who do not use DRM, the majority do. And they seem to be arbitrary. While I can understand the concerns regarding piracy and intellectual property rights, the ebook landscape is not friendly towards long held standards and expectations regarding the First Sale Doctrine. Until that's resolved, I'll stick with my paperbacks.

[Bradley Robb]

Glad you pointed this out, Mark. I through some matchbook math (
http://www.fictionmatters.com/2009/04/08/ebook-pricing-math/) at a couple of New York Publishers about this very topic ages ago when I was advocating for the $3 eBook. That's when I was given a lecture on what a P+L statement is.

[Mark Coker - Huffpost Blogger]

Hi Bradley! Thanks for that link - good post. The ebook pricing issue causes flared emotions on all sides. Consumers want ebooks at a fair price that more closely reflects their perception of manufacturing cost. Publishers argue that the production, sales and marketing costs of creating a book (acquiring rights from the author, editing, proof-reading, packaging, printing, channel sales, returns, overhead) entitles the publisher to charge a price for the ebook that's more on par with the price of print book.

Both sides are right and wrong at the same time. Ebook or no ebook, a publisher will invest the necessary resources to create, market and sell their print book. The incremental cost to produce and distribute the ebook is practically nil, especially if the publisher implements the proper workflow to produce the ebook. Fiction ebooks are cheaper to create. Non-fiction, or those with more sophisticated layout, are more costly.

Publishers gain other benefits from ebooks. 25-50 percent of all print books shipped to retailers are returned unsold, since book retailing is a consignment business. Print books are also zombies - they never die. We share them, resell them, donate them, etc., and each time the author and publisher sees no income. Ebooks have no inventory returns, and most are licensed like software - they're for the sole use of the purchaser and cannot be shared, resold or redistributed. These qualities mean the publisher can sell ebooks for less than print and still earn a fair profit.

[Bradley Robb]

The big stumbling block that I've seen time and time again is that publishers are still very tuned into the world of scarcity economics, which is something that doesn't apply in the world of digital publishing.

As usual, we're in complete agreement on this issue. When you divide the cost to produce by the lifetime sales potential, the price for digital books falls down to nearly zero. When you factor increased returns for every eBook, profits might start out slimmer for lower priced eBooks, but over time the weight of the back catalog will allow publishers to take more chances.

I think risk aversion and Newton's First Law of Motion are the real culprits.

[BlackJAC]

For me it's a question of content and storage space, not price. I admit price factors into my usual decision to wait for the paperback reprint, but its smaller physical size allows me to maximize what I can rack on my shelves. If people want it badly enough, they'll pay whatever the price is.

[lilpeg]

Mark; There are already loads of books at $4 and under. They're called used books and books in the library!!!!

[Marilynn Byerly]

Here's why you'll never see a $4 ebook.

The distributors take a vast majority of the profit. In ebook distribution, the average cut for a distributor is between 50-66% of the book’s price. That means that the publisher can’t price a book too cheaply if it wants to sell ebooks in the venues where a vast majority of people buy books. The distributor won’t make enough profit to cover their costs so they won’t be interested, and the publisher will go bankrupt.

A small indie epublisher can't survive on between $1.33 to $2 a sale which would be a loss for most when you factor in the cost of creating the book and paying the author, editor, and cover artist their cut, and the big conglomerates would be selling at a loss for each sale.

The day the big publishers agreed to those massive cuts to the distributors was the day the possibility of a cheap ebook died.

[Bradley Robb]

Hi Marilynn,

The markup charged by digital distributors will change shortly. Mark's own company, Smashwords, only charges 15% of the cover price. Scribd keeps slightly more. Right now it's the big players that are putting the squeeze on publishers with their scarcity markups.

It's a big game of chicken right now to see who's willing to cut what first, and publishing is currently wrapped up in year zero. Those who arrive on the otherside will have learned how to leverage the law of the large numbers and build strong, continually profitable backlists.

Why? Because setting up a file server with a store front to sell eBooks across a wide variety of mediums is easier than Amazon wants you to believe.

[kwnewton]

I agree with a loft of this post, although I appreciate the irony of citing the ability to reach folks with less money via a format that requires at least a minimal level of technology. I quite agree that will be less of an issue with time, as hardware prices come down. I should mention the recent NY Times subsidy offer for buying a Kindle DX as an example that may become more common.

People often want to compare digital books and digital music but I don't think a lot of that comparison is valid. No one buys music they want to listen to only once, but not many people routinely re-read books. Movie tickets might be a closer match, certainly for digital books where you can't resell them. I'm not saying ebooks should cost what movie tickets cost. Movie produces have more limited venues; there are only so many movie screens and a finite number of movies can be shown at once. Not so digital books.

I own (and love) a Kindle and I welcome the advent of reasonably priced ebooks. I'm also waiting for publishers to apply the same quality assurance protocols to the ebook version as they do to the print. Right now that's not always happening.

When publishers are ready, I'm here.

[dhansen01]

Interesting take. I have to admit, I feel that you are missing a few interesting points. By offering a cheaper alternative might drive sales up, offering that less expensive product for a media that requires multi-hundred dollar hardware really only benefits your high end, early adopter client. Isn't a bit ironic that we would require someone to spend hundreds before they could get a cheap book. Here's a little of my fuzzy math. I'm sure an economics guru can point out problems, sorry - I'm a writer not a mathematician :)

Cheapest Kindle option - 299.00 (S/H + tax not included) + 10 books at 4.00 = 339
cheap paperback solution 45 books @ 7.50 = 337.50

That is a large discrepancy. For the reader that reads 1 book a week, it would take 3/4 a year to hit the tipping point.

@ 10.00 an ebook the total only rises to 399 - that would take 53 paperbacks to equal out. The problem in this solution is decidedly the hardware - not the cost of books.

one last rant - .99 music @ 5 minutes per song doesn't come close to the total entertainment value of a 250 page novel. Entertainment dollars per hour would be another interesting way to look at this argument.

fun topic - thanks :)

[markcoker]

Hi dhansen01, thanks for the comment. It's probably worth noting you don't need an expensive ereading device to read ebooks. Today, more people read ebooks on smart phones like the iPhone than on dedicated e-reading devices. In the next few years, billions of entry-level (i.e. "cheap") phones will be ebook ready. You can also read ebooks on your computer monitor. And for those who prefer the advantages of a dedicated e-reading device, prices are coming down quickly. Several are in the $199 range now, and I wouldn't be surprised to see a $99 device in 2010. I also wouldn't be surprised to see free e-readers that are sold with subscription plans, much like cell phones. The price of the device would paid by the ongoing subscription.

[dhansen01]

Hi Mark,

I can see what you are saying, but for now it is a major hurdle. The Iphone argument compounds the problem. Granted, it has a million other uses (I'm an addict) but it is even more expensive than the Kindle, apple is just more clever at getting at your wallet than Amazon at the moment.

I think the subscription model is a relevant discussion. You might be right, this could happen in the near future. Direct to consumer micro transactions are very enticing but until they offer things like, pay per chapter, pay as you read or a model like that it is still more expensive than a paper back. It just is.

The argument of whether digital is coming is moot, it's here, it's economics and like I said before - I ain't no expert on this topic - far from it.

good debate.