Why Do eBooks Cost So Much? (A Publisher’s Perspective)

At least once or twice a week someone asks me, “So why do eBooks cost so much?” This is a fair question. After all, digital publishing eliminates the costs of physical manufacturing and distribution. What expenses do publishers have left?

3D Rendering of the Word “eBook” Using Conventional Type - Photo courtesy of ©iStockphoto.com/Franck-Boston, Image #12661284

Photo courtesy of ©iStockphoto.com/Franck-Boston

As it turns out, plenty.

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Let me begin by putting things in perspective. First, the retail price has already been adjusted. As you are probably aware, Amazon is selling most eBooks for $9.99. That is already roughly half the price (depending on the format) of the typical physical book.

While Amazon is currently buying these books from some publishers at a discount off the physical retail price of the book, this will ultimately change. When it does, publishers will net approximately 70% of the retail selling price or $7.00. (This is often referred to as “the agency model.”) This will fluctuate up or down, depending on where retail pricing levels ultimately land.

Second, physical manufacturing and distribution expenses cost less than you think. Some people assume that these two items represent the bulk of a book’s costs. They don’t. Together, they account for about 12% of a physical book’s retail price. So eliminating these costs doesn’t do much to reduce the overall cost structure.

Publishers still have to pay for acquisitions, royalties, editorial development, copyediting, cover and interior design, page composition, cataloging, sales, marketing, publicity, merchandising (yes, even in a digital world), credit, collections, accounting, legal, tax, and the all the usual costs associated with running a publishing house.

In addition, publishers have to incur at least three new costs:

  1. Digital preparation. Granted, most new books start out as a digital file. If they aren’t already digitized, then they have to be scanned or manually keyed in. But that’s only the beginning. Publishers must then format the books, so that they work on all the various eReaders.

    Currently, there are about six major formats. Some are similar, but each has its own nuances and quirks. In addition, publishers must collect and add all the relevant metadata, so that customers can actually find the books when they search for them.

  2. Quality assurance. Once the publisher gets the eBook formatted for a particular eReader, he then as to take it through a quality assurance process (often referred to as “QAing” the book) to make sure that each of the major eReaders renders the pages correctly. This is a time-consuming and laborious process.

    This is fairly easy with books that are straight text. But few are this simple. When you add epigraphs, pull quotes, tables, charts, graphs, illustrations, footnotes, etc., it quickly becomes complicated. In this sense book publishing has become much like software development. At Thomas Nelson, we have seven full-time people managing this process, and we’re currently looking for three more.

  3. Digital distribution. Once publishers have finished the QA process, then they have to distribute the files to the various eRetailers. You might think Amazon, Barnes & Noble, Apple, and Sony are the only ones out there. They’re not. We are currently distributing our eBooks to more than twenty separate accounts.

    Each of these has a different upload protocol and digital asset management system. When something changes in an eBook (e.g., simple corrections or a new edition), publishers must re-distribute the new file and ensure that each eRetailer has the current version. Publishers must also collect payments from these accounts, ensuring that they are getting paid for each download, so they can, in turn, pay their authors.

So far in our experience at Thomas Nelson, the elimination of manufacturing and distribution costs are being offset by retail price reductions and the three additional costs I have outlined. The good news is that we are making about the same margins, regardless of whether we sell the book in physical form or digital.

As a result, I don’t expect eBook retail prices to come down any more. If they do, then publishers will have to figure out how to make it work. But for right now, I think the pricing is fair, based on the associated costs.

Question: What questions do you still have about eBook pricing?
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  • http://joannamuses.com Joanna

    Why do ebooks cost more depending on where you are buying from? Because I do the right thing and register with my real Australian address rather than a fake American address on sites like Amazon I tend to get charged more (usually $2 extra on amazon). Surely it isn’t any more expensive to sell an ebook to someone in Australia than someone in America?

    • Liz Borino

      Are there special taxes in Austrlia?

      • http://joannamuses.com Joanna

        Not when buying from a site outside the country.

        • http://www.michaelhyatt.com Michael Hyatt

          I would think that even if there are, those would be added to the same retail price.

    • http://www.michaelhyatt.com Michael Hyatt

      I honestly don’t know. That doesn’t make sense to me either, unless it has to do with the eRetailers costs. I’m stumped.

    • JFK

      It easy, publishers try to make money. Books x price, they try to hit the sweet spot which is different in each country and even in countries. There are other things of course, tax’s regulations etc. but it all comes down to maximising profits.

  • http://mrshields.com Adam Shields

    That makes lots of sense for newly published works. What does not make sense to me is the high cost of the back catelogue. If there is a paperback (especially a mass market paperback, which I know Thomas Nelson does not do much of) then there should be a corresponding reduction in cost. Instead I can point to hundreds of cases where the ebook at Amazon is a couple dollars more than the paperback.

    I think most people understand a hardback at $10. I am even willing to spend $12 or $13 for a fairly obscure book. But I am not willing to several dollars for an ebook than I can for the paperback (or sometimes for the audiobook.)

    • http://www.michaelhyatt.com Michael Hyatt

      I definitely would not spend more for a a digital book than a paperback, except in very rare cases.

      It is true that backlist books are more profitable, but that’s the publishers reward for taking the risk on the frontlist (or new) books. What you don’t see are the 85% of books which never make it to a second printing because there was not enough demand to warrant it.

      The fact that publishers can now make everything available forever via digital publishing (the much ballyhooed “long tail”) make eventually change the economics of this. But publishers won’t volunteer to lower these prices unless the market demands it. Right now, that is not happening.

  • Andrew Brotherton

    I didn’t know all of that went in to making an e-book. I also don’t think they will go down very much at all. I think someone like Amazon creating a subscription service for the Kindle or Barnes and Noble creating a subscription for the Nook would take a lot of the attention of the price of them.

    • http://www.michaelhyatt.com Michael Hyatt

      I think the subscription or rental model is an interesting idea. We are doing some modeling on that now.

      • Anonymous

        Booooo

  • Patricia

    So glad to have this information, because Kindle prices are rising and I often think it is just gratuitous price inflation. Still, the issue of QA — while you might be checking format, many eBooks I read (and I have acquired and read hundreds) often contain typos and odd symbols in place of characters.(from scanning, I imagine. While I appreciate the nature of the digitized book, I believe the electronic copy requires proof reading word for word. Its formatting needs consistency just as a physical book does.

    It’s also good to know that the production costs of physical books is not the greatest expense to publishers. Yet, that notion seems to fly in the face of limited runs for some books, page limits imposed on certain kinds of books etc.

    I love my eBook reader. The convenience cannot be quantified. There should soon be a day that children are not required to carry bags of books on their young backs, but to carry their electronic reader in its place.

    As a reader, I often purchase both the eBook and the physical one. The ebook for notes and marks that will never (with luck) disappear, and the hard copy to look at, handle and love.

    • http://www.michaelhyatt.com Michael Hyatt

      I find myself often buying both, too

  • Kingsly

    why do eBooks cost so much? I had this question for a long time. Thanks for clarifying in details. This write-up is an answer to my question.

    • http://www.michaelhyatt.com Michael Hyatt

      Excellent. That is what I was hoping. I wanted a post that I could link to whenever I get asked this question!

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  • http://www.ministryelements.com/blog Jason Simmons

    Great Post! This is E publishing 101. Thank You.

  • http://charphar.wordpress.com Charlie

    I, for one, am pretty much satisfied with the pricing of ebooks. The fact that I can browse the Kindle Store, select the title(s!) i want, and download them for way less than the dead tree version still blows me away!

    I want the best price, sure. But the “best” price has to take into consideration all the factors you mentioned in your post. I also believe strongly in the “unseen hand” of the market to effectively and fairly regulate pricing, etc.

    So far, so good for me. Thanks, Michael, for the insight!

  • http://ronlane.wordpress.com Ron Lane

    Michael,

    Thank you for this explanation. While I realized that there were still costs involved in putting together an ebook, I still learned a lot.

    One other thing that you did not mention was the fact that you still have normal overhead costs no matter which type of book is created.

    Thanks for being so open with us about this subject.

    After reading this, one could now understand that even in the digital world, you get what you pay for. Which would explain the quality of some of the electronic versions of books that are either free or low costs (under $5).

    • http://mrshields.com Adam Shields

      Honestly, I have seen as many errors in the high priced books as I have in the cheap ones. I have enjoyed many of the lower priced books as much or more than the more expensive ones. It is more about the publisher than the price. Some publishers seems to have more errors.

  • http://www.abnormalmarketing.com Fiona Bosticky

    Hi Michael, I have a question: Are there certain types of books that are more popular as ebooks than as traditional paper books?

    • http://www.michaelhyatt.com Michael Hyatt

      Unfortunately, we don’t have enough data yet to make any real assessment. eBooks are only about 2% of our company’s revenue at the moment.

      The early data suggest that fiction is the most popular because it is so consumable.

      • http://www.abnormalmarketing.com Fiona Bosticky

        Wow, only 2%, there must be amazing potential there. Especially with the new lower priced Amazon Kindle’s hitting the market recently. How long have you been officially producing ebooks?

        Makes sense about the fiction.

      • http://joannamuses.com Joanna

        That makes sense about the fiction. Most fiction I’m probably going to only read once so digital works great whereas non-fiction I’m more likely to want to read more than once, take notes, quote it (so need proper page numbers),lend out ect. so print makes more sense for those.

      • Let’s think about this…

        Maybe that 2% would increase if the prices went down. I don’t feel the explanation here justifies higher prices than paperback. I’ve seen a large number of books where the paperback is less than $5 yet the ebook is $9.99? This doesn’t make sense.

        As far as digital format convertion fees I just don’t see that either. I can download 10 different FREE programs that easily and quickly convert between formats. They work effectively and I don’t see why anything other than that approach would be used.

        Also let’s look at paper vs. digital. With paper books you have production costs for each book. I don’t believe they’re only 12% but let’s assume they are. The author also gets about 10%. So that’s 22% and the publisher gets the rest. With a digital book your costs are in creating one book and then you make copies! Where are the costs with each additional copy? I can make 100 copies of an ebook on my pc and it costs me nothing more than storage space. Besides the author fees, additional copies are just pure profit for publishers.

        As long as you people keep believing these industry standard answers that are being provided by the very people making that huge profit (conflict of interest anyone?) then nothing will change. The publishing industry is going the same way as newspapers and record stores and they are going to fight the whole way down. Or fix ebook prices so that they come out making even more profit than printed books. IF we let it happen…

        • Confused

          My thoughts EXACTLY. And there is no response from the author of this blog.

          I made the point that when you purchase a book from a company like Kindle, Barnes and Noble, you don’t actually own the book and they can delete your account and EVERYTHING purchased.

          I can’t support those procedures.

          • http://michaelhyatt.com/ Michael Hyatt

            No problem. Just don’t buy the books. Vote with your pocket book.

  • http://www.karenjordan.net Karen Jordan

    Thank you so much for sharing your wisdom and expertise on your blog. I wanted you to know how much this online resource means to me as a writer. May God continue to bless your work and your family.

  • http://fearfultofearless.com Koozzz

    What’s the prognosis for the number of ebook formats coming down to reduce cost?

    • http://www.michaelhyatt.com Michael Hyatt

      That’s the $64,000 question. My guess is that we will end up with three or four major formats.

  • http://www.jeubfamily.com Chris Jeub

    I’m a publisher of a niche market in curriculum, and I’m facing the same attitudinal barrier: printing and mailing is thought to be the largest cost of a publication. I agree: It is actually very little. I just had a conversation with a friend in church last week about this very subject. I forwarded this post onto him. Thanks for the great post!

  • Mark McKeen

    I am considering buying an Amazon Kindle. I have seen both your video unboxing of the Kindle 3 and your post about why you like it. I believe that E-books will save me hundreds of dollars in the long run. Since I am a pastor, reading is very high on my priority list, and I do my best to read a book per week. This gets a big pricey, but I think going to E-books will save some money.

    • http://www.michaelhyatt.com Michael Hyatt

      That has certainly been my experience, though you have to be careful. You might actually buy MORE books!

  • http://theway.posterous.com John Harris

    So what’s the margin on an eBook compared to a hardback? Are publishers making much less on eBook or close to hardback?

    • http://www.michaelhyatt.com Michael Hyatt

      As I mentioned in the post, it’s about the same. As a result, we are “format agnostic.” We don”t care if people buy our books in hardcover, trade paper, or digital. With the new print-on-demand technologies, I believe people will be able to pick their book and then select the format they want.

  • http://theperkinsblog.net Michael

    I recently was given a kindle DX. To be honest, I hadn’t thought that the eBooks were expensive. I figured with advertising and everything else that goes into it, that the price was more than fair. My question is actually this: Is there enough data to show that those who own eReaders spend more money on books because they are so easily available?

    • http://www.michaelhyatt.com Michael Hyatt

      Amazon says that Kindle owners buy 3.3 times as many books as the traditional book buyer. If that number remains constant, it is good news for publishers. However, we suspect that it is too early to tell. This is because the first thing people do when they get a new device is buy a bunch of books. This artificially inflates the numbers. I think we need some more time before we will truly know. Thanks.

      • http://theperkinsblog.net Michael

        That’s really interesting.

      • Jai

        I think Publishers Lunch (a daily email newsletter read by many in the publishing industry) noted that when Amazon says that Kindle owners buy 3.3 times as many books as a traditional book buyer, they’re publishing a number that leaves a skewed impression. Amazon is a dominant player in e-books; they are selling a lot. Amazon is not the only seller of physical books. So the amount of physical books Amazon sells is not reflective of the overall sales a title sells throughout the market. Amazon sells 3.3 times as many e-books as THEIR sales of physical books, not the overal sales for a title.

