Having read an article about e-book costs in the Daily Mail, I got wondering just how much do books cost, not to me the consumer, but to publishing houses, and bases on the lack of physical medium, what should an e-book really cost, logically?
I had a look online and some of the pricing break downs were related to John Grisham novels – I’ll reference that a little later with some figures, so I thought I would take a visit to Amazon and compare one of his latest books, The Litigators. As I enjoy reading and am looking to get a kindle or similar for Christmas, or in the sales, then this is a subject close to my heart, and wallet.
At the time of writing the Amazon pricing of The Litigators is as follows:
|Audio, CD, Audiobook, Unabridged||£11.96|
|Audio Download, Unabridged||£14.99|
Whilst the focus of this article is purely on the disparity between e-books and physical editions, I also found it interesting that the audio download edition was more expensive than getting a physical CD version. That just seems illogical. It should be noted, for balance, that the audio download is free with a 30 day free trial of Audible.co.uk.
As we can see from the pricing of the book, getting a kindle edition will cost £3.99 more. Pay more, get less. At least with a hard back version you get a physical medium you can touch, flick through and, should you wish, even smell. It seems massively illogical to have to pay more for something which would inherently cost less. After all, there are no costs for paper, ink, bindings or distribution – so why do we have to pay more? Let’s take a look at the breakdown of the cost of a book. Back in 2009, Cnet.com ran an article which gave a breakdown of the cost of a book, which I will be using for reference here. Prices on there are in US dollars, so I will convert those into GB pounds with an exchange rate of 1 GBP = 1.55470 USD.
- Pre-production £2.28
This will cover the cost of graphic designers for artwork, editors, proofreading etc.
- Printing £1.82
The cost of ink, paper, bindings etc. (the stuff you don’t get with an e-book)
- Wholesaler costs £1.80
The middlemen between publishers and retailers
- Author royalties £3.00
Based on a best selling author getting 15% royalties on the list price, then
- Marketing £1.29
Book tour, sales stands, adverts etc.
All of that adds up to a cost of £10.19. As the book we are using as an example has a UK retail price of £19.99, that’s a nice profit section of £9.80. What’s interesting at this point is that these costs raise the price of the book to above what Amazon are selling it at. As such the prices are clearly an over exaggeration by at least 32% for the publisher to make any profit. So, going with the minimum overestimate of 32%, the cost of producing a book is £6.93 and would leave a profit margin on a physical copy of £0.07 and £4.06 from those costs on an e-book.
As there are no physical printing costs on e-books, we can take the £1.82 printing costs and add them straight on to the profit margin. That’s a nice £5.88 for the publishers and Amazon to work out who gets what, based on the Amazon prices. Based on the costs above, and the fact there are no print costs, the actual cost would be £8.37, and when we factor in the 32% difference in what is an estimate cost, and what would make a book slightly profitable, the actual cost would be more along the lines of £6.53.
At that point most people will expect, therefore, that e-books should be the same price as the hard-back, but there’s something else to factor in. VAT. Yes, those three awful letters which infuriate everyone. For some wonderfully odd reason e-books are seen as a luxury and are therefore subject to VAT, which is not levied on regular books. There is a whole other debate around that part, mainly to do with environmental considerations. Surely the fact that I’m not going to require trees to be cut down, my book to be transported from the printers to the warehouse, and then from the warehouse to myself should give me a nice tax break so I don’t have to pay extra on top of the normal cost. At a tax rate of 20%, the cost of the e-book would be £7.83. Still more than the hardback, but nowhere near the cost the e-book currently is at.
Another thing to consider is that hardbacks are inherently more expensive to produce than paperback books. As the paperback books are retailing, in this case, for £5.99, then there is no reason there should be a £5 premium for saving the publisher some money. If a retailer and a publisher can make a profit from £5.99, and they want us to consider moving away from physical copies, which would cut their costs significantly (at least £3.62 from printing and wholesale costs, or £2.82 with a 32% adjustment on estimates from earlier, per book!), then they really need to consider reducing their profit margins on the e-books. By at least £5 in this instance.
I’m not saying that they shouldn’t make any profit, after all publishers are businesses, but they really need to think properly through their pricing if they are to avoid the mistakes of the music industry when things went digital for them. If they don’t get consumers on side, people will look for pirate versions of their work, and then everyone loses.
So, back to the initial question, what should e-books cost? I’d say they should be no more than the paperback version of the book. And absolute worst case they should be the same as the hardback edition. There’s no reason at all why this can’t be the case, especially when Andy McNab’s Dead Centre is priced at only £5.99 on the kindle, but is £9.00 in hardback. It would seem that Bantam Press has interests of consumers somewhere high on their list, where as Hodder & Stoughton are only considering their top line profit, and therefore don’t deserve an inbound link to their website.