eBooks: When the container has no value, what are you actually paying for?

I recently stumbled into a conversation with the lovely @Virginia from Booki.sh, on twitter. I’d waded into some discussion about the excessive price of ebooks in Australia vs Amazon’s pricing (for non-Agency pricing, obviously).

@PnPBookseller @fangbooks I’m yet to understand (as a reader) how an ebook is worth $15+. I get costings etc, but as a _reader_ it’s crazy.

@PnPBookseller @fangbooks personally $10 is the utter maximum I’d pay for a non-DRM book. $5 would be reasonable. #themarketdoesntlikeittho

Twitter is a great medium for forcing you to refine your point, but subtlety is often lost. What I meant is that, purely from a reader/consumer perspective and disregarding any production costs of an ebook, $15 is a ridiculous price to pay for a digital file. Virginia challenged me with:

@Cacotopos But as a reader, you’re used to paying $30 for books! And most of the enjoyment is derived from the words, is it not?

To which I eventually responded with:

@virginia enjoyment comes from the words, sure, but I don’t think of it like that, maybe b/c the $ is separated from the experience? Dunno.

@virginia Worse, a digital file has no value; the money I’m paying to acquire it is purely an ‘ease of acquisition’ fee. Much like e-music.

Her appropriate response was:

@Cacotopos So you really don’t value the content at all? Or place its value below the medium in which it’s delivered?

This stopped me in my tracks. She was right, in a way. Did I not value the content of the digital files I bought, the stories, the experience? The art?

Valuing digital files

For the record, I never ever never forever buy DRM-crippled files. In digital music stores, time has proven my point: I can now buy pretty much any music I want online and use it anywhere I like. My attitude when applied to the modern e-book world (which is about 10 years behind the music industry for digital media, in my opinion) means I can only buy a very narrow selection of content, but in compensation that content tends to be priced from $0-$4. Here in Australia, e-books are usually around the $15-$20 mark. And yes, the Australian dollar is worth more than the US dollar. This means we are paying slightly more than that in US figures.

It made me think deeply about pricing models, containers, and my attitude towards art.

An electronic file is the enemy of the scarcity model of retail/business. The scarcity model relies on a controllable flow of individual units of ‘stuff’. A digital file is defined by a (practically) infinite ability to be copied.

Immovable rock (scarcity model of book selling), meet irresistible force (infinitely copiable book containers). How d’ya do?

By definition therefore, a digital file by itself has no value. You could argue at best that its value is the cost of storing it, which at present is roughly 5 cents per gigabyte ($100 for a 2TB drive). This makes an ebook’s digital container at 1MB size worth approximately 0.005 cents. I think you’ll find most ebooks don’t get nearly that big.

So what are we paying for? I told Virginia that we pay for the convenience of access, that it was “purely an ‘ease of acquisition’ fee”, a diversionary channel carved into the free flowing river of digital content, easing my passage through the download process and charging a nominal fee for the service.

Can you value digital books like digital music?

I had arrived at this position through my experience with iTunes. iTunes makes the process of acquiring music super easy, and so I frequently pay my hyper-inflated Australian $1.69 to buy tracks through it. Note that I never buy albums, because $17 for a digital album is ridiculous in my opinion; luckily I can go elsewhere online and buy the same albums for $10 without much hassle AND THEY WORK EVERYWHERE (because the music industry abandoned DRM for obvious reasons).

But a book…a book is more than a 5 minute background ditty, surely? Books are hours worth of entertainment, regardless of how they are delivered. Virginia made me consider that perhaps I was still willing to pay for the content, separate from the value of the container; not all of the money I was spending on e-books was for the service of delivering my digital book to me.

Taken in that context, the total cost of the electronic entertainment (be it book, song or video) was actually broken into the service fee and an inherent content value that I had determined subjectively.

