Obligatory e-book pricing post

If you are reading this blog it should not come as a shock to you that I like to read. And yes Mr. FTC man, I do get a decent amount of review copies. But I also buy far too many a great many books. I also own and very much enjoy my Kindle.

What does all this mean? It means by the ancient rights of the Internets I get to step up on my soapbox and unleash a diatribe of my choosing. [OK, I made that part up … but it sounds good doesn’t it?]

But I do, however, feel like I might have some perspective on the whole e-books pricing issue both as a consumer and as someone with philosophical opinions on the matter.

So let us use this handy-dandy notebook! New York Times article on the subject as a jumping off point shall we? If you are game, see below.

First off let me just say that I will try to avoid the grand moralizing that seems to invade a few too many opinions on this matter. For example, I don’t think the Amazon v. Macmillan clash is about morality or ethics or anti-trust law or jerkiness (sorry to get into the technical terms here) but rather is simply two very large companies trying to establish a foundation for future profit and market share.

Now I am a big fan of Amazon in general and both shop there and use their affiliate programs (to be fair I also shop at Barnes & Noble, Borders and any other book store I stumble upon).  But in this case I am largely in favor of the system that Macmillan outlined.

But first, let’s establish that both consumers and authors/publishers are not particularly familiar with how prices actually work. One of the biggest misunderstandings when it comes to economics and pricing is that pricing should be tied to cost (particularly marginal costs).  Far too many consumers insist that prices be tied to what it costs to produce something and frequently very poor ideas about that cost.


“I just don’t want to be extorted,” said Joshua Levitsky, a computer technician and Kindle owner in New York. “I want to pay what it’s worth. If it costs them nothing to print the paper book, which I can’t believe, then they should be the same price. But I just don’t see how it can be the same price.”

This short paragraph is filled with confusion. First, you aren’t being extorted you are being exposed to the book market. The place where one group of people decide what to charge and other people decide what to pay. Ring a bell?  Also note the complete lack of aknowledgement that a book might be more than the paper it is printed on – as if digital = free. Note to Josh and others: Kindle formatting costs money too as do a gazillion other things involved.

But wait, authors can be just as moralistic and ill informed:

“The sense of entitlement of the American consumer is absolutely astonishing,” said Douglas Preston, whose novel “Impact” reached as high as No. 4 on The New York Times’s hardcover fiction best-seller list earlier this month. “It’s the Wal-Mart mentality, which in my view is very unhealthy for our country. It’s this notion of not wanting to pay the real price of something.”

Street sign for Wal*Mart Drive, south of Gordo...
Image via Wikipedia

Yes, it is the consumer who has the sense of entitlement! Yes, lord forbid publishers try the Wal-Mart mentality of making gobs of money by giving consumers what they want! Outrageous that consumers demand lower prices.

Um, Mr. Preston, there are no “real” prices there are is only what the market will bear or what someone wants to charge.  Now, you might want to use the cost and value of books to convince consumers to pay more than they otherwise might but there is no “real” price involved in this debate.

So let’s review:

  • Everyone want to make more money; be charged less and keep more (either in the short or the long term).
  • Prices ultimately are what the market will bear; they are how buyers and sellers decide what something is worth at a particular moment given a set of circumstances. Over a mind-boggling number of transactions eventually the market sets a price that reflects what people are willing to pay (all things being equal).
  • Nothing says that prices have to be tied to marginal cost (the cost of the next widget) although that clearly plays a role in how prices are usually set.

Now that I have laid out my own snark filled condescension let me just say that I don’t know enough about Amazon or MacMillian to say what is best for either company in terms of pricing for a sustainable business model but I will assume they are both acting in what they see as their best interest.

Now back to the agency model that seems to have prevailed in this dispute – at least for now. The reason I support it is because it makes the most sense to me as to how pricing would work where consumers have useful price points to make decisions.

In this model books are most expensive when first released – and are assumed to have the most leverage – and get cheaper over time. A book by your favorite author – or on an important topic – comes out and you simply have to have it? Well, you will pay more for it.  The positive back end of this also applies. After a book goes into paperback and ultimately into the backlist then it should be cheaper – hopefully much cheaper.

The publisher will try to maximize profits when a book is hot but can also look to a long-tail effect where people are a still buying the backlist. In the long term I envision a world where books don’t go out of print.

To me this is about access to the most books possible. I don’t want the fear over the $9.99 price point to keep a publisher from offering an e-book version of a just released book. I want to the choice to pay more for it and I would like the choice later to pay a lot less. If we can start down a path where we experiment with these price points I think the system will work better.

This all takes place in a world where hardbacks and paperbacks are still the way the vast majority of people read books.  Now I understand that as time passes and things change this will not be the case. And I can see where there might be wisdom in moving to a high volume lower price type structure for ebooks. But for right now I just don’t see the industry set up that way and expecting it morph into that quickly is asking too much.

Let me reiterate: this is just the system that makes sense to me and makes things convenient for me as a consumer. I am not saying it is the moral way or the only way that makes sense economically or anything else. I just favor this system because it seems to allow consumers a variety of choices.

Now, if all the people ranting and complaining about books priced above $9.99 are the majority – or a powerful minority – then we are likely to see publishers react to that either by marketing, outreach and education or by lowering prices – most likely a combination of both. Again, that is how it works – buyers and sellers act in their interest and prices eventually reflect what people are willing to pay.

This endeth the rant.

What do you think?

Kevin Holtsberry
I work in communications and public affairs. I try to squeeze in as much reading as I can while still spending time with my wife and two kids (and cheering on the Pittsburgh Steelers and Michigan Wolverines during football season).

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