      • http://richwheeler.blogspot.com Rich Wheeler

        One has to be careful about reading into that number. Kindle owners may buy more e-books because they’re less expensive and convenient, but they may buy Kindles because they already buy so many books.

      • http://joannamuses.com Joanna

        It would also be a bit hard to tell because there is only one place (amazon) you can get recent releases for kindle but there are lots of places you could get print books

  • Diane Stortz

    I’m wondering if ebook prices will remain the same if printed books go away? Or will prices have to rise to cover publisher costs?

    • http://www.michaelhyatt.com Michael Hyatt

      All of our fixed costs are baked into the new model, so we are basically “format agnostic.” In other words, we are already allocating to digital books, there share of the costs.

      • Diane Stortz

        But what if there were only digital books and those had to absorb all the costs? Could the current price of ebooks keep publishers afloat if there were no print books?

  • Speed

    So the condensed version is that all the fixed costs (more or less) remain and the variable costs get close to zero (more or less).

    Why are there no ads in books?

    • http://www.michaelhyatt.com Michael Hyatt

      It’s not quite that simple. Royalties and selling expenses (e.g., sales commissions, advertising, promotion, publicity, etc.) are variable and they remain in the new model. With eBooks two variable expenses get eliminated: manufacturing and distribution. But the others remain.

      With regard to ads, I think you will begin to see some experimentation along these lines. The reason we didn’t typically have them in print books is because the shelf life of the book was longer than the shelf life of the promotion. However, with eBooks, that will change, because you can have live links to the cloud where you could change out the ads as necessary.

      • http://Ronlane.wordpress.com Ron Lane

        What do you think that will do to the industry by having ads in ebooks?

        I know that for most of my apps on the iPhone and iPad that I would rather pay for them and not have the ads everywhere.

        Would the inclusion of ads in them cause the price to drop? If so, by how much does the industry feel they will go down?

        • http://www.michaelhyatt.com Michael Hyatt

          I could envision one edition that is less expensive but subsidized by ads. If you want the ad-free version, you pay a little more. I don’t know if this will work or not. I think we just have to experiment and listen to our customers.

      • http://richwheeler.blogspot.com Rich Wheeler

        You left out another variable expense: Nobody will be finding unsold copies at the Dollar Tree or at the recycling plants any time soon. Or is that loss considered part of distribution?

        • http://www.michaelhyatt.com Michael Hyatt

          We call that “obsolescence” and it is included in the manufacturing number. Thanks.

  • http://successbeginstoday.org/wordpress John Richardson

    Thank you for a great explanation of the publishing process. It was very interesting to see the costs associated with actual printing were so low. My question is… do any e-books use hyphenation? I remember vividly the pain I went through formating my first self published book when using the hyphenation engine in Word 2007. Yikes! I can only imagine the format nightmares with 6 different e-book templates.

    • http://www.michaelhyatt.com Michael Hyatt

      John, I honestly don’t know. I read almost everything now on my Kindle but haven’t noticed. I’ll have to go back and check. Thanks.

      • http://mrshields.com Adam Shields

        It is in the source file. It is recommended not to use hyphenation because the lines are not fixed. I have seen sloppy editing that leaves in hyphenation but because the print changes size, the hyphenation doesn’t make sense later.

  • http://www.gospelofkingdom.com Gregory Scott

    Thanks for the information. I too had wondered why eBooks weren’t cheaper. That makes sense.

  • http://www.library.ie B Teeling

    Michael, I’ve bought a few ebooks on Amazon but the DRM issue is a problem for me. I’m reluctant to pay for something that I can only read on one platform. Have you any thoughts on the DRM issue? Thanks, Brendan

    • http://www.michaelhyatt.com Michael Hyatt

      Yea, I hate it. I think it is unnecessary and only penalizes honest people. The sooner we can get rid of it the better.

  • http://thatguykc.wordpress.com ThatGuyKC

    Thank you for the insight into the costs associated with e-books. As a new Kindle user was curious about the pricing model and your explanation makes a lot of sense.

    When people see me using a Kindle their responses are typically at opposite ends of the spectrum. Some will be excited to use the technology first hand while others will declare their undying loyalty to tangible books. Am surprised by the false dichotomy. Just because I use a Kindle doesn’t mean I don’t enjoy a paperback thriller on a regular basis.

    What reactions have you gotten from people who see you using a Kindle?

    • http://www.michaelhyatt.com Michael Hyatt

      The reactions I have received are similar to yours. However, I have seen numerous people who love traditional books change their tune when they actually try a Kindle. I don’t doubt that a physical book is a different experience. I think this is why, for example, we still use candles, though electrical lighting is much more efficient and economical. There are times we want the ambience of a candle. I think this will be true of traditional books, too.

  • http://andreaaresca.posterous.com/ Andrea Aresca

    As a non-US and non-UK English books customer… I firstly saw Kindle (and ebooks in general) the solution to my problems! I thought: I could buy books, have them earlier and save high delivery costs.
    I soon realized that it was not so easy: ebooks were more expensive than I expected and now I know the reason.
    In addition to that Amazon UK is now offering Free Delivery to Italy (http://www.amazon.co.uk/gp/help/customer/display.html/?nodeId=200355380) and this gives me no reason to buy an ebook.

  • http://www.yuzzi.com Rick Yuzzi

    Thanks for answering this. I was one of the people who asked in the past about the cost of ebooks. I knew there were still set-up and promotional costs, but once the non-recurring costs are sunk, it’s more of a business like software (especially software you can download, with no media and packaging). I see your point about having to cover the initial costs. It seems like over time, if a book will remain available for download, that costs to offer it drop significantly, and the price could also come down.

    • http://www.michaelhyatt.com Michael Hyatt

      That may indeed happen, but the profits from the books that are successful are generally reinvested in new books. The majority of books published never reach a second printing. In many ways, publishers are like venture capitalists. We take risks on a lot of books, hoping we have a few winners that will cover our losses on the others.

  • http://www.twitter.com/adamsab Adam

    Thank you for posting this. I have this discussion with people constantly, but it’s great to have an informative post that I can point people towards. Hopefully ereader prices continue to drop so a wider audience can experience the format.

  • http://musicroad.blogspot.com Kerry Dexter

    helpful post (and discussions in the comments). thanks.

  • Ralph Stoever

    Dear Michael,

    Thanks for this very interesting presentation of your business and it`s cost structure. I am not surprised that the physical production is such a low percentage. In fact, I would have thought it is even less (clearly below 10% was my assumption).

    What makes it so high? Is it more pre-production with the printer(incl. QAing the pre-prints and prints)or production itself? What about the costs of type-setting the book? By that matter, how do you typeset electronic books, so they still “look” good?

    Best regards,

    Ralph (Montreal, QC)

  • http://www.tiendaobrerofiel.com Brian Masters

    Thanks for the quick run down of the expenses involved in e-books. Another interesting side is the income involved with e-books. We are a small publisher for Spanish Christian books and have experimented with e-books. Physical books are great, but shipping worldwide is too cost prohibitive. As Spanish-speakers have migrated all over the world, we are finding that e-books are the best way to distribute the materials worldwide. The biggest area of difficulty is finding a worldwide payment method for those who live in a cash-based society. Thankfully, several companies are working on models to charge small fees to a prepaid cell phone thus making cell phones a small “bank” that can be used to purchase e-books, etc. This will enable many Spanish-speakers to be able to purchase e-books via their cell phone and download them to their computer, phone, etc. Regardless of the format and price, one has to be able to sell the e-book in order for it to be profitable. :-)

  • http://www.dailyreflectionsforsingleparents.blogspot.com/ Scoti Springfield Domeij

    Who are the other twenty distribution accounts besides Amazon, Barnes & Noble, Apple, and Sony?

    Books are designed in QuarkXPress and Adobe InDesign. Is there a special formatting program publishers us to format the books to work on all the various eReaders?

    • http://www.dailyreflectionsforsingleparents.blogspot.com/ Scoti Springfield Domeij

      OOPS! Didn’t proofread my comment. Meant to write “use” to format the books…

    • http://www.michaelhyatt.com Michael Hyatt

      I’d rather not help my competitors by providing that list, but you can get an idea by Googling ebooks and online retailers.

      We use a variety of tools to take the digital output from InDesign and tweak it for the various formats.

      • http://richwheeler.blogspot.com Rich Wheeler

        As software for converting formats becomes more accurate, tweaking will consume far less time. You should also see more versatile software so that a single tool does what several do now. Hopefully, that will bring down prices slightly.

        • http://www.michaelhyatt.com Michael Hyatt

          Yes, I hope so. I think there is also an opportunity to automate the syndication of files to all the distributors.

      • http://www.DashBook.com Greg

        You really should help your competitors. bit.ly/bZRoLt

  • http://www.LaurindaOnLeadership.com Laurinda

    Thanks for this post. But I’m still confused. Most blogs I visit offer an e-book (including yours). So you are strictly referring to those e-books published by traditional publishers? Are e-books that are self-publish a lesser quality than those published a traditional publisher? What are the risks of self-publishing an e-book? Or is a “download” different than an “e-book”?

    • http://www.michaelhyatt.com Michael Hyatt

      When I am referring to eBooks, I am primarily referencing a traditional book, offered in an eReader format. eBook downloads—like the ones offered on my blog—are really just straight PDFs that you can read on a computer. They aren’t formatted to be read on an eReader.

      • http://www.LaurindaOnLeadership.com Laurinda

        Thanks for the clarification. I wasn’t sure what the difference was.

  • http://www.hearthope.org Olga Griffin

    It is interesting to find out about the ebooks, but I am still a bit old fashioned, since I like the feel of having the “real” book in my hand.

  • http://www.LinkedIn.com/in/davidandlisafrisbie David & Lisa Frisbie

    Thanks for this excellent discussion! You might consider a follow-up post explaining how editorial services, in particular, are one of the strongest “value-added” propositions provided by publishers.

    There’s a profound difference between a tweet or a blog, and a refined product such as “Outlive Your Life” (Max Lucado).

    • http://www.michaelhyatt.com Michael Hyatt

      Good point. With the avalanche of published material, I think editors and publishers are more necessary than ever. Someone has to filter how the good from the bad and the curate the content so that it stands out from the rest.

      Thanks for the post idea!

  • http://www.lovingcharlotte.com/Cornelius.php Keith

    I would not have imagined all the overhead still incurred from the publisher perspective. It is always just easier to download a PDF from a website and read-it that way, but you loose all the readers and marketing channels.

  • http://www.brianhinkley.com Brian Hinkley

    I thought the publisher and distributer set the prices in a crazy scheme to actually turn a profit.

    Thanks for this post. There are a lot of costs that people usually don’t think of when it comes to digital media. Looking at it in this light it’s easy to see the cost of paper; physical storage and transportation are one of the cheapest aspects of the process.

    Is there an advertisement supported model for eBooks to lower the costs?

    • http://www.michaelhyatt.com Michael Hyatt

      I think there might be an advertisement model. I’ll bet we’ll see some publishers testing this within the next 12 months.

    • Anonymous

      Seriously?

  • Angie Weldy

    Wow, I would have never guessed that manufacturing AND distribution only account for about 12% of the price. Okay, I will stop wondering why eBooks cost so much…:-)

  • Scott Macdonald

    Mike, are new titles released as ebooks at the same time as the physical copy? Or is the distribution strategy, similar to movies, to publish the hard cover vesion and then later release the ebook? Related to that, are all new titles released as ebooks?

    • http://www.michaelhyatt.com Michael Hyatt

      Most publishers are releasing them simultaneously. We are. We are “format agnostic.” We want to capture as many sales as we can as soon as we can—while the promotion is at its peak. We want to give our customers the opportunity to purchase the book in the format they prefer.

      • Dmott24

        I seem to see physical books before I find them as an ebook.   What about the ebooks that are published by a company that only does ebooks?  Can they ever get published as a physical copy by another publisher?  Or is that a part of the contract between author and publisher?

  • http://ingredientsinc.net Alison

    Great post and information!

  • http://www.validleadership.com James Castellano

    I noticed more and more textbooks are available as e-books. My question is why are they temporary? You can purchase them for 6 months or 1 year.

    • http://www.michaelhyatt.com Michael Hyatt

      Maybe a text book publisher can chime in, but typically text books are very expensive, because of the market for used books. In other words, the publisher makes an extraordinary investment to bring the book to market. Because the book will be re-sold, and they don’t participate in that sale, they have to charge more for the first sale in order to recoup their costs. (I realize that this is a bit of a chicken-and-egg situation. Maybe if the books were cheaper to begin with, more people would buy new books.)

      I assume that the temporary textbook rental is so that the publisher can price the books lower and keep re-renting them and thus recoup their cost.

      Again, I am out of my league, since I have zero textbook experience. This is just a guess.

      • http://www.validleadership.com James Castellano

        Thanks for the response

  • http://ashley.theworldrace.org Ashley Musick

    This is a very informative article and really answers some of my questions regarding eBooks. I recently purchased a Kindle and I’ve wondered why some are so expensive and some less. Overall, I think I expected lower prices all around, but this explains why I’m not necessarily seeing a huge drop in prices.

    What I have noticed is that despite the dramatic decrease in price that I expected, I’m purchasing more and more books just because it’s easier. That has to be good news for publishers.

    • http://www.michaelhyatt.com Michael Hyatt

      Indeed it is. I think I underestimated the convenience factor and how big a role “friction” plays in demand. If there is less friction between the consumer and the satisfaction of owning the product, the more they will buy.