Breaking it all down

Applying this kind of value-breakdown to books in my head gave me a new perspective on buying digital media. The bad news is that it hasn’t changed how much I’m willing to pay for it; the good news is that my previously arbitrary valuations (why was I comfortable paying $5 for an ebook, but only $1.50 or so for a song?) now have some point of reference.

So, it roughly breaks down to this:

DRM: -$10 (yes, that’s a negative)
Short Fiction content: $1-$2 Book/Novella content: $3-$8
Digital container: $0 Paperback container: $5
Hardcover container: $15-$20 Limited Edition tinsel: $15-$20
Convenient online shopping: $1 Instant access: $1-$2

Using these components we can see that I’m comfortable paying:

$5-$10 (content + convenience + instant access) for an e-book.

$8-$13 for a paperback book (add various dollars for easy buying/shipping sites like BookDepository and Amazon)

$18-$28 for a hardcover (adjust for ease of purchase)

$33-$48 for a hardcover + Limited Edition tinsel (eg. signed, special cover, whatever)

Just out of interest, let’s calculate what it would take to get me to buy a DRM ebook from you, using all my upper ranges:

DRM -$10
content +$8
Convenient instant shopping +$3
optional Limited Edition tinsel
(how you would do this digitally I do not know)
(+$20)

$1-$21

So without Limited Edition tinsel the most I’d pay is apparently $1. Sounds about right. Not looking good there.

It’s possible to construct all sorts of offerings (eg. paperback book with instant digital edition download) and come up with a rough price that I would be comfortable paying.

Where to from here?

Obviously this is a purely personal assessment, but breaking down how I value the various components of a book that I’m buying, including the process of finding a shop, acquiring my purchase, etc, gives me a little bit of guidance and confidence when I make wild proclamations online about book prices.

I don’t know how useful this kind of breakdown is to people interested in pricing their books competitively, but it was an interesting journey for me, and it might help someone out there construct their own little matrix.

I would love to hear your comments below (they’re not moderated so please don’t hesitate to disagree with me).

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34 thoughts on “eBooks: When the container has no value, what are you actually paying for?

  1. Improving the container – beautifully designed ebooks, rather than some of the fairly appalling dross we’re seeing at the moment – is something I’m very interested in, but there’s a huge amount of inertia in the publishing industry. We’d love to be able to raise the value of ebooks to match their prices, rather than just assuming that prices must necessarily hit rock-bottom in order to be appealing.

    • I agree very much – cover art has never been as important as it is now (across both self-published and traditionally published books).

      The race to the bottom of ebooks seems to have slowed down a little too (in the US market, where there’s actually a bit of competition and activity). The old ‘oh no, everything will be $99 cent trash!’ prediction hasn’t panned out so much; it does seem there is a more realistic base-value associated with the content of ebooks. From my observations it seems to be hovering around that $5-$10 mark I keep stomping my feet in support of, particularly for self-published work where the price is more market-driven than that set by publishers.

  2. Part of the challenge for the ebook designer is that the quality of the reading experience is also affected by the device on which the book is read. The nasty typography on a (hardware) Kindle, the too-small-but-convenient iPhone, the larger-but-so-bright iPad; what effect to they have on your perception of value?

    • That’s a great point too – consider the as-of-yet unsolved problem of typesetting in a flowing layout like epub. You get ugly rivers of empty space through pages.
      Worse, letting a reader select their own font, resizing the text – all these make it impossible to have the kind of quality control over layout that publishers are used to.

  3. Really good post.

    I had a brief look recently at ebook prices purely as a commercial comparison. I hadn’t thought of what intrinsic value I might be putting on them.

    But I should raise another point: I don’t buy many real books anymore because the price on the shelf is often north of AU$15, usually much higher. I baulk at paying $35 for a trade paperback of an acclaimed novel by an author I haven’t read before. Small wonder I won’t pay AU$30 for an ebook of an author I actually do know. Yet the paperback was AU$21.

    So I came to two initial conclusions: 1. publishers are fighting the move to ebooks by deliberately pricing them too high. 2. publishers have hated the lower price point for mass-market paperbacks for forever and are now trying to “teach” the public that books have been too cheap all along.

