Monday, February 27, 2012
By: Angela Render
As the next chapter in the ebook saga moves us toward all-out war in the pricing arena, readers are fuming in the cross-fire. But is the problem here really in price gouging or is it a product of yet another back-firing marketing and sales strategy?
A recent Cnet article outlined the messy slug-match between Amazon and the Independent Publishers Group (IPG) over setting prices for ebooks. (“So how much is a fair price to pay for an e-book?” by Charles Cooper) Traditionally, it has been the retail outlets that have always determined the final sale price of any book they sell. The publisher puts on a cover price and sells the book at a lower wholesale price and then it’s always been up to the retailer to establish what sort of discounts they’re willing to offer to move the product. Where the trouble started was with Amazon’s decision to boost Kindle sales by offering huge discounts on ebook titles—sometimes taking a loss on the ebook sale to do it.
In stepped Apple who offered the Independent Publishers Group the ability to set their own ebook prices on the iBookstore, so long as Apple got its 30%. But there was the condition that as long as another store was selling them at a lower rate, Apple would be able to match that discount and still get its 30%. That sent the IPG to Amazon looking for the same deal when their contract was up and they couldn’t reach agreement so IPG titles were pulled from the Kindle bookstore. Eventually, the publishers won control over setting those prices.
But wait a minute. What about all those people who bought Kindles with the expectation that they would be saving money on books? They’re justifiably angry, especially when they can now get hardcover copies of these titles through discount chains for less than the ebook.
While I think an ebook should always be priced lower than its print sibling, the assertion that ebooks are “cheap” to produce isn’t exactly true. Having produced an ebook, I can tell you that to do it right, it’s not cheap. Publishers still have to go through the editorial process, marketing, cover design, layout, distribution…and let’s not forget actually paying the author.
For an individual, the ISBN alone can cost $100—at a 30% royalty, that’s over 300 – 99 cent downloads to break even on the ISBN, not to mention all that other stuff expected in a professional-quality publication. Trust me, to even get that meager 300 copy sales figure, it’s going to take a lot of time and effort in polish and advertising.
So “cheap” is relative, but more importantly, Amazon, in its strategic marketing decision to push Kindle sales on the promise of savings on book titles, has skewed consumer expectations. Now the industry, floundering its way through this fledgling technology, is paying the price in consumer good-will. While there may be some price gouging in certain areas, it’s more a factor of customers expecting continued artificially low book prices and companies not being able to maintain the revenue loss necessary to meet that expectation.
Add to the ebook arena, Amazon’s move from simple middle-man to full-fledged publisher with its easy access for individuals as well as the exclusive publishing deals it’s singing.
What will be interesting to see is if the ebook industry can bridge the chasm Amazon’s Kindle marketing team has created. On one side, you have the professional publishing houses with their high product standards and large overheads. On the other you have consumers demanding a high quality product at a low price. The market is currently being flooded with inexpensive products of random quality. Consumers are left “taking a chance.”
This should be fun to watch. Please pass the popcorn.