  • Dave McShea

    Mike,

    Great post showing what is behind publishing a book. It also shows why digital distribution will never replace publishing. People think they can just write something and then just make it available online and it will succeed. There is a lot more to publishing than meets the eye.

    My question is, how far off before you will see the ability to “loan” or “borrow” an e-book or possibly re-sell your e-book? Without that it seems like revenues may actually increase in the long run with e-books. Between libraries and people that just trade books, it seems like the average printed book is read by more people than the e-book. Not to mention the entire used book industry. How will this aspect play into the future pricing of e-books?

    • http://www.michaelhyatt.com Michael Hyatt

      I do think you will see the ability to loan books out. Nook already has that feature. Amazon just announced last week that they will do it, too. I think it will become common, and I don’t think it will hurt book sales. I think it provides a means of sampling. If people really like the book, they will want to own their own copy (particularly non-fiction), so that they can mark it up or refer to it later.

      Some people will go to the hassle of illegal copies of books, but I think for most people, if the book is reasonably priced, it is just easier to buy it. We’ll see.

  • @DougHalcomb

    Do you think that eBooks will start being packaged with hardcopies of books so you can order both the eBook and the hardcopy at a reduced price for the combo? I would likely purchase the bundled combo for some of the eBooks I purchase. Or maybe when you purchase a hardcopy having a digital code to download an eBook version to load onto your eReader?

    • http://www.michaelhyatt.com Michael Hyatt

      Yes, I definitely think you will begin seeing more of this kind of bundling, especially as we approach the holidays.

  • Preston

    I think it’s a stretch to say most ebooks are at $9.99. Rather, most ebooks that people want to read are at $12.99, $14.99, and up. It’s a sham for readers to pay this much for a license that they can’t do anything with. I love reading on my Kindle3, but some books I’m buying hardback at Costco because it’s cheaper. That’s just not right, especially since I paid $190 to render the words on a device.

    • http://www.michaelhyatt.com Michael Hyatt

      I think you are right. The prices are all over the map. I think a lot of experimentation is going on.

      However, I just did a quick analysis of The Top 100 Paid Books (not free), the average price was $8.81. Of the 100 titles, 21 were priced at $9.99; 50 were less than $9.99; and 29 were more than $9.99. Since these are the most purchased books on Amazon’s site, I don’t think it is accurate to say that most book are more than $9.99.

      It will be interesting to see if prices stabilize or if there begins to become some correlation between length and price as there is in the print world.

      Thanks.

  • Timothy

    Great post. I’ve seen articles in the past that attempt to answer consumers’ complaints about “high” eBook prices, but this is the first one I’ve seen that also addresses that issue from the standpoint of *additions* to the publishing process from eBooks. Our publishing house has found that the third item in particular (“Each of these has a different upload protocol and digital asset management system”) takes as much time as building and testing the eBook.

    • http://www.michaelhyatt.com Michael Hyatt

      The tough part of the third one is that it keeps changing!

  • Harrison

    Thanks for providing this background. After purchasing my Kindle 3 a couple months ago (thanks, in part, to your unboxing and reviews), I thought the digital prices were high considering that I was just getting an electronic file. But after actually sitting down to read these books, I realized the value of what I have and think the price is more than fair. I think that the simple economics of determining value will change people’s perceptions of what an ebook is worth.

    • http://www.michaelhyatt.com Michael Hyatt

      I agree with you. You really are buying the content and the effort it took to create it and bring it to your attention rather than just the bits and bytes. The biggest investment anyone makes in a book is the time they spend reading it.

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  • http://tomjamieson.wordpress.com Tom Jamieson

    Michael, thanks for outlining this in such an intelligent, yet easy to understand manner. I have silently asked this question over and over again in my head. Now I have the answer! Thanks for sharing!

  • http://timmilburn.com Tim Milburn

    One of the things I’ve noticed since purchasing my Kindle a month ago is the ease in which I can buy an eBook (digital download). I can see how Amazon sells more digital books because there’s instant gratification and I get the book in my hands in a matter of seconds.

    I think the most dangerous button on Amazon is the “buy with one click” button. It’s too easy for the lover of books. And it can add up when I get the credit card bill at the end of the month.

    • http://www.michaelhyatt.com Michael Hyatt

      I’m with you on this. Sometimes I think one-click should come under the oversight of the FDA as a narcotic!

  • Bruce

    Hi Michael. Very useful information – thanks. I am loving the Kindle app for iPads. My question is why do new release books not always have a kindle version. When I heard the new John Grisham novel was coming out I was very excited but on release date and even today there is no kindle version. I am travelling shortly and don’t want to lug a book around so will only be taking my iPad. Sadly it seems this trip will be made with out one of my favourite authors.

    • http://www.michaelhyatt.com Michael Hyatt

      Good question: sometimes because the publisher doesn’t have their digital act together. WIth a big author like Grisham, however, I doubt this is the case. It is probably a release strategy where they want to maximize profits on their most profitable formats first, then broaden the audience with the less expensive formats.

      Back in the old days of publishing, we did this, too. For example, we might release a book in hardcover, then trade paper a year later, and then mass paperback two years later. Each successive format was less expensive, drawing in those readers who didn’t want to pay the higher prices.

      Movies do this, too, releasing the movie in theaters, and then on-demand TV, then the rental market, and then retail sales.

      I don’t know in Grisham’s example, but I would bet it’s strategic.

  • sjbarkley

    Why are some e-books free?

    • http://www.michaelhyatt.com Michael Hyatt

      There can be a variety of reasons. Sometimes the book is simply in the public domain and someone wants to make it available for free. They go through the hassle of making it available for the same reasons people contribute to Wikipedia for free.

      Sometimes, it is a publisher who is attempting to drive awareness or sampling that they can monetize later with the same book or as an introduction to a body of literature from the same author.

      Thanks.

  • Reggie

    Thanks for the great post, Michael. What do you think the chances are of there being a standard file format in the future that all eReaders can read? And if this does happen, I’m assuming the digital preparation and QA costs would go down. How much of an effect on the price would this have, if at all?

    • http://www.michaelhyatt.com Michael Hyatt

      I doubt that will happen. Amazon has a vested interest in controlling the format. So do many of the other online retailers. The last thing they want is for this to become a commodity. Having said that, I do think many of the peripheral formats will go away.

  • http://www.twitter.com/emmacunningham Emma Cunningham

    I think this is a great article. I work in ebook production, and felt that this did justice to the process.

  • A.M. Thompson

    Do publishers have a plan to deal with piracy?
    The music industry appears to be redefined by the digital age.
    And how are authors faring?

    • http://www.michaelhyatt.com Michael Hyatt

      Piracy with eBooks is minimal. Some big books get pirated but the biggest investment in any book is the time required to read it. It’s not like a song you can steal and consume in three minutes.

      I don’t think authors or publishers need worry about privacy. For most authors, obscurity is a much bigger danger than piracy.

  • http://www.oldsaltblog.com RickSp

    I am highly skeptical of the figures quoted. The 12% quote for production and distribution seems far too low.

    In Ken Auletta’s New Yorker article this year, “Publish or Perish” in the New Yorker of last April, he quoted the cost of printing for a hardcover with a retail price of $26 at about $1.80. He included $1.70 for distribution costs. So printing and distribution, using Auletta’s figures, are about 13% of the retail price. Of course, publishers are not paid the retail price. They are paid wholesale and get roughly $13, which makes the printing and distribution costs around 26% of their net proceeds. But publishers allow returns, which according to Auletta average 35%, so grossing up the costs as a percentage of the books actually sold, printing and distribution costs rise to over 40% of the revenue received by the publisher per book.

    Printing and distribution costs are a significant portion of the costs of dead tree books and are costs simply not incurred with ebooks. This savings should be reflected in the price structure.

    • http://www.michaelhyatt.com Michael Hyatt

      I can’t speak for all publishers nor do I know where Mr. Auletta got his numbers. At Thomas Nelson, manufacturing, inclusive of obsolescence, is about 9% of the retail price. Distribution costs, inclusive of returns processing, is 2.5%. I am pulling these numbers right off my year-to-date financials, so this isn’t theoretical.

      Second, our returns are less than 20%, but the religious publishing category doesn’t run as high as general trade. Even then, we turn around and resell these books, so you can’t simply add the returns percentage to the overall costs. Worst case is that we double our distribution costs on these returned books to 5% of retail.

      With the already adjusted retail prices of eBooks and the added costs I outlined in the article, I stand by my assertion that the costs are roughly equivalent as are our margins. (By the way, subsequent to this post, I looked at the pricing of Amazon’s top 100 paid [not free] eBooks. The average price is $8.81.)

      • http://www.oldsaltblog.com RickSp

        Except for returns our numbers are not so far apart. According to a footnote I know that Auletta’s original figures have been revised at least once, so I suspect that they are reasonably representative of costs in the US. The figures you quote are similar to Auletta’s. Your printing costs are higher and distribution costs lower than the figures he quotes. Your returns are lower than the average quoted for publishers in the US, which is great. Nevertheless, adding up your costs and assuming a 50% markup on wholesale pricing, which may not reflect your practices but is pretty typical of many publishers, the cost of printing and distribution is still approaching 30% of net revenue.

        My point is that e-books, even with all the associated costs do avoid significant printing and distribution costs, and should be priced accordingly. As a consumer I do get annoyed by some publishers who price e-books at or above the market price for hardcovers. For example, Amazon is selling Ken Follett’s “Fall of Giants” hardcover for $18.00 while Penguin has set a Kindle price of $19.99. Not only won’t I buy the book at that price but I am thinking twice about any book by Penguin these days. E-book readers are good customers and a tremendous potential market and should be treated accordingly. Some publishers, and I am not necessarily including Thomas Nelson in this category, haven’t gotten the message.

        • http://www.michaelhyatt.com Michael Hyatt

          I was basing the 12% cost number on retail. If you convert that to wholesale, even allowing for returns it amounts to 22–24% of wholesale. I am arguing that this is offset by the additional costs we have incurred.

          Regardless, I don’t disagree with your main point. I think it is absurd for publishers to price eBooks about the price of their printed versions.

          Having said that, I don’t subscribe to a cost-based pricing model. A book is way more than the hard costs. The value is in the content. I subscribe to a market-based pricing model. At the end of the day the “fair price” is whatever the market says it is.

          If publishers overprice their books, demand will fall. Eventually, they will get the message or be out of business.

  • Jem

    Simple question, though I’ve not read any other comments so it might already have been said. Why can’t we pair the two items together? Much like Blu Ray has with “digital copies”.

    I have yet to delve into eBooks simply because I like having my hardback on my shelf. This hardback I generally purchase on sale, unless it’s something I have to have on release day. This being said, I would quickly snap up an eReader and be buying hardbacks far more quickly after their releases. I can justify $20-$27 for both the hardback and the digital copy, but not $35.

    I am pretty stubborn, so I can guarantee you that I will not be nickled and dimed for something I already own one copy of, but toss it in as a bonus for free or a small bump in cost and you might have me hooked to this new craze.

    • http://www.michaelhyatt.com Michael Hyatt

      Actually, I think we can. I believe you will see more bundling of formats for people like us who want it more than one way. (I’d also like to see audio as an option, since I consume so many books while I run.)

      • Jem

        Well, simply put I think you made my day. Thanks.

      • http://mwlfblog.com Caleb Griffin

        That is great news. I wish more titles were released in audio format and bundled with other formats.

    • http://www.vampireacademy.org Marie

      This is also one of my biggest complaints when it comes to e-books. I talked to an older gentleman a couple of months ago, explaining to him the benefits to e-books, but also discussing the drawbacks. And for some reason it just hit me then: Why can’t we just buy bundles, exactly like with DVD/Blu-ray? Then if you’re just interested in the physical book, you can buy that, and pay full price; if you’re interested in the e-book, you can buy that, and pay full price. But if you want both you can get a discount. I simply don’t have the money to buy the same book twice, full price, for the convenience of it, but I’d love to be able to bring my book everywhere on my iPod.

      It makes me happy when you say that’s the way we’re heading, because it just seems like it’s obvious that we should, and I don’t know why it hasn’t happened yet. I think it would end a lot of book piracy.

      • Rob

        But I would think that Piracy could actually be kept at least at the level it’s currently at(which let’s face it, is alot) by taking preventative measures. Use scratch off pads for the code numbers on the inside of the hardback, like a phone card. Or just seal the book in plastic like a magazine. There are methods to minimalize piracy. Then once you’ve obtained your DL code from the book you could just DL it from the publisher’s website.

        • http://www.michaelhyatt.com Michael Hyatt

          There’s actually very little piracy. This is a problem largely promoted up software vendors selling Digital Rights Management software. I haven’t seen a study yet that demonstrates there is a significant problem. As I said in another post, for most authors, obscurity is a vastly bigger problem for them than piracy.

          • http://www.sarajhenry.com Sara J. Henry

            Did you just say “very little piracy”? Are you talking digital files of books? Writer could spend hours a day tracking down copies of their books posted on the internet for free download – completely illegally, of course. It’s a huge problem. You could argue that those people downloading free illegal files wouldn’t have bought the book anyway, but there’s no way to back that up.

          • http://www.michaelhyatt.com Michael Hyatt

            Yes, “very little piracy.” There have been several industry studies done, and we are participating in one now. It is just not a big deal overall. Like I said early, most authors have more to fear from obscurity than privacy. Thanks.

        • http://www.vampireacademy.org Marie

          Yes, I think there are certainly ways of preventing those kind of things (although, that’s more like shoplifting than piracy if the code for example can only be used for one download).