    But I also know how much it costs to actually print a book. So then I realized publishers are really just trying to make as much money as they can. First big publishers to buck the system and price ebooks decently is going to cream the others.

    • My understanding (through my limited exposure to the topic) is that publishers have definitely been trying to keep ebook prices equal to or close to physical book prices, because they erroneously believe it is one or the other for readers. In my experience, I buy a digital book and then the physical book if I want to keep it.

      An earlier post of mine (https://cacotopos.wordpress.com/2010/07/17/epublishing-paperbacks/) talked about how ebooks are the new paperback – cheap and disposable. Granted, that is a year-old opinion, so the best-before date has probably kicked in by now. 😉

      • You’re still right about one thing: publishers are still figuring out this Brave New World.

        I haven’t started collecting ebooks yet: I’m still to buy an ereader and have been put off by the prices of ebooks of authors whose books are on bookstore shelves. I don’t know yet if I would be the sort of reader to purchase both.

        But I know I’m not the sort of reader who throws paperbacks away. I buy books to keep and will probably continue do so once I start purchasing ebooks.

        Publishers need to pay attention to what people are *actually* paying in retail for paperbacks, instead of what they tell distributors to charge. I would be happy with reasonable prices for ebooks, but that means less than retail paperbacks. After all, the ereader still needs to be bought first.

  4. Interesting post. Sometimes I’ve paid over $15 for an ebook just because I’ve desperately needed something to read while travelling and haven’t been able to access a book store. On those occasions, I have wondered what it is exactly that I’m paying so much for. I’m willing to pay a lot of money for a good printed book, but I think I substantiate that with the whole ‘it’s a tangible object’ reasoning.

    As for ebooks? I’m still not sure what I think about the prices. I can’t justify them costing the same amount as a traditional book because the cost of printing etc just isn’t viable. Then again, I have to admit, if I see an ebook at too low a price I tend to question its quality, the author, the content and/or the writing. With self publishing becoming more and more widely available, it seems that while it offers an opportunity for some great work to reach a wider audience, it also allows for a lot of rubbish to enter the market too.

    Conclusions? I’m not I’m not prepared to pay for the cost of printing something that’s not printed. However, I would neither demand the price be set at the supposedly low cost of making it digital (writers need to make money after all!). I am more than willing to pay for quality content plus the small cost behind making it digital, and I expect that to amount to less than a traditional printed book.

  5. Pingback: What is an ebook actually worth to you? When the container has no value – via @Cacotopos | Literarium – The Blog

  6. the ‘container cost’ of an A-format, mass-market paperback is pretty small as well, but the primary reason a mass-market edition is cheap(er) yet doesn’t appear for up to a year after the first ‘expensive’ hardback or trade paper edition isn’t to do with publisher ‘profiteering’ but with them *recovering fixed costs*. Once a printed book goes into a second, cheaper format, that’s an indication that it has made back the publisher’s initial investment and it’s starting to be profitable (so they can afford to sell it for less)*. Logically, if the ebook is a first-release format (and it has to be — ‘windowing’ is just dumb) then its initial price has to factor in any author advance, editing & design, marketing & promotion, regardless of the ‘container’ it’s in. I tend to agree with you that backlist ebooks should come at a minimal cost — the only imposts for the publisher there are any re-formatting and digital infrastructure costs and author royalties — but new-release titles have to make back the publisher’s investment somehow, whatever the format.

    *p.s: notice how few Australian books ever get released here as an A-format pb? That tells us that very (very!) few locally published books are genuinely profitable for their publishers.

    • Oh, absolutely. I want to emphasise again that I was trying to approach the figures from a reader-only perspective. I’m roughly aware of the upfront costs associated with book production, but I didn’t want to bias my ‘gut feel’ approach as a customer. The majority of people won’t even have a rough idea of the total costs of book production, so I hope my approach has some validity.

