eBookonomics

eBooks were one of the first true revolutions in the publishing industry. For the first time in literally centuries, we no longer have to mash up plants, print something on them, and distribute via boat or foot or truck or whatever, to a brick-and-mortar store.

Think of the reduction in production costs! Transportation costs! Commercial overheads!

Imagine the lowered costs for consumers and the environment! The higher profits for authors!

And imagine the newfound freedoms!

For decades, authors who wanted to write epic sagas had been reeled in by publishers with an eye on the bottom line.

Novelists in genres that trend towards longer stories, like fantasy, found it tough to find someone to take a risk on them.

Publishers, so the conventional wisdom went, only had an appetite for books of around 70,000~100,000 words, even though the reading public has long demonstrated an appetite for much longer works.

Now, that might sound like a lot of words. But the first book in the Harry Potter series – the one I rejected for being too short, even as a child? – that slim volume was close to 77,000 words.

The typical length of a scifi/fantasy novel is often given as 110,000 words+.

And it’s not just genre fiction. Literary novelists whose work was deemed too “niche” to sell enough copies to recoup production costs, even if they stuck to the “ideal” word limit, have also struggled.

So imagine all of the new and diverse authors publishers might take a risk on with the cost-per-page effectively removed!

Oh happy days!

Except… None of those things happened.

At least not across the board, and certainly not on a permanent basis.

In a recent post on book pricing, I wrote mainly about paperback prices. But in my investigations, I noticed something very strange going on.

Contrary to my expectations, the vast majority of the Kindle editions I examined were very close to their paperback counterparts in price.

But wait!

Wasn’t the big promise of ebooks that they would lower – maybe even halve prices by drastically reducing production costs?

I can see why, for example, a movie might cost roughly the same as a digital download as it did on disc. The vast bulk of the cost involved in producing a movie isn’t the burning of the disc and printing of the case insert – its the work of hundreds, if not thousands of people for months, if not years, before release.

But that isn’t true of books. Books are primarily written by single authors, who receive (ever dwindling) editorial and promotional support from a publisher.

Writing is a relatively solitary business.

Certainly, Amazon’s publishing costs for indie authors reflect this balance. For an average book of 378 pages, with an average list price of US$14.31, close to two-thirds of this figure is chewed up by the printing (38%) and distribution (25%).

A paltry 22% “royalty” remains to split between the author + everyone else doing the work of a traditional publisher (editing, proofing, designing, promoting etc).

Many books and websites comparing the pros and cons of going indie vs. traditional publishing often trumpet the larger royalties that can be received by independent authors. But few indies are professional editors and graphic designers and marketers as well as professional writers. The fact that all of these costs must come out of the royalty – plus other expenses like ISBNs is not often mentioned.

Even if you do have skills in all of those areas, your time is valuable. Time spent choosing fonts or correcting margin widths or creating social-media ready images is time that you aren’t writing, and perhaps more importantly, that you aren’t truly living. And what is the point of being an independent author if you aren’t spending your time doing the things you enjoy, or that will inspire your next novel?

So why aren’t ebooks half the cost (or less) of paperbacks?

In short: because they don’t need to be.

Of the ten NYT bestsellers I looked at on Kindle, nine out of ten cost more than half the cost of the paperback.

But, bafflingly, two cost even more than the paperback edition – People We Meet on Vacation was selling for just $9.99 in paperback, but was $1.28 more on Kindle. The Guest List was selling for $11.26 (again, brand new) as a paperback, but was a whopping $2.64 extra on Kindle. That’s an enormous 23% markup for the convenience of receiving an electronic copy with digital rights management restrictions on who you can lend the book you ostensibly “own” to, and with no resale value.

And in case you think that’s just some weird anomaly, that Amazon decided to mark down those two paperbacks and it’s just a bit of a hiccup, consider the following:

Of the ten 600~650 page novels I looked at (the ones whose paperbacks were, 80% of the time selling at lower than Amazon would permit an indie to sell a book for, and in one case, for less than the printing costs Amazon quotes), FOUR OUT OF TEN Kindle editions were more expensive than the paperbacks.

What the what!?

Lengthy novels were exactly what many of us readers hoped Kindles and other eReaders would make more affordable, by drastically reducing the production costs involved. Aside from a little extra editing and formatting, a novel of 400,000 words should be no more costly to produce and distribute on Kindle than a 40,000 word novella.

Yet, 40% of the time, these longish novels cost even more on Kindle than they did in paperback, the most egregious case being The Amazing Adventures of Kavalier and Clay which, for some unfathomable (on the surface) reason, was selling for $9.14 in paperback, but cost an extra $2.31 on Kindle – a markup over over 25%.

What did we expect?

Big publishers and big sales platforms will, in true capitalist fashion, charge whatever the market will permit.

Amazon has more than enough data to make tiny tweaks to its pricing algorithms to maximise profit at every turn.

In major markets like the US and UK, Amazon is said to account for around 90% of all eBook sales. This lack of competition is unsurprising given the “velvet handcuffs” model of Kindle eReaders which makes reading material from outside of the “Kindle ecosystem” difficult. Kindles are so popular in English-speaking countries “kindle” has practically become a generic term for eReaders in general, in the same way “google” now refers to any online search, and “ipad” is used to refer to any tablet computer.

And it’s not just me pointing this out. Last year, Amazon and the big five publishers were accused of price fixing, colluding to keep the price of ebooks artificially high.

The limited competition which still exists, however, is in the sale of physical books.

The Final Frontier

As the Guardian mentions, Amazon controls around 90% of ebook sales, and over 50% of physical book sales.

It’s not unreasonable to assume that Amazon would like that figure to be well over 50% of physical books.

Now, I know that big publishers can negotiate better deals on book production costs than I, as an independent author “negotiating” with Amazon. (And by “negotiating” I mean plugging my details into Amazon’s calculator and grudgingly accepting whatever it spits out, whether I like it or not).

But publishers still have to be making a profit. After all, the big five report profits in the hundreds of millions or billions of dollars every year.

It makes sense to me that Amazon is accepting very low or no commissions, or even selling books at a loss, purely to increase their paperback market share. Meanwhile, they are quite happy to work with publishers to keep ebook prices high because they can – there is practically no competition in the market.

It’s not just that Amazon controls 90% of the ebook market though. It’s also the fact that readers are actively dissuaded from trying other options due to two factors: sunk costs, and what Richard Stallman calls “velvet handcuffs”.

Sunk Costs and Velvet Handcuffs

If you already own a Kindle, you’ll find it extremely easy to download and read books from Amazon – and challenging, or disappointing to try and get books from other sources onto your device. First of all, you’ve got to grapple with the fact that many booksellers use DRM that prevents you from converting from one proprietary format to another. And then, you’ve got to grapple with the fact that making it easy for you to read books from Amazon – and difficult to read books from other sources – is one of the design features of the Kindle. So you have hurdles to overcome at both ends of the race.

Trying out a book from a different retailer as a once-off is tricky for Kindle users. But maybe you want to swap entirely? Sure, go ahead – but be prepared to lose your entire library. That’s the “velvet handcuffs”. The pink fluff might make them look fun to put on and feel comfortable while you’re wearing them, but it’s not until you want to take them off that you realise how much your freedom has been restricted this whole time.

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