          What I was talking about was more the moral aspects. There are heaps of pirated books out there, regardless of scratch cards or sealed books. By creating bundles you could prevent the piracy that happens when a person buys the hardcover, but still wants to be able to read the book on the bus without having to have a bigger bag just to take the book with them.

  • http://dimsumthinking.com Daniel Steinberg

    I hope the following does not sound disrespectful. I learn a lot from your posts but disagree with your conclusions today.

    I don’t want ebooks to come down in price, I want authors to get a greater share of the pie. I’ve been an author for 25 years and have published books with half a dozen publishers. I’ve also worked for two decent sized publishers. Your world as a publisher is changing but so is mine as an author. I would say that you’ve left out a crucial piece of your costs — the cost of editing the material and bringing it to market. The cost of targeting the different formats should not be the highest part of targeting ebooks.

    I’ll grant you that the publisher’s share of the total pie has decreased as the channel has squeezed the publisher. Amazon and the channel take nearly 2/3 of the cover price of a physical book. Amazon began the kindle with the same pricing model. The iPad forced Amazon to adopt two pricing models but it’s not clear to me how a book sells to both platforms and gets the better deal from Amazon as both sides insist they not be underpriced by anyone else.

    For some titles, a good publisher is the only way for me to get my book onto the shelves at B&N and Borders which helps get it noticed at Amazon. Publishers are not marketing books in any meaningful way.

    I don’t know what percentage you pay authors but a traditional publisher often pays 10-15% of net. This amounts to somewhere around 5% of the cover price. For digital publications that seems wrong to me.

    So again, I don’t think eBooks cost too much, I think the publisher’s share is too high.

    • http://www.michaelhyatt.com Michael Hyatt

      First of all, your comment is not disrespectful in the least. I don’t expect everyone to agree with me. In fact, I don’t always agree with me. ;-)

      I can’t speak for other publishers, but at Thomas Nelson, I want the eBook royalty rates to be comparable to physical book royalty rates. Because, as I have argued, our costs are roughly comparable, and because we are certainly not making any more money on the digital editions, I think it is fair to maintain roughly the same print rates.

      Based on my experience, the royalty rates you are quoting are WAY low. I don’t know of any authors who settle for 5% of the cover price. I can’t get into the specifics without creating issues with my own authors but suffice it to say that we pay much, much more than that. Maybe you need to challenge your agent. 5% is not standard even for first-time authors.

  • Nora

    I have really mixed feelings about his issue. It’s good to better understand the process- I like that.
    However, I have found several ebooks that are priced higher than the Hardback Edition and quite a few that are more than the paperback.
    As a retailer I bought products from wholesalers- not one of which told me what price to charge for the products I bought from them. I could choose to lose money on them if I wanted to. In my view, the publisher is the wholesaler and Amazon (an example) is the retailer. Once the books are sold by the publisher, the books no longer belong to them.

    As a retailer and consumer, I want to be fair to everyone including my self. I absolutely love my Kindle. The funny thing is, since having my Kindle, I have purchased some books both in the Kindle edition and the paper edition. My husband does not use an ereader.

    In the end, the consumer will decide. We either buy the books or not. I have discovered many free books and some wonderful indie authors since having my Kindle. I evaluate each book, its price and how much I want or need it individually, but I resist those higher ebook prices whenever I can. That is how I cast my vote on this issue. No bad feelings, just my thoughts. I just want to read.

    • http://www.michaelhyatt.com Michael Hyatt

      I just did a quick analysis of The Top 100 Paid Books (not free) on Amazon, the average price was $8.81. Of the 100 titles, 21 were priced at $9.99; 50 were less than $9.99; and 29 were more than $9.99.

      I totally agree that in the end the customer will decide. I am all about letting them vote with their wallets!

      Thanks for your comments.

      • Nora

        I see your point and still have mixed feelings about the subject. I’m obviously not reading the most popular books on Amazon. It isn’t every book but it isn’t a rare thing for me to find that the paperback edition and some hardcover editions are cheaper than the ebook. The funny thing is, I’m buying more books since having my Kindle, than ever before. I follow a Kindle forum where many others have stated the same thing. Surely, this is beneficial to everyone including the publisher. I don’t want to be argumentative. Really, I want it to work for everyone. Have a great evening and thank you for giving me something to think about.

      • Nora

        Ugh! I just tried to buy Tribes by Seth Godin. The hardcover is $14.25, the paperback is $10.19 and the Kindle edition is $16.99. Sigh!

        • http://www.michaelhyatt.com Michael Hyatt

          I just checked this myself, because I couldn’t believe it. You are right. This is really dumb. I don’t know what the publishers i thinking. (Perhaps they are not!)

        • http://tatumweb.com/blog/ Rich Tatum

          I see it as $14.25 currently.

          • http://www.michaelhyatt.com Michael Hyatt

            That link didn’t go anywhere for me. If you go directly to Amazon, you get the $16.99 price. However, that look like it may be Amazon’s pricing issue since the print list price is $20.95.

          • Nora

            Barnes and Noble– Ebook $16.99. Hardcover price $15.08.
            Hastings Hardcover price $20.95.
            Oh well!
            It’s interesting to follow but I’d rather be reading the books. I’m patient. Either way, reading your post Michael has been good for me- I learned some things I did not know. I follow your blog and Seth’s. Happy Sunday evening.

  • http://yamabe.net Brian Yamabe

    While I can appreciate that the publishers’ costs are agnostic, until digital resale is feasible, the consumers costs are not. I’m not buying a digital book above the impulse buy price of around $10. Why? because if I buy a $19.99+ ebook and it’s a stinker or not reference worthy, I have no way to recoup even a part of that. I’ve bought plenty of $24.99+ physical books from Amazon, found them lacking and sold them used been out less than $10.

    Until publishers and platforms solve the resale issue my main source of ebook purchases will be the various ebook “deals of the day” (even then O’Reilly lost me with their new pricing policy).

    • http://www.michaelhyatt.com Michael Hyatt

      But doesn’t the sampling program that Amazon and Apple use solve that problem. You can read part of it and see if you like it purchase it.

      With regard to resale, I am a bit prejudiced since neither publishers or authors participate in the second sale. I would be happy to see it go away. (Just being honest.)

      • http://www.myfriendamysblog.com Amy

        I understand but what about giving away books? It’s impossible to keep every book I acquire. Also surely you’ve sold a used car or participated in used goods in some way. Buying things new simply isn’t an option for everyone.

  • http://www.passionaustralia.org/blog Dave Quinn

    Thanks for explaining that. I have often wondered about that question. I (like most people) thought that the printing and distribution was more than 12% of the cost.

  • http://ModernServantLeader.com Ben Lichtenwalner

    Thank you for this very informative post, Michael. I would still have the following questions (apologies if someone asked these already – I did not see them in a quick scan):

    1. Publishing Support Services: In researching self-publishing service providers, like WestBow Press, many of these services are available for self-publishers. This post could also be a selling point for using these services. Are there any key differences to watch out for with these service providers?

    2. Text-to-Speech Readers: As a long commuter, I was excited to learn of the text-to-speech capabilities built into Kindles. However, I found many authors (publishers?) opting out of permitting this capability by book. Any thoughts on this? I am excited about how TN is leading the way with NELSONFree, but do you foresee TN broadening this program or other publishers pushing to open this up more?

    • http://www.michaelhyatt.com Michael Hyatt

      Thanks, Ben. With regard to #1, I am really not that familiar with the support services offered by other providers. I would ask for references and then check them out first.

      Personally, I don’t like text-to-speech. I just don’t think the quality is there yet. However, having said that, I think publishers should include it, especially for the sake of the visually impaired. It opens up a whole new world to them.

      The results from NelsonFREE weren’t very positive. It didn’t appear to move the needle much in the limited testing we did. However, we do think bundling is great tool, and plan to experiment more with that as the CHristmas season approaches. I think you will see this from a lot of publishers.

      Thanks.

      • http://ModernServantLeader.com Ben Lichtenwalner

        Thanks Michael. I’m bummed to hear that NELSONFree results are not more impressive (yet?) and hope future results are more impressive. It seems to me, if you buy one format, you should get the others as well, at least at a less-than-full-price point. However, perhaps I am not the norm here. As always, thanks for sharing.

  • Beth

    Fine. I understand. But why then was the most recent ebook I wanted to buy a dollar more than the HARDBACK? It seems ridiculous to me.

    • Beth

      I want the author to earn what he/she deserves but without the cost of ink, paper and distribution, I think the ebook should be cheaper!

      • http://www.michaelhyatt.com Michael Hyatt

        They are cheaper in almost every case. Occasionally, you find an eBook that is priced higher than the physical one. This doesn’t make any sense to me either. However, of Amazon’s Top 100 paid eBooks, the average price is $8.81. I check yesterday. Almost 50% were priced at $9.99 or less.

      • http://www.bookbrewery.com Bjarne Bjerklund

        Seems ludicrous doesn’t it?

        The answer is quite simple really. When you buy a paperback or hardcover book at amazon, you’re buying the book from amazon. When you buy an e-book you’re buying it from the publisher.
        Amazon gives you a significant discount due to their deals with the publishers.

        Sad, but true.

        • http://www.michaelhyatt.com Michael Hyatt

          Actually, yes and no. Many publishers (like my company, Thomas Nelson) sell eBooks to Amazon under the same terms as print books. In other words, they buy at a discount off the retail price of the print version and then price the eBook at whatever price they want. We do not set the prices. Other publishers have moved to an agency model with Amazon, so they are, in effect, setting their own prices and selling the books themselves with Amazon acting as the agent.

          However, even in the “agency model,” as it is now called, publishers don’t have absolute freedom to price the books however they want.

          If this seems complex and confusing, it is because it is. I am sure it will ultimately get sorted out. But for now, we are in a state of flux.

  • Jennifer

    I work in the college textbook market and this idea of bundling is actually the most popular way to receive an ebook in our market. They CAN be purchased as a stand alone to replacement the print product, but then it can also be ordered bundled with a new book at minimal, or in most cases, no extra cost. Right now these Ebooks are web based and include other activities, study tools, and media. I’m sure the model will adapt as reading devices become more popular with students. Another option most publishers provide in this market is the Ebook and study materials packaged with a less expensive 3 hole punched version of the text for only a slight additional cost over the Web Only option- the idea being that these versions will not enter the used book market so the savings comes at the beginning of the semester instead of at buy back. I think it’s a win-win business model for the publisher and student.

  • http://blog.cyberquill.com Cyberquill

    I’m wondering why books never seem to contain any advertising except for little teasers about other books by the same author or publisher in the back of the book. But why not include a paid ad every 20 pages or so? Perhaps that way, a publisher could “sell” books for free and live off the ad revenue. (Needless to say, I know nothing about book publishing, so I’m sure there’s a very good reason why this isn’t done.)

    • http://www.michaelhyatt.com Michael Hyatt

      I think that will be tested in the future. The problem previously is that the ads became obsolete faster than the book. Imagine opening a book you bought five years ago, seeing ads for outdated products or companies that no longer exists. However, in electronic format this can be fixed. The book can ping the cloud and load relevant ads each time the book is read—kind of like a Web site.

      • Jem

        I see this all the time in graphic novels (comic books). That being said, I’m not a fan of ads. If I’m buying the book I don’t want to see an ad in the middle of it, the product had better be free for me to watch/ read ads.

        Cable was designed to pay and not have ads, much like HBO and the “premium channels” do now. We’ve become so commercialized that even products that we pay for are now having ads, and the cost hasn’t been subsidized one bit.

        If ads are brought in, then what prevents publishers from doing the same thing? Not all companies out their have the Christian principles like TN.

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  • Gary

    I was self-employed for a number of years and I know that there are costs associated with production/manufacturing that the end-user does not even realize. Further, in a capitalistic society there is this thing called profit. The question that each producer faces is how much profit can I squeeze out of this before someone else jumps in, which presents opportunity to others. I own a Kindle and love it, one day someone may compete with them because of profits oh wait we have the ipad, the nook and etc. That what keeps most areas at and “honest” profit is competition. I don’t like paying any more than I have to, but the cost of e-books is not that unreasonable. There is something to be said for the convenience of sitting in the park and download the latest.

  • http://stevenahill.com/ Steve Hill

    Thanks for taking some time to explain this. I would imagine that a company like Amazon has quite a bit of bargaining power over the publishers of ebooks, because they seem to be the place to go to get them. Do you find that is in fact the case?

  • Chris

    Thank you for being willing to discuss this topic so openly. It is definitely of great interest to anyone who loves books. One question that I have is whether or not the authors are seeing increased royalty rates for ebooks. You touched on royalties in your list of costs but did not provide too much detail. Just trying to understand if that might explain the lack of lower pricepoints for EBooks.

  • http://burleyblog.blogspot.com Lisa

    I work in an academic library and we get this question all the time. Thank you for giving a concise answer from the publisher’s perspective. I hope that with time, we will have some standardization of format so that purchasing an e-book will not be device specific. I also like the idea of including a digital copy with the purchase of a physical copy, but that is probably cost prohibitive for all but the largest publishing houses.

    But thanks. I will probably be referring people to your explanation rather frequently.

    • http://www.pastorbrett.com Brett

      I love the idea of getting the digital copy with the physical copy. In fact, I have really appreciated it when a book includes a CD or DVD with it. I would be willing to pay a dollar or two more for a physical copy if it means I could also have access to read it on my iPhone when I’m out and about.