  7. I can understand the arguments, but I still refuse to pay more than $10 for a digital file. I buy paperbacks and value their tangible nature. Despite valuing the content, I cannot bring myself to pay so much money for something I can’t touch. I tend to buy the paperbacks as well as the ebook because I like seeing my room covered in books. Books are an obsession for me and looking at my collection brings me a sense of elation. Opening a book gives me a sense of peace and contentment and smelling the scent of paper and ink makes me happy. I value the story equally on the method of delivery, but I am not willing to pay more than $10 for an ebook file when I could just buy the paperback and have something I can hoard for the rest of my life. I do not get that sense of ownership from scrolling through the menu of my ereader. I understand the argument but I would not pay the same price for an ebook as I would for a paperback. I would consider paying a little more if there were other files attached to the ebook (zipped folder with artwork and playlist, or other relevant files) but not for one ebook file. I have no guarantee that an ebook file will last as long as a physical book. I just can’t bring myself to pay that much money for something I can’t touch.

    Added to this, I buy the ebook when it first comes out in hardcover or trade paperback, and then buy the paperback for keeps. Why would I pay the same price for both? I would be smarter to just fork out $35-55 and buy the bloody hardcover! That was what I wanted to avoid when I bought my ereader.

    I also have a indie bookstore I frequent which caters to all my speculative fiction needs. If I was isolated in the country, hours from a bookstore or library, I would concede the “ease of use” argument, but unless I am forced to move back to my parent’s home, I can buy books with little effort. The ONLY value an ebook has for me is the actual story. A paperback (or hardcover, which I still sometimes buy for favourite authors) has so much more to offer! I will not be changing my behaviour. I see it as a point of rebellion. I will not pander to the Australian Publisher’s demands and pay a ridiculous price for a digital file. I still buy my music in physical form too. I don’t trust technology not to change. I LIKE owning books and cds. They have so much more value than just the story or the song.

    Sorry if this was a garbled reply. I am in desperate need of caffeine.

      • Yes, basically I agree. The figures didn’t make sense to me, but that was because I am doing data entry this morning and need a few cups of strong tea before I see numbers as anything other than squiggles to copy.

        I have only talked to one or two people happy to pay higher prices for ebooks and they have all be a part of the publishing industry. I would be happier if the price meant the authors were paid more, but I still couldn’t justify paying that much for a file.

        I doubt you will be surprised about how many readers agree with you. After all, why buy one expensive ebooks when you can buy two for the same price. Serious readers will never own enough stories. We’ll be spending about the same amount on our books, but more expensive ebooks mean less books (unless you have an extremely disposable income, in which case, I would be extremely jealous!). I have no concerns with the quality of the ebooks I have been buying. And buying a $1 ebook to test that an ebook store did in fact sell to Australians helped me to discover a new author to autobuy, as well as buy her entire back catalogue.

        */ end rant /*

  8. Great post.

    You give a nod to the fixed costs of producing a book (costs the publisher has to cover whether the book is printed or electronic — ie author’s advance, editing, marketing, maintaining an office, etc.), but as you make clear your discussion of the “value” of a book is focused on what the reader is willing to pay. A fair enough exercise, but publishers can’t price books based solely on this sort of valuation. Readers might argue that 99 cents or $5 is a “fair” price for an ebook, based on how much pleasure they derive from the product or how important books are to them — but if that price won’t cover the publisher’s costs, it’s not a sustainable price. In the short term, some publishers might decide to price some books super cheaply in order to boost sales and to compete with self-published authors (who don’t have to worry about many of those fixed costs), but in the long term they will still have to claw their costs back somehow — either by upping the price of the rest of their books, cutting costs, or a combination of both.