  • Eduardo Grandio

    After reading your blog I got a Kindle. Now I am finding difficult to find classic works of literature and other books for free. I though these were available. Are they? If so, do you have any recommendations on how to find them? I am also very interested on leadership books.

  • Greg

    Michael, Thank-you for the informative post. I’ve noticed a few blog posts lately about POD (print-on-demand) as a method for authors to receive a higher proportion of the cost of the product and to make these products accessible through the Kindle or the iPad. A few asserted that many of the functions of traditional publishers can be assumed by well-informed authors or through service providers. I’m still inclined to believe that working with a reputable publisher will result in a higher quality product that has to clear more hurdles and meet more stringent requirements to make it to market. I would be interested in your thoughts on this issue.

    • http://www.michaelhyatt.com Michael Hyatt

      The problem is that the book market is very fragmented. I think authors have to assess how they want to spend their time. Do they really want to be interfacing with myriads of retailers, negotiating discounts, collecting accounts receivable and fulfilling orders? Or do they want to create and let someone else handle “the ugly stuff”?

  • http://tatumweb.com/blog/ Rich Tatum

    Excellent post!

    One reason why some ebooks are more expensive than the physical book is that as lower-priced physical editions are released, the physical price comes down while the digital price remains the same. The industry is still young enough that publishers are not always in control if the digital price and when they are, they fail to issue price changes to the various etailors distributing their digital titles.

    I’ve seen discussions about pricing discrepancies where authors and consumers speculate that publishers are doing this intentionally in order to discourage sales, but I don’t believe this to be the case. The reality is that once price points get set, then the publisher likely moves on to the next project, rarely revisiting the price points for digital product. OTOH, physical book prices get reviewed all the time. When additional print runs are ordered the price gets reviewed. Same for When cover art or packaging gets updated, when production costs increase, when alternate formats are issued (hardcover-to-softcover), and when subsequent editions are released.

    There are many opportunities for physical book prices to move around, but rarely do ebooks come under that kind of repeated review.

    Regards,

    Rich

  • http://thoughtsaboutnothing.com Kyle Reed

    It just seems like for the pricing point they should be taking advantage more of the e side of things. You know, very interactive with media, music, art and interaction.

    I just wonder where that is?

    • http://tatumweb.com/blog/ Rich Tatum

      Most publishers are still just trying to get in the game with standard electronic facsimiles of their print products. There’s no agreed-upon standard yet for what consumers wnt with interactivity in their content. Do, rather than spin up a lot of expense and infrastructure for features (and cost) the market may not bear yet, they’re taking a wait-and-see approach to learn what shakes out.

      Publishing houses are very conservative when it comes to this kind of innovation. The profit margins on books are small enough to discourage a lot of risk in pioneering untested formats.

      Regards,

      Rich
      AKA BlogRodent

  • http://www.twitter.com/jodyfransch Jody Fransch

    Mike, I’ve always wondered why ebooks were so expensive, so thanks for sharing some insights about the whole process from a publishers perspective.

    I believe that in this digital age we are living in…ebooks are the way forward.

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  • http://twitter.com/NowInANutshell @NowInANutshell

    I used to think authors choose ePublishing because its relatively lower cost. But now I get an understanding of the process can be as rigorous as traditional publishing, I’ll value my eBooks as I do hardcovers and paperbacks. But I’d like to know, what some factor/s will make eBooks price go down, will there be, like new technology?

  • http://twitter.com/NowInANutshell @NowInANutshell

    I used to think authors choose ePublishing because of its relatively lower cost. But now I get an understanding that the process can be as rigorous as traditional publishing, I’ll value my eBooks as I do hardcovers and paperbacks. But I’d like to know, what some factor/s will make eBooks price go down, will there be, like new technology?

  • http://curtismarshall.tumblr.com Curtis Marshall

    The explanation about the cost of e-books is great! I never realized such a small percentage goes into the printing and distribution.

    So what about audiobooks? I know this diverges a little from the topic at hand; but why do audiobooks cost so much? I understand that there is some additional cost to having someone read the book, but all the formatting issues with e-books should be minimized by the singular format.

    Honestly, I get most of my audiobooks from the library due to the cost, but I would love to buy more if I could find them cheaper.

    • http://www.michaelhyatt.com Michael Hyatt

      The reason audiobooks cost so much is because of the upfront production costs. You have to hire a good reader, plus an audio engineer to record and edit the final product. In general, we will only sell 5–10% of what we will sell in print, so we can only afford to create audiobooks for the most popular books. Thanks.

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  • http://www.shortthoughts.com Jeff Short

    I realize I am late to comment on this post, which is kind of like shouting into the Grand Canyon. I really appreciate this explanation. It is very helpful to hear it from this perspective. I do think this may not resonate completely with the typical book consumer, because we probably do not pay the cover price for new books. I’ll admit that I have very rarely paid the cover price for a new book. At the very least, I have probably paid 20% less than that price.

    I am not saying that the current price of eBooks is not justified. I am just stating a reason why I think many consumers still think it feels too high. I would love to hear your thoughts on this.

    • http://www.michaelhyatt.com Michael Hyatt

      Jeff. This is a good point. Of course, as publishers we don’t feel that, because the retailer is taking the discount out of his or her margin.

      • http://www.shortthoughts.com Jeff Short

        The other thing I would add is the price of the paperback release. When the paperback hits the shelves it is nearly half the price of the hardcover. So e-books are very close in price to the paperback edition.

        Do you foresee e-book prices following a trajectory similar to DVD’s in the future? When a film first becomes available on DVD, it is around $20. With six months or so the price drops to about $12.

  • upneguy

    The financials all depend upon the context of the publisher. In the University Press world our total sales of a book, on average, are under 1000 copies. At that rate plant costs (fixed costs) are 60-65% of the total costs. This can easily mean $6-$8 of fixed cost PER BOOK sold. We do not believe that pricing a eBook at $9.99 is magically going to increase our sales by 300%.

    And don’t forget at this point publishers are still issuing print and electronic simultaneously. That means print-only fixed costs are still in the budgets and must be paid for. There are plenty of book designers, production managers, and typesetters out there that hope their jobs don’t go away in the digital realm. If we had a digital only delivery system it is true that many of these costs would go away but not while we are running dual production operations. Personally, I don’t believe print will go away any time some.

    Then there is the erosion in return. When you lose $29.99 print sales to $9.99 electronic sales and your fixed costs remain the same it is a significant financial burden to the publisher.

    There’s lots to consider in book pricing.

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  • http://www.simon-royle.com Simon Royle

    I appreciate that at least one major publisher is taking the subject of eBooks seriously. I do have a couple of question marks over the 3 added costs.
    Using available software formatting is not a very time-consuming cost. I can format a straight text eBook in about an hour (roughly 120K words book). I can then take that file and convert to the different formats.
    Most of the QA I have done takes maybe another hour tops.
    Distribution to 20 outlets? Surely that’s a template canned email and an attachment or six (what 30 minutes with a coffee break?).
    At least you didn’t claim the high cost of digital storage as one of the CEO’s of a major publishing house did.
    Kudos to you for your efforts at being online and explaining your position clearly.

    • http://tatumweb.com/blog/ Rich Tatum

      For most publishing houses (all?) physical book production drives the creation of a new title. The digital versions come *after.* So, creating an ePub (source format) of a new book is not as simple as converting straight text to a given format. The source file for an ePub will likely be a finished InDesign file, or something similar. *Lots* can go wrong and invariably does. Running heads, page numbers, soft-returns, soft-hyphens, and physical page breaks all have to be stripped. Then you have to decide what to do with extra-textual features like pull-quotes, sidebars, inset text, epigraphs, and images. (if you’re using images you also have to verify that you have digital rights to distribute those images in perpetuity.) Initial caps (those decorative letters used as the first character in a chapter) have to be re-integrated into the text.

      There are dozens of thing that have to be remediated to make a book suitable for conversion into an ePub. It’s not easy.

      When digital begins to drive the production process, this will change. But it doesn’t yet for *most* houses.

      Sending that file to etailors is easy, certainly, but many of them insist on creating their own versions of consumer-facing files (Amazon, for example, creates the .mobi/Kindle version), and each requires QA. If there’s a problem, you have to fix the source file, not the etailor’s version, and resend and perform more QA.

      Despite the presumed ease of conversion, every ebook I’ve ever read from major publishers had artifacts and errors owing to the conversion process. It’s definitely not state-of-the-art yet. It’s still time-consuming, and it’ not cheap to scale. 

      Regards,

      Rich
      AKA BlogRodent

      • http://www.simon-royle.com Simon Royle

        Yes I understand your point, which is, and please correct me if I’m wrong: formatting, QA and Distribution are expensive because we start the process in the wrong place, using the wrong tools…

        Would that be a correct assessment? That’s a poor excuse to pass on to the consumer as to why the product is expensive.

        • http://www.michaelhyatt.com Michael Hyatt

          No, that is not a correct assessment. We use the latest tools including InDesign, Calibre, etc. We also resigned our workflow a couple of years ago to optimize the eBook development process. I am sure we will continue to adjust, but our tools and process are state-of-the-art—for today.

          • http://www.simon-royle.com Simon Royle

            I didn’t think it was, judging from the comments that you had made earlier.

        • http://tatumweb.com/blog/ Rich Tatum

          Publishing houses are in the middle of changing processes to accommodate ebooks In general, though, while your assessment might handily summarize what I said, your conclusion is not what I implied

          Publishers focus their time, processes, and infrastructure to produce the product that runs their business best. Right now that’s not the ebook–so giving physical books a lot of attention is not the “wrong place” to start from (yet).

          Regards,

          Rich
          BlogRodent

    • http://www.michaelhyatt.com Michael Hyatt

      How many eRetailers have you actually worked with? The formatting is much more time-consuming that that what you have described. The QA process is also not something you do solo. You have to submit the file to the eRetailer, get their modified version back, and then QA that. It is an iterative process.

      I don’t know of a single eRetailer that would accept emails with attachments. (We would we sending scores each day, and we’re just one publisher.) Instead, we have to submit the files, using their back-end system, along with the metadata.

      Producing eBooks in a production environment is much more analagous to software development that traditional book editing and manufacturing.

      Thanks.

      • http://www.simon-royle.com Simon Royle

        I’ve “actually” worked with three. I know that you are more experienced in publishing than I am, which I why I phrased the points as “question marks”.
        Funny that you mention software development, I am a CEO of a software company. In software our primary costs are development, and testing. Distribution cost (excluding physical product) is negligible.
        Thanks for your answers.

        • http://www.michaelhyatt.com Michael Hyatt

          Thanks for clarifying that. Imagine shipping thousands of products (eBooks) that have to work on numerous operating systems. That’s a bit of an over-simplification, but it also explains how digital publishing is similar to software development and why it’s harder than you might think.

          I am sure that the tools will improve as well as our process. Regardless, overall eBooks are still less expensive than traditional print books. I realize there are exceptions, but as I pointed out above, of Amazon’s top 100 paid books (not free), the average price is $8.81 per book.

          Thanks for your comments.

          • http://www.simon-royle.com Simon Royle

            What you describe (which is the difference between my “one-man-band” and your giant publishing) it is very similar to developing software for mobile. In Indonesia, one of our primary markets, we have over 20 million subscribers to our software products. There we have to format for each operating system and in quite a few cases adapt to hard-code in phones.
            I am sure that eBook prices will fall further, I’m also sure that you’re ahead of your mainstream compatriots in this field.
            As I said earlier Kudos to you for taking the time to talk to your customers via this blog, and answering questions personally. For that alone, if it means anything, you have my respect. Oh and thanks for visiting my site – isn’t technology great :-)

  • http://www.kathyfannon.com Kathy Fannon

    Wow, I had no idea! Thank you for sharing this, Michael. I never really thought about all that is involved in publishing a book. I learned a lot from your post and the comments. I’m not a fan of eBooks because I like to have paper in front of me to make notes, draw arrows and circle things…I’ll stick with paper (as long as I can)!

  • Jenny H.

    Thank you for sharing this. It was helpful from a consumer’s perspective to understand the nuts and bolts impacting the prices we’re paying.

  • http://papajoesfantasticworld.com Joe Vadalma

    If it costs so much for you to do these tasks that you cannot sell below ten bucks, how come my small press publisher can sell my ebooks for five bucks and make a profit.

    • http://www.michaelhyatt.com Michael Hyatt

      Honestly, I don’t know. It all depends on the publisher’s cost structure. Do the provide all the services I outlined above? Editorial? Marketing? Distribution?

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  • http://www.christopherscottblog.typepad.com/ Christopher Scott

    As ebooks become more popular and more widely read, they should become less expensive, right? Or will the price increase because there will be more demand.

    Just my preference, but I only read nonfiction books in paper books. If it’s fiction, I don’t mind ebooks. But anything nonfiction I like to be able to write in the margins and file away quotes for future reference.

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  • Tiffany

    The physical book will eventually go out of style, like the cassette player, the typewriter, and various other things our grandparents used to play with. Is it say to assume that when book eventually become digital in distribution that the price of the existing ones will increase?

    • http://www.michaelhyatt.com Michael Hyatt

      I think the market will determine this, depending on what consumers are willing to pay.

  • Greg

    I think one obvious flaw in this analysis is in the volume of sales.

    With physical copies, the manufacturing and distribution costs are going to be ongoing costs for each copy, albeit somewhat diluted by volume. From my understanding (which is that of a layman and may be incorrect), such costs come in batches. In other words, for 10,000 copies you would sustain a cost of $25,000, which for accounting purposes you would then break down to the per unit cost. For certain tiers of purchasing, you will pay reduced costs per unit for these batches. Regardless, every unit will mean a sustained cost.