    All this is complicated by the fact that in Australia, ebooks are still a pretty small slice of the market, so there are still print costs to keep in mind for nearly every book. These print costs will be factored into the retail price of both the printed and electronic editions, because the project as a whole needs to break even — ie, ebook editions won’t be costed in isolation; their sales will be expected to help to cover the cost of producing the project as a whole, including the cost of printing the physical edition, and their retail price will reflect this. This might seem unfair to ebook buyers, but I’m pretty sure that’s how most publishers are still approaching their costings.

    Comments like the one above that “publishers are really just trying to make as much money as they can” suggest a flawed understanding of the economics of publishing, I think (full disclosure: I work for an Australian publishing company!). Margins in publishing are very tight. Publishers are constantly battling to keep costs down, a book is doing well if it breaks even (especially in the current retail climate), and most people in the book business, especially authors and editors, get by on not very much money at all. It’s not a case of publishers trying to make massive profits — they’re simply struggling to break even and keep their businesses afloat. Which isn’t to say they’re perfect or that there aren’t ways they could make their businesses more efficient. But I think readers who care about books need to remember that there is a difference between a carefully edited book and a sloppily produced self-published one, and that a higher price may well reflect this difference in quality. Publishers are counting on this, anyway — we’re all hoping that even though there are plenty of 99c books available, readers will value professionally produced content enough to pay a bit more for it. Just how much more is the question, I guess — probably the answer will end up being somewhere in between what publishers and shoppers hope for, and your post raises some excellent points about how readers are assessing this question.

    • Thanks for a great comment, Dolores! I agree absolutely that there is a difference between an achievable and sustainable price and customer expecations. I think addressing this pricing approach from the publisher’s perspective would require another few posts, and unfortunately I have only a layperson’s understanding of it. Would be fascinating to read, though.

      It’s interesting that there is a marketing failure here, not so much of product pricing, but of managing reader expectations: if the consumer feels that they are being gouged on price, mostly because they are unaware of the actual fixed costs involved (as Tim pointed out above), then all publishers suffer from the (unfair) negative customer backlash.

      I can’t pretend I know the answer, though.

      • That’s one of the keys: Managing Reader Expectations. IMO, this is being done poorly at the moment. Readers are expecting ebooks to be cheaper than mass-market paperbacks. Publishers haven’t shown why they believe this is not possible. But I’m keenly waiting.

      • Absolutely. That conversation is currently being driven by:

        Amazon

        Hey, we’ll sell this for a price which is actually below cost, just to get you in. This loss-leading is invisible to you so we’ve lowered your pricing expectations.

        Self-Publishers

        Read my work, read my work, read my work at any cost.

  9. Dan Ariely has some interesting stuff to say on the issue of economics and publishing (such as at http://danariely.com/2011/04/10/the-rationality-of-one-star/).

    Economics isn’t always an intuitive system, and we apply different values to our exchange system depending on what’s involved. In hindsight, I wish I’d studied more economics in the past – I never realised just how much sociology and psychology was involved until recently.

    The current changes in the publication industry are interesting to watch, but suck to be in the middle of. I feel as a writer that it’s a shit time to be stuck in between two market systems. Ten years in the past or ten in the future would be great, but right now (I still have no idea what’s happening with TS’s ebook situation, in spite of my agent nagging the publisher) the evolutionary processes are frustrating to make heads or tales of.

    • One of Joe Konrath’s (@jakonrath) recent blog posts described how he signed up with an Amazon publishing imprint, which aaas the best of both worlds: marketing and distribution grunt combined with authorial input and control. To be honest, in my view (without any background in the publishing industry), this is the only viable future model. It just seems to me that traditional publishers really don’t value their mid list authors at all. 😦

      • Right. Therefore their value to people actually buying books has decreased. Which seems to be reflected economically. Plus with cutting back staff the actual product is of lesser quality in a usability sense.

        Konrath can sell books to anyone in the world, especially digitally.

        An Australian with an Australian only contract cannot. Is also currently lucky to sell here at all, and cannot overseas.

        An Australian with an overseas only contract can’t sell books here. Not to mention dorkbrains like Winton that presumably refuse to.