    With Electronic formats, the extra costs you describe are a one-time expense. I expect it is a significant expense, but once you have taken it selling a thousand copies will cost the exact same amount to you as having sold a million copies. Anything past the point of meeting these expenses will be pure profit.

    Which means that at a certain level the costs will be approximately even, as you say. Past that point, the costs for E-Books goes down sharply while the physical books will remain relatively stable. This goes for most of the other costs as well, of which I’ll accept the point of being the majority of the costs associated with publishing the given book.

    For example the editing will similarly be a certain level of expense, and the more copies of the book you sell the more diluted this cost becomes because the expense never rises. I understand that there are a few expense that will not fall in this category (i.e. author royalties), but most of the expenses you describe would presumably fall here. This, however, is outside of the scope of the article so I will leave it be.

    The short of this is that while smaller publishers may never reach far beyond this peak with the sales volume, an E-Book copy of a NY Times best seller will have the given costs reduced to the point of being pennies on the dollar you describe. In the experience I’ve had, this has not affected the cost of the E-Books to the end consumers. In fact, the highest volume sellers, in my experience, have been amongst the highest cost E-Books to purchase. While I, coming from the business world, understand the need to make a profit, I feel reduced costs should be at least partially reflected. This reticence to adjust to the E-Book market appears to me, unfortunately, to be the primary reason the expansion of this market is growing as slowly as it is despite the book in electronic readers and larger awareness by consumers.

    • http://www.michaelhyatt.com Michael Hyatt

      Thanks for your thoughtful response.

      One thing to keep in mind is that this is the FASTEST growing segment of the publishing industry by far. It is nothing short of astonishing. Our own eBook sales are up almost 300% over last year. The rest of the market is similar, so I don’t think that price is slowing down growth.

      Second, there are indeed fixed costs that, once you have recouped them, go away. But this is really no different that physical books. They are just different.

      I am confident that the market will ultimately determine the right price, regardless of the arguments made. At the end of the day, people vote with their pocketbooks.

      • Greg

        I’m always looking to learn about things, and I found your article very interesting despite having some argument over the details.

        The boom of E-Books is definitely amazing, which can be attributed to several factors including the number of newly released E-Readers (along with presence in physical stores, as well as price reductions), more awareness of them in the public consciousness, and more widespread acceptableness (for lack of a better term) in the public eye. They really have come along way from the geek’s toy of a couple of years ago.

        That said, my point was that pricing was holding it back from the growth it could be sustaining. From my subjective experience many people I know are hesitant of or avoiding E-Books because with the lack of significant pricing differences they don’t wish to spend a chunk of money on a relatively expensive electronic device. Frankly, there is a $200 or so buy-in required before you can even start reading E-Books (unless you wish to read on a computer, which the vast majority of consumers don’t wish to). Even I have found myself purchasing a few physical books rather than their E-Books, despite having almost entirely switching over to electronic format. While exploring hypotheticals is always a fool’s game, I think it is fair to say that given a larger markdown for the format the growth could be significantly higher. How much higher? Impossible to say, but my subjective experiences suggest that it extremely large.

        As far as the pricing, the difference is really in that physical books sustain all the volume based costs, while the E-Books only absorb some of them. Once you get past that magic volume number where you’ve essentially paid off your fixed costs, the electronic format will be primarily profit while the physical copy will be comparatively more expensive.

        Without having realistic numbers, it’s hard for me to explain properly. To give an example, though, in my industry we have manufacturing costs that have fairly significantly varying production costs. We have some product lines, and customers for that matter, that we sell at very thin margins just to increase volume. That increased volume will actually dilute costs across the board (including to our more profitable lines/customers) thanks to shared labor, administration, overhead, etc. It seems to me that the publishing industry is subsidizing the costs of the physical copies by having wider margins with the E-Books, and thus increasing profits. While this is hardly an immoral strategy (companies are in the business of making money, after all), this seems to more be ingrained more in resistance to the new format than in directly making profit. Regardless, I can’t help but feel that the matter is being intentionally obfuscated by the publishing industry. Whether that is still due to resistance to change or in trying to protect the new high margins that the industry is suddenly realizing it has, it seems counter-intuitive to me since it is undoubtedly inhibiting growth to some extent (though how much is up for debate, as above).

        Regardless, I do agree with you that supply/demand economics will eventually have its way with the concept, one way or another. Personally, I feel that the prices will eventually have to go down in order to maintain the growth that we are seeing now. I hope that, if I am correct, the publishing industries allows more give before the concept is crippled or before new potential readers (drawn to the new convenience of books) give up.

        Time will tell.

  • Christian

    Great post, Michael, thanks for sharing. Very nice to see how it works from the perspective of someone inside the industry. There are definitely lots of costs involved in publishing, much more than a customer can usually figure.

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  • Mary G

    If publishers end up publishing in 20+ digital formats — why don’t publishers and ereader companies develop a digital standard for publishing?

    • http://michaelhyatt.com Michael Hyatt

      Mostly because eRetailers want to control the platform. However, having said that, I think we will eventually get there. Consumers will demand it.

  • http://twitter.com/PatrickBMiller Patrick Brian Miller

    Thank you for the very interesting insight into the costs of ebook preparation. It’s fun to watch this revolution playing out. Digital books are the historical equivalent of the printing press replacing hand-written books, and we get to live through the initial experience.

  • http://fghart.wordpress.com/ FGHart

    This post is very thought-provoking. My initial reaction is concern for the trees. In a paperless society our tree farms will be replaced by parking lots & malls (or something like that). Fortunately the move toward “paperless” has been slow, indeed.

    I’ve owned a Kindle for all of 2 weeks now. I immediately downloaded well over 200 classics (which are free). And last week I bought a new hardback from my favorite author (impulse buy, yes. Maybe habit).

    I just finished writing a novel and I uploaded it onto my Kindle. Now I need to figure out the easiest way to tweak the formatting. I understand the challenges you mention on that front.

    All of this is to say: I read, I write and I’m curious (& conscientious) about the industry and trends. I’d wondered why an e-book costs so much. I appreciate the insight you’ve offered here.

  • FGHart

    Disqus vs. OpenID is giving me fits. I may have to change identities.

  • FGHart

    Disqus vs. OpenID is giving me fits. I may have to change identities.

  • YTI instructor

    Ok, well, thanks for the explanation about pricing. How about when publishers will make ebook versions of traditional textbooks available as true downloads instead of subscriptions? I do not want a publisher deciding how long I need a book, where I wind up paying more for a continued subscription than I would for the physical version.

    One suggestion is to take a page from Apple’s iTunes book (no pun intended), and lock the downloaded file to the device the book is initially downloaded to. Although music lovers may not like this approach when they incur upgrades to their computers and need to reinstall iTunes, this model does indeed work to protect publishers from copyright infringement (ie: purchasing an ebook, then giving a copy to a classmate).

    • http://michaelhyatt.com Michael Hyatt

      Unfortunately, I am not a textbook publisher, so I am afraid I can’t offer much insight. Hopefully, someone else will jump into the conversation and enlighten us. Thanks.

  • Cameron

    Some of this makes perfect sense, however the one thing that makes NO sense whatsoever, is why do ebooks cost more than paperbacks? The smaller footprint paperbacks cost <$7.99, the larger footprint ones cost anywhere from $10-20 all dependent on subject, author and number of pages. With fiction likely being the most popular category of books, and most fiction books are available in pocket paperback, I think that many people will hold off on adopting e-readers because e-books are still priced in excess of what the pocket paperbacks cost.

  • Guest

    bullsh.., this guy have not idea on how digital technologies work and is using bad arguments to justify the price

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  • carp

    I don’t believe you.

    Oh, I guess you probably believe what you’re saying, but I don’t believe it’s true.

    I’ve been a computer professional for close to 30 years now, so I know a tiny bit about things.

    Digital preparation:  The only issue here should be graphics.  Any decent developer should be able to create translation software that  pushes one format in and another out.  Better yet, as a publisher, push back.  insist on a single, standard document format.  You and the other publishers have the power.  If you choose epub, the devices will support it.  Metadata?  You’re telling me that it’s more difficult for you to create metadata for a single book than for a music producer to create similar metadata for an album and each song on that album?  They can manage it, so you can too.

    QA:  This is where most of your cost should be.  Yes, things need to display correctly, whether it be text of graphics. However, I still believe that you, as a publisher, should push back and get a standard and insist that each device work with that standard.  I’m dreaming a little, I know, but for books that are pure text — 99% of what I read — this shouldn’t be an issue.  But with a standard, you at least have a starting place and most, if not all, of the book should display correctly.

    Distribution:  Sorry, no sympathy here. None.  A whole twenty separate accounts?  Sheesh.  Unless there’s a lot there you aren’t saying, it can all be automated — and even if there is a lot you aren’t saying, I still suspect it can be automated.  Stuff like this is done all the time with a lot more than twenty accounts, is fully automated, and it gets handled.

    Look.  I’m your perfect audience for e-books.  I’m a computer professional, I have gadgets galore, and I love to read — I have thousands of real books.  One of my main problems with so many physical volumes is not being able to find a specific book.  I’ll buy the e-reader, that my major cost.  But I won’t spend more than $10 for an fiction e-book, and even then, it had better be one heck of an e-book.  If the normal cost was $5.00 and less, you’d have me.

    From my point of view, I can visit Amazon.com, and over half the books I want to own I can get used for about $5.00.  Most of the remaining ones I can get used for under $10.00.  So, no financial benefit.  The benefit is to be able to carry around a bunch of books at once.  And except for multi-week vacations, that’s not a big deal.

    E-book prices must come down into the $5.00 range.  Do that, and the sales will, I suspect, take off.

    • http://michaelhyatt.com Michael Hyatt

      You’re stating the obvious. Yes, we know we need standardization, but we’re not there yet, though we are pushing.

      I do not think e-book prices will “explode” at the $5.00 range. They are already exploding. Ultimately, the market will determine the price. The cost of production won’t determine the price; the value to the market will.

      Thanks.

      • carp

        I’m not asking this to be rude, I’m just asking…

        If the market will determine the price, why not price e-books lower now and get a bigger market?

        Besides, the market won’t really take off until *I* buy an e-reader… :-)

        Sean.

        • http://michaelhyatt.com Michael Hyatt

          I’m not convinced we would get a bigger market. I don’t think people buy price; I think they buy value. Thanks.

  • Claire Steel

    I’m still not totally convinced I’m afraid.  Two of your three arguments also apply to physical books (typesetting and quality assuring) and so these are not additional costs that eat into amount freed up by not printing and distributing. And if the uploading is costing you that much I think that you might want to look at your processes and see if efficiency savings could be made. I cannot conceive of how ANY book can be *more* expensive in an eBook format compared to a physical format. And if you check the UK listings on Amazon you will see that this is frequently the case for top sellers.

    • http://michaelhyatt.com Michael Hyatt

      I can’t defend e-books costing more than physical books. That doesn’t make any sense to me either.

  • Theyjumpedship

    Nope. We as customers don’t want to pay your high prices. The books are only worth as much as we are willing to pay. Consumers hold the cards, not publishers. You need us or you’ll go out of business. Simple as that. Bottom line. Publishers not being able to pay their rent is not our problem because you, we know there is money flowing with ebooks. We know they’re outselling print books from Barnes & Nobles and Amazon. We also know publishers are trying to keep ebook prices high to try to push consumers back to print. If isn’t much $ in ebooks presently why is JK Rowling starting her own site to sell Harry Potter? Why would a billionaire author go solo just to publish these? Why is Salman Rushdie, Ian Fleming who wrote the James Bond books going solo on ebooks if it’s just so-so and not much $? Why not let their publishers handle it?

    I wonder whose next: Stephen King? Dan Brown? Somebody’s going next and you would have us believe the money in ebooks is “meh”, so-so.

    • http://michaelhyatt.com Michael Hyatt

      Not sure who you are referring to. Most of my company’s e-books are $9.99—about half of what the print editions cost. We make the same profit margin regardless, so we are format-neutral. I am happy to sell the books in whatever format our customers prefer.

  • http://vitalischronicles.com Jay Swanson

    Thanks for the insight, this actually quells a lot of the questions I’ve had. I still find the prices a bit daunting at times, but realize that to run a business you will have a lot more overhead than an indie. Thanks!

    • http://vitalischronicles.com Jay Swanson

      Oh wow, talk about being late to the game. Just realized this post is 8 months old

  • Greg

    Unfortunately you are wrong. This style of thinking is just like the record and film industries have taken (particularly the  record industry) but with less justification. 

    Large publishers who refuse to adapt will be outmaneuvered by a mix of new independent publishers (who are more than willing to lower ebook prices and cut down waste and overheads) and self publishing authors. The main publishers now will see a period of sustained decline until they restructure and actually begin to think like it is the 21st century.

  • Chudez

    can you also make a contrived reason as to why i’m allowed to buy in my country the ebook for Part 1 of the Engineer trilogy but am somehow unworthy to buy Parts 2 and 3? 

    • http://michaelhyatt.com Michael Hyatt

      I couldn’t tell you. Sorry.

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  • david

    So how much did you make writing such a BS article. Let’s break down all of your lies:
    1: eBooks are half price $9.99??? Just went to the bookstore yesterday and it looks like the average is $7.99 half price would be $3.99
    2: Manufacturing and distribution = 12% 12 percent of $7.99 is 96 cents. So the new totals are
    $3.51 for a book since you take that out before you cut the price in half like he claims they do.
    3: the whole acquisition and other fees are negotiated with the author while everything else is the standard for doing business so there is no set number so we will have to come back to this if possible.
    4: 99% are in digital format, the only one holding out would be older popular authors. You can pay someone 50 bucks to do this and they could get it done in a day 1 cent over thousands of purchases covers this but publishers want their money back immediately.
    5: In all reality you don’t have to convert your product to these 5 formats, and all you did was hire someone to create a program that does this for you and even though that cost has been paid for you will continue to charge the same price.
    6: Open whatever email service used, add each representative from the companies, attach eBook, send. Cost to the publisher zero. Any changes because of software need to be the responsibility of the e reader not you if you push the cost to them they will develope an easier format and get rid of the previous BS requirement.

    So in reality eBooks should cost $3.52 possible increase for taxes but overall a fair price, and once someone creates an online bookstore where authors can publish their own books and set their own prices for a reasonable fee then it could drop a little more.

  • http://pulse.yahoo.com/_L6BGBXIIY5JTQWASAFFKQ5DXCY Mel Lingerman

    Sorry,

    An ebook should not cost more than a paperback of the same title.

    Gouging and just wrong.

    • http://michaelhyatt.com Michael Hyatt

      I agree. However, I don’t think it is wrong (as in a moral wrong) just stupid.

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  • AnonymousAuthor

    And the reason indy writers can afford to charge $0.99 for an ebook is that they do all these things themselves, from marketing to formatting to the actual writing. eBook packagers are also doing all these things for writers at very reasonable prices, for authors who do not have the technical skills.

    While I understand that the big publishers need to make money to pay for their corporate infrastructure, I think I’d rather do it myself and retain all my rights and control over my work. That means I’ll spend a week on formatting and testing (which are part of my skill set anyway), then as long as it takes to market my books myself. The alternative is waiting two years for the publication process – then still having to market my own books, which is by far the most work-intensive part of publication after writing. And then there’s the whole royalty issue.

    In other words, your math doesn’t work for writers who understand the digital and online world. More change is a-coming, and I think big-pub prices will have to come down in order to compete with the indy world.

  • PaulRP

    Nice BS explanation. Now, tell me that printed books do not go through the same QA process, and that distribution AND take back costs aren’t high?

    If “publishing” (leaving out all the expense of distribution etc) is 12% of the cost of a printed edition, just WHY is an ebook MORE expensive than it’s paperback edition? It should be AT LEAST 10% LESS.

    And, please, the “explanation” that you have to deal with many different upload protocols to  distributors holds little water. Computers can take care of that little “problem” very quickly.

    ANYone remember the 80s when CDs came out? LPs were $7.99, CDs were double. And we were lied to again. “When more people own CD players prices will drop.” Uh huh. How many NEW issue CDs have you seen at $7.99 or less? And producing CDs now is SO much less expensive than LPs they should sell for MUCH less.

    As I said this post is so much garbage it’s pathetic. I LOVE ebooks, but REFUSE to pay more for one than an equivalent paperback.

    And unless readers stand up to this garbage and do the same, then I guess you just love to be RIPPED OFF again, as usual.

  • PaulRP

    OH, forgot to mention. I can loan/give a physical book to anyone I like, cutting publishers’ profits. That obviously affects profits. Isn’t it funny that ebooks do NOT offer the same advantages? THAT means MORE SALES!!!!!!!

    SOME ebooks on Kindle I can “loan.”

    NOT THE SAME.

    Just more garbage and subterfuge and “explanations” to GET READERS MONEY!

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  • Reen

    Dear Mr. Hyatt – Thank you so much for your answers.  They do offer some explanation for the baffling expense of a digital product.   It would just seem to me that some of the required processes involved in digital book production would be similar to those required in producing hardbacks an paperbacks.  Is the collection of metadata unique to physical books.  Don’t we need that to search for any book?  Regarding your distributing to 20 e-retailers, wouldn’t you be distributing physical books to far more retailers than that and that involves the shipping process?   What about the copies that are sent to people previewing books.  Are you able to send more or all of those digitally?  Don’t you still have to make sure that each copy all parties are receiving is the current one? Wouldn’t you have many times more similar accounting demands since you are dealing with far more brick and mortar retailers?  Authors get paid per download, I believe you are saying.  But don’t you still have to deal with that in some capacity and even more with returns from distributors.  Isn’t physical distribution and production of physical books an astronomical cost?  With new editions, edits and corrections, aren’t you dealing with word processing and publishing software changes in both cases, but you have to, again, manufacture, ship, distribute physical books as opposed to digital transmissions.   I do understand you statement that there are problems unique to e-readers that are laborious, but how many employees would publishers really have to pay to do that?  Laborious yes, but astronomically expensive?  I question that.  Also, who buys hard backs and paper backs at the publishers’ full retail price?   I think you’re comparing apples to oranges in saying that a digital book is half the price of an e-reader because of the publishers list prices of their books . While I am not privy to actual statistics on this, I don’t know anyone who isn’t stuck in an airport with no other choice, who pays full price for a physical book.  Lately I have been shocked to find that e-reader prices on Barnes & Noble are so close to the cost of a paperback.  I’m looking at a Barnes & Noble page of books right now where the paperbacks are only a little over a dollar more than the Nook prices.  Anyway, those are my thoughts about the whole thing.  

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  • Chris McBride

    And yet I can still get a mass market for the same price or cheaper than an ebook.  Ebook pricing isn’t ‘fair.’

  • Jenbusick

    Seems to me y’all are leaving two important things out of the equation: What consumers are willing to pay, and sales volume. I’m currently tracking eight different ebooks that I will buy when the price drops from the $10-13 range into the $4-6 range.  Guess how much the publisher is making on those books?  From me, it’s a big fat $0. But the smaller press books that are more realistically priced, those I’ve gone ahead and bought. The publishers and authors who have priced their ebooks in the $4-6 range, or even cheaper, are making a lot more money off of me than the publishers who are determined to maximize their profits by maintaining artificially inflated prices at paper-book levels. 

    I’m not the only person who is opting for less expensive eBooks, and waiting on the more expensive books from the larger publishers. So, which is going to make more money for the publisher? Selling ten copies of a book at $5, or selling one copy at $12.99?  What you seem to think you’re losing in absolute pricing terms you could probably make up in volume if you’d just DROP THE PRICE OF EBOOKS. 

  • http://www.facebook.com/mcheeswright Mark Cheeswright

    it would be nice if combo package was available… as is currently available with blu-ray DVDs (DVD+Blu-ray+Digital Copy)… buy the hard copy + a couple extra dollars and get the physical book sent to you to put on your shelf, plus download the ebook to your kindle simultaniously. best of both worlds.

  • http://twitter.com/UrbanMuseWriter Susan Johnston

    I actually think eBooks are relatively cheap ($9.99 is pretty standard, but Amazon sometimes offers sales where eBooks cost as little as $.99) and that audio books are pricey, even with an Audible.com membership. I’d love to read such a well-reasoned explanation of the economics behind audiobooks.

  • http://www.facebook.com/james.mcw James McW

     I really cannot believe that the Publishing Industry is making the exact same mistakes the Music industry did. The marginal cost of a second ebook is $0.0 yet they are averaging around $10 to buy. This is insane. What of the huge libraries of books we have already bought from Amazon? If I can prove my purchase history to amazon. I should get the digital book free.

    The Publishing houses do not serve the same gate keeping role they once did. There is a new business model for online content and either a new style publishing house will emerge and dominate the market, or the existing publishing houses will need to adapt quickly. If an ebook was $1 I would buy 10 or so a week for my tablet. Because at that price it feels easier to buy then not buy. For someone on a budget, a $10 ebook is a decision that you will often not make.I have several friends at Random house, and even those my age, don’t get this. Milenials will not pay over the odds. Already I know of websites springing up whose servers are in areas of the world outside of Western law, who are looking to offer cheap illegal downloads of books. Until Amazon becomes more like iTunes, the publishing industry is in dire straits.

  • Dante

    The value attributed to an ebook by a reader (the price he or she is willing to pay) has nothing to do
    with the costs of production and is arguably equal to or greater than the value
    of a paper book for most readers.

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  • Sejp

    I understand the arguments raised above, but I disagree about the pricing model. As a consumer, the bottom line with an ebook is that I can’t lend it, sell it, give it away, and don’t even actually own it. For these reasons alone, the price of an ebook should be significantly lower than a print book in all cases. I recently saw the digital version of “A History of the World in 100 Objects” on sale by Penguin through Amazon and the Apple bookstore for ~$30; several dollars more than the print version. This is simply absurd.

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  • Rodger Dow

    I do not buy hard cover books because theres no where to put them after I am done. So I was thrilled when I finally bout an e-reader last summer. I was dismayed to find that e-books cost the same as the paperback version in my local store. 

    After doing some investigation, I found the real reasons why. The printers unions saw this as a direct assault on their wages and forced publishers to keep the prices the same. Being a union member myself, I have long known that unions helped raise wages for workers in the early to mid 20th century. But now unions are desperately trying to keep wages absurdly high compared to the non-union side. This is the real reason e-books cost so much.

  • Philip Wright

    What this article DOESN’T mention is that the consumer is getting a lesser product. That is, with a hardcopy book, you can donate the book to charity after you’ve read it (for a small tax break), lend it to a friend indefinitely, sell it to a used book store, write in the margins, or just plain give it away. With an e-book, you’re completely stuck and often times you can’t even put all your books on the same reader because they’re all in different DRM formats. Also, batteries don’t die on a hardcopy book. Until I can transfer the license for my book to another party and/or format, paper books remain a MUCH greater value. I don’t need to carry 200 books with me because I only read one or two at a time. It’s not a burden to throw a paperback in my backpack with my tablet computer, so the extra convenience  of e-books is just about nil. When the pricing of e-books drops to match the comparative drop in my purchase satisfaction, I will start building up my e-library.

  • Philip Wright

    I remember many years ago when Encyclopedia Britannica tried to sell their books on CD for the same price as their physical books. It was something like $2000 for the small stack of CDs. Microsoft Encarta almost immediately drove them into near bankruptcy. It seems to me the book industry hasn’t learned much since then.
    “Smell is the most powerful trigger to the memory there is. A certain flower or a whiff of smoke can bring up experiences long forgotten. Books smell… musty and rich. The knowledge gained from a computer is… it has no texture, no context. It’s there and then it’s gone. If it’s to last, then the getting of knowledge should be tangible. It should be, um… smelly.” -Rupert Giles (BTVS)

  • Guest

    Hogwash!  

    1.  New books are submitted electronically to their publishers, no data entry costs here.  Furthermore anyone with computer experience knows that file conversion from one format to another takes a click of the mouse.

    2.  A new book will be QAed once and then it is done not each time it is purchased online.

    3.  Distribution costs:  Distribute what?  Book sellers will download to their sites electronically.

    If readers want the cost of ebooks to go down, stop buying them until they go down.  The publishers will eventually figure it out.

  • Dawna Denman

    This really ‘explanation’ sounds utterly ridiculous to me!  The cost of most Ebooks is ridiculously high, and this is proved by the selection of books that can be found for a fair price.  Like you stated, almost all books are already in digital formats.  Editing a book into a sell-able format does not take very much labour.   And authors don’t get paid that much for their books.  

    In all, I think it’s quite ridiculous to have to pay $15 for a book written by a man who died more than 50 years ago.  If that were just one case that may be fine, but to find that some are priced so high while others can be sold for a dollar.  There’s too much of a price gap to believe that the publishers are making so little as you suggest. 

    (Having also read through the comments on this page I found it quite remarkable that there were so many people agreeing with you so easily and none disagreeing.  The I read the ” I reserve the right to delete comments that are snarky, offensive, or off-topic. ”  bit and wasn’t very surprised.  Seems a little dishonest to me…)

    • http://justin.am/ Justin Wise

      Hi Dawna … You sound frustrated by the new direction the industry is taking. Do you have a background in books?

    • http://michaelhyatt.com Michael Hyatt

      Thanks for your comment. 

      I am not sure if you live in the U.S. or elsewhere, but here most e-books are still in the $9.99 range. Again, this is about half of what the physical editions sell for at retail.

      Regardless, if publishers have priced e-books too high, you would expect the market to react and demand to fall off. But, in fact, that is not happing. E-book sales continue to grow by triple digits, which tells me that consumers are happy with the pricing.

      By the way, I rarely delete comments, unless they are spam or really offensive. 

      Thanks.

  • Anonymous

    The honest answer to the question is greed.  In a free market, the price of something is determined by marginal cost … the cost to make one more copy.  Copyright allows companies to largely ignore the free market and charge whatever they feel like.  Modern corporate executives care only about money and are not about to pass any savings on to the consumer when they can steal it themselves.

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  • Redreader

    Your initial assumption is a bit off for most readers. You say that “As you are probably aware, Amazon is selling most eBooks for $9.99. That is already roughly half the price (depending on the format) of the typical physical book.”

    That bit, “Depending on the Format” is REALLY important.

    As an example, “Ghost Story”  by Jim Butcher on Amazon currently retails for $17.04 hardback.  Kindle version is $14.99.  Paperback will be $9.99 (This price just went up a few months ago, one wonders if the publishers raised the price on paperbacks $2 to help justify ebook prices.)

    There is no justification for the ebook version being more than a paperback. If the publishing costs really are so much more than every other aspect of printing a book, then it goes to show, time for the publishers to evolve or die.

    We saw book prices suddenly all jump a few months back from 7.99 for a paperback to 9.99. At the same time all six of the big publishers all priced ebooks at no less than 9.99. In many cases the prices were the same as the hardback prices. (Which by what you say here, were already inflated!)