  10. Australian customers are definitely being gouged on price for foreign books when you read things like ‘the Australian sales from a particular UK book can be 33% to 50% of our cash.’ Despite the huge differences in populations.

    Stephen King paperback, USA. $8. Stephen King paperback, AU $22.

    Are Australian publishers 2-3 times worse or more inefficient? Especially as bunches of the books are ‘published’ in the sense only of having a sticker put on them with a different price. Then this money goes to foreign authors and foreign companies. Can’t be spent by customers on other local businesses either.

    A reasonable consumer might also expect to see a bit of a price decrease when the dollar jumps around 30% higher than in historical value.

    Reading Mike Shatzkin can be entertaining – like databases and analysis are almost a brand new idea to the publishing industry. Hardly any wonder they are doing not so well in comparison to other industries.

    Not to mention innovation or entrepreneurial spirit seems to be completely and utterly absent in the Australian flavour.

    • I have no idea why your comment ended up in spam, btw. But yes, there is a huge problem with Australian consumers being unable to understand why prices are so very different. I could postulate many reasons, but the reality is that the publishing industry isn’t doing a good job at all of explaining to us why we should pay more for what looks like the same thing.

  11. But the consumers realise that sometimes it IS the same thing. e.g. getting an English book (which may have been printed in China or somewhere maybe) that is still completely English, and the only thing difference is an Australian price on it. Something that has no value at all to the consumer. In fact a negative one if it is a sticker or something like that that can reduce the physical quality of the book.

    I am pretty sure most of us wouldn’t mind paying a little bit more taking into account GST etc., but 300% or thereabouts is ludicrous.

    So if the Australian publishers that are rump offshoots of English, American and French or German companies have said screw you to both their readers (on price, format, timeliness, etc.) and their retailers (on Parallel Imports lobbying and pricing, etc. which now, as we told them would happen is killing off their retail partners) why do we actually need them?

    If they disappear, the actual small percentage of their content that is Australian in-copyright work of interest only to Australians can easily be handled by local companies. And if such organisations only handled locals we actually could give them tax or legislative concessions for cultural promotion without rubbishy free trade reasoning getting in the way. Plus take up export opportunities in the digital arena that keeps the money in the country.

    Anyone want to start a Dymocks Dead Pool? That might be interesting.

  12. I love ebooks, but when it comes to price, no they are not worth the same as a physical book.
    A physical book can gain value, (become scarce, collectible) can be sold for at least part of the money back, can be shared among friends and family until it falls apart..
    Whereas an ebook, I can’t even share it with one friend, much less onsell it, so no, I am not going to pay over $10 for an ebook.

    • That’s a very good point – the rights over your ebook are currently zip and void. You can barely open the damn thing on your ereader of choice, usually. However, this is a factor of DRM, and DRM is by definition broken and finite. Eventually there will be no DRM on books – your ability to give them to friends will be infinite, but correspondingly the resale value will be $0. Interesting times ahead.

  13. I wonder how long it will be before the space occupied by a physical object (of any kind) will be something we resent, and, thus, want to pay less for? Is that fifty years off? Twenty? In Japan, for example, it’s already happened, and digital reading has become popular much more rapidly (partly) as a result… there’s a very real cost associated with housing a collection of printed books.

  14. Less. The younger generations are squeezed out of the real estate market more and more – UK of course has a big problem there with its tiny landmass a bit like Japan, but others, too, and dragging huge amounts of crap around will not be doable or affordable, in storage terms.

    • Hmmm, yes and no. We won’t be able to offer digital products at a premium because ‘otherwise you’ll have to buy the physical copy’, because it doesn’t work that way. Remember that digital files are trivially available for free, and increasingly so. So we have to sell added value with our files, for example membership to a community such as ReadCloud, which might be available only to legit purchasers of content. As we know (rant for a later time) DRM is an expensive imposition that doesn’t work, so sellers can’t rely on that to save their business models in the move to digital.

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