    The cost of printing a book and distributing it is only 12%? That might be true of a perfect bound paperback, but hardly true of a hardback, and hardbacks are what you’re basing your ebook prices against.

    This whole ebook price thing stinks. I’m not the only one who thinks so either. The DOJ is currently investigating into charges of conspiracy against Simon and Schuster, Hachette, Penguin, Macmillan and HarperCollins.
    I look forward to seeing where this goes in the next few months.

  • Davidtoth

    What your talking about maybe true, but bear in mind what started out as an idea, turned out to be a major profit for the publishing companies eliminating the cost of printing productions. But not to worry, the Justice Department is investigating price fixing by Amazon and Publishers, even though the wheel of justice turns slowly, they do turn.

  • Vince ba Bince

    How much do Ebook websites pay to own a book that they can rent to their customers?  Is it a pay per rent, or do they pay a one time fee and tailor prices accordingly to make back their money?  What is an average profit margin for the ebook renter on a textbook?

  • http://twitter.com/WilliamNyikuli William A. Nyikuli

    It just seems a little off (and the Department of Justice appears to share that view).  I mean why can’t book publishers follow the model of the music industry? Look at Apple. Their prices of digital music are lower than prices of physical albums in stores. Also music piracy is down.  There’ll always be a loss to piracy/stealing, but at the same time, there are many honest customers who don’t want to get ripped off and who don’t want their intelligence insulted either. 

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  • CRave

    It doesn’t matter what the publisher thinks it should cost.  Price elasticity is what matters.  And managing risk.  Let me explain:
    1) Price Elasticity:  regardless of what you want to sell the ebook for, I don’t want to pay it; and, therefore, as a consumer, I will choose not to buy it (some may even pirate it).  Either publishers aren’t thinking straight, or it’s a misguided attempt to preserve print.2) Managing Risk:  with printed volumes, you have to engage in demand forecasting:   how many will people buy a copy of a book?  Take a guess, then print a certain quantity.  If you run out, then you can’t sell as many as you’d like.  If you make too much, then you’re stuck with inventory.  And, storing inventory cost money.  So does discounting for clearance.So, while an interesting read, the author’s opinion means absolutely nothing in terms of managing customer value.  Ignore customer perception and microeconomics at your own peril.

    • http://michaelhyatt.com Michael Hyatt

      Thanks for your comments. We are watching price elasticity and demand very carefully. By the way, this article was written over two years ago. A lot had changed since then.

  • Sterks

    Utter Rubbish, Amazon sell mots books at $12.99 and above.  Secondly your distribution cost are cheaper than conventional books. So thats also rubbish.  Also the publisher has already got the book in the format required for publishing.  

    Its just a price fixing rip-off

  • Tom

    Hi Michael,
    Have you noticed what guys like bookboon.com are doing? If your pricing example is true how should that then at all be possible? According to publishing Perspectives they expect 50 million downloads this year.
    Best regards
    Tom

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  • http://www.facebook.com/jphoenix3 James Phoenix

    I see an eBook at 9.99 or 12.99 for example. Then I look on Amazon and see the book price is the same price or close to it. So the question becomes why should I purchase an eBook if I can get the physical copy of the book for near price? Sure I get an eBook immediately, but how will eBooks survive if they are not cheap enough?  

    • http://michaelhyatt.com/ Michael Hyatt

      eBooks are doing very well. Evidently, people are willing to pay this, otherwise the price would come down.

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  • Bookworm

    I understand what you are saying here, but it does not add up. For starters, we are talking about ONE book file, that has all the non-printing costs, which is then spread over hundreds, thousands, possibly millions of individual books. More digital books are sold, because there is no second, third, etc hand market. The same applies to loaning or lending in most countries. You don’t have to worry about returns for non-sales or damage, etc. Paper may be cheap, but let’s not forget ink, glue and labor. Storage and transport costs are not really all that negligible when you consider everything from warehouse space (temporary and permanent), then there is transport (vans, lorries, shipping, air), and the cost of keeping a book on a store shelf, competing for others for pride of place in many instances.  Thus marketing is more costly for physical copies. Then there is availability, where digital allows for instant purchase always available, so you can sell even more again. Then there is all that waiting for a print run, where you are under pressure to make Xmas sales, etc. I’ve written articles about all this and more on personal forums, but I’m quickly reaching the point where I want to go public about the rorting in a big way. Books on the whole, have been far too costly for too long as it is, and now the greed is going to increase with ebooks. Also consider the fact, that selling two books for the current price of one, may mean two authors get a sale and more are sold because they are cheaper. Publishers seriously need to change their modelling. Do you know how many ebooks I wanted to buy in the last 6 months alone? Heeps, but most of them cost too much, so I didn’t. And guess what. I didn’t buy the physical version either, because I only wanted the ebook one. Now I hope in vain most likely, for the prices to come down. All those lost sales. How foolish the publishers are, especially as I might eventually turn to free DRM stripped downloads, if frustrated and fed up enough.

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  • Mr TRUTH

    this is BULSHIT.  everything this guy portraits as “new” or “extra” costs can be done by a few people in 1 room.  NO transportation costs, NO storage costs, NO fabrication costs, NO unsold stock.  really, this whole article is a piece of rubbish, written by a piece of shit.

  • Frank

    Hey. Mr. Truth, let’s see your general ledger entries for running a
    digital book business. Show us
    how you can start, then run an e-book publishing and distribution business for pennies; paying salaries, web contractors,
    taxes, health costs, regular expenses, and then offer the e-book over the long term. Fifty-percent of of new books generate only $500 per year, less than the typical cell phone plan.

    Why do you think Amazon sells toasters? There’s no way to make a living selling e-books alone. So buy your $49 toaster and get a $.99 e-book. All creative, hard-working authors will gladly eat the burnt crust and crumbs if you care to share.

  • John

    $9.99 is half the pysical book.  What do you buy gold plated books?  I have never read so much BS.  Writers, sell ebooks yourself.  You will make more and the buyer will pay less.   

  • Confused

    I don’t understand why they are still so expensive when companies can shut your account down, and all the books you buy are gone. The purchaser doesn’t even own a book they buy in digital copy, and can disappear in the blink of an eye at the sole opinion of a company such as Kindle and Barnes and Noble, to name a few.

    I will probably never “purchase” ebooks, for that reason.

    • http://michaelhyatt.com/ Michael Hyatt

      No problem. I understand.

  • Frank

    There’s a better chance digital books will be available over the long-term. But why would someone shut down your account? The only reason might be abuse or violation of the user agreement…..and that doesn’t sound like something you’d do.

  • http://profile.yahoo.com/YC6OUMQLN7UCKPZLKGE7M5NDLM Dan

    When people want to know why something is getting more expensive the first thing I hear is shipping is going up because fuel prices are going up and manufacturing is going up because because materials are going up. Its not just shipping the books out to various retailers, its getting the materials to manufacturer. They say in this article that shipping is a small percentage. I don’t believe it.
    Then the three add on he mentions— 
    Digital preparation– why are there so many formats? look that up. Simplify it and make a single format. 
    QA? I do believe that a human has to look over a finished product for even the most advanced automated software but even then– once a book has been reviewed then you are down. Besides- what percentage of books have all the additional stuff that he mentioned?
    Digital distribution?- there are costs involved to don’t try to make us believe they add significantly to price. That is also a highly automated process where software has been available for years to accomplish.
    When a leisure book is first printed– it is typically in hardcover.. and the price is, of course, higher. When it is switched to softcover.. they lowered the price. So why is it when a new book comes out its e-version is still higher until the soft cover is available? There is no change in the way the ebook is distributed!
    Now– he didn’t maintain the one thing I would think would induce the most cost. Ownership tracking and storage. There has been software available to manage ownership tracking available for a long time and storage of a pristine digital copy (and its redundancies) that can be perpetually copied does not use that much digital space.. but the sheer volume of that can be staggering.
    Finally, even after all the digital costs are added.. taking away the physical manufacturing and delivery should leave a gap. A gap that could be passed to the consumer. 

    Dan

    • Frank

      So many armchair critics fail to recognize the combined electronic and human costs. All this jabber about low cost distribution and so forth is naive as well. Software development, servers, maintenance, links, bandwidth, licensing, copyright, business overhead, …on and on and on. The human costs for personnel are no different than any other business, including editing, graphic design, management, healthcare, salaries, …and don’t forget the poor author who needs a and deserves a considerable piece of the action, and rightfully so. The ninnies who expect everything for free or to be at substantially reduced cost like $.99 are simply business dimwits. Good luck getting literary quality when no one can make a fair living. Ask yourself the same question in the mirror  –  does my employer need me in an everything-for- free world? The consumer is getting more choice than ever right now, more convenience, and lower prices, but willing to spend $500 to $800 for an iPad without blinking….yet still whining when an e-book is less than a Starbucks latte.. Give me a break.

  • Steve

    Hi
    If you (UK users) were sensible (like me!), you would return your Kindles (not buy a Kindle) because with my KOBO I can visit my local Library (online) and download a huge selection of books for free.
    When I tried this with a (quickly returned) Kindle it doesn’t allow you to read them! What an absolute deal breaker. i.e. we (Amazon) are going to stop you using this part of your local Library.
    What a shame. The KOBO itself is excellent and the ‘borrowed’ library books sit happily on it for 21 days and then get ‘returned’ to the library for the next person to read.

    Steve

  • hunter

    I think ebook is still expensive because supply and demand.  Ebook doesn’t have much competition yet.  why do they have to lower the price.

    • Frank

       Expensive? A couple slices of pizza cost more than most e-books.

      • http://michaelhyatt.com/ Michael Hyatt

        Now that brings it into perspective!

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  • Nicthalon

    Why does almost every article on this claim $9.99 is half the typical book price?  Half of the typical hardcover, yes, but an ebook shouldn’t cost a penny more than a PAPERBACK !

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  • Slick1

    I hate to say it but I think this whole article is BS. The only part I believed was: “The good news is that we are making about the same margins, regardless of whether we sell the book in physical form or digital.” So what you’re telling me is; as long as you make just as much money you don’t care what the cost is?

    I guess this is why the DOJ sued the major publishing companies on price fixing.

    • Frank

       I agree, the whole article and argument is garbage, and old. But price fixing is illegal; making your margins and earnings stay the same or improve legally is brilliant business. So let’s drop this armchair commentary on whether or not e-books or print prices are fair or not. There are 300,000 companies in the USA alone that claim to be publishers, far more than and other media category except websites. There’s plenty of opportunity for competition – so the DOJ did the right thing slamming those few big traditional book names and Apple for attempting to crush the little guys. But everyone needs profitability, so stop harping how much – let the 300,000 publishers duke it out, and all the consumers will be the beneficiaries.

  • Dave

    Publishing companies see themselves as print book publishers so the cost of creating and marketing the books in e-book format is an additional cost (a nuisance). To the print book publisher, the e-book format is a convenience item for which they are entitled to a higher markup (profit) just as a grocery store would take a higher markup on a cake pan than on grocery items. Mr. Hyatt sells e-books at the price the market will bear. Since they have a monopoly on most of their titles, there is little incentive to discount. There are new businesses coming online who see themselves as e-book publishers and they see printed books as the convenience format. The market will change, but it will take a while.

  • Frank

    Is this topic really still being discussed? Print versus digital….consumers versus publishers….armchair critics versus people responsible for up-fronting the costs? Look, the human costs haven’t changed, except they get higher. Nobody can make a living at 99 cents a book when 80% of new books generate less than $500 in gross revenue per year. Take out production costs, sales tax, local, state, and federal income taxes, healthcare fees, rent, food, and utility bills and maybe then a lucky writer or publisher can make money at 99 cents a book. So please stop this foolish discussion for those who think everything on the Internet should be free. Face it, the slouches out there who want everything free online will pay $15 for a lousy pizza and beer….but a good writer’s hard work and a publisher’s risk is devalued by the same idiot.

  • Rowan

    Could you refer me to any source that outlines the investment costs for digital publishing (purchase of software etc)? For my master thesis, I am researching to what extent supply intersubstitutability exists between printed and digital books. Thank you in advance, Rowan

  • Joey Ebach

    Good article and explanation. But I think the rise of subscription models for books through companies like oysterbooks.com and nokbok.com is going to dramatically reduce what people are willing to pay for individual e-books. Publishers will have no choice but to reduce the cost. I’m not sure these companies will damage physical book sales too much though, because there are still a ton of people who prefer physical to digital, like myself.

  • Ron

    So you think you are justified in charging the following rates for the following book formats (example – The Shadow Lamp – Lawhead)?

    I have written to the authors and several have responded stating that they only get less than $1 from each copy sold! In fact, a couple have resorted to publish their own Kindle version ebooks. The sell these for $2.99 and get more per copy than they get from the publishers!

    List – your website:
    Hardcover – $ 26.99
    Paperback – $ 16.99
    ePub – $17.99

    At B&N:
    Hardcover – $18.93
    Paperback – $ 13.59
    ePub – $ 17.99 – no discount

    At Amazon:
    Hardcover – $18.93
    Paperback – $ 13.73

    Kindle – $ 13.04 – discounted

    And yet both Amazon and Barnes and Noble emphatically state that “the Publisher sets the selling price” for ebooks.

    At another publisher – Enclave Publishing – they have both printed books and ebooks and they are consistent in their pricing – $14.99 for paperbacks and $5.99 for ebooks (both Kindle and ePub).

    So I think you are less than honest about your high margin – higher than other publishers. That shows – in the least – gross inefficiency – or the worst – excessive greed! This is not a good message to the rest of the world. The secular publishers manage their costs – and prices – much more effectively.