Ebook Economics

Big name authors are making ebook marketing deals like Open Road Integrated Media and Odyssey Editions, while Amazon claims they are selling more ebook titles than hardbacks.  Is there an ebook gold rush?  Is 2010 finally the year of the ebook?  I’m meeting more and more bookworms with Kindles and Nooks.  I ordered the new third generation Kindle the day it came out, and lucky for me, because it sold out in a matter of days.

If everyone reads on an ebook reader does that mean printed books will go extinct?

On several of my online book club groups we have been grumbling because of rising ebook prices.  Ebooks used to be like paperbacks – far less glamorous than hardback or trade editions.  After the Kindle came out, ebook editions started coming out concurrent with the hardback editions, but priced at $9.99.  Can you imagine in the old days if new books were published in hardback and mass market paperback on the same day?  Which would you have bought?

Are cheaper ebook editions published the same day as hardbacks too good to be true?

Publishers now want more money for ebooks because ebooks are replacing hardbacks, as well as trade and mass market editions.  It used to be you bought the expensive hardback because you wanted to be among the first to read a book.  Sure there are book collectors, but most people just give away their hardbacks when they finished them.  Publishers want the most money for a book when its new, even if its in a digital edition which has no collector value at all.

It’s now possible on Amazon to find Kindle editions more expensive than hardback editions?  WTF?  That doesn’t make sense, does it?  What will be the new cheap mass market paperback edition then?  If everyone reads ebooks will they slowly drop in price as their sales dwindle?  Instead of waiting for the paperback edition, people will wait for the $4.99 digital edition.

What does that mean for new book sales, used books and remaindered books?  It used to be if you waited a few months you could buy a new hardback marked down for a fraction of the original price.  $35 books would go for $7.99.  Or you could go to a used bookstore or a library book sale and get a copy even cheaper.

If a bestseller sells a millions digital copies, how many used and remaindered books will show up for sale?  Will physical books from before the ebook era become more valuable as less books are published on paper?  Or will people just prefer a Kindle edition?

I’m in four online book clubs and I try to read one or two each month.  Some books I can get at the library, but often I can’t.  My choice is to buy either new or used.  I can generally get used hardbacks cheaper than new mass market paperbacks.  But if I had a choice between a $5 used hardback and a $5 download I’m going to pick the download for the convenience.  However, if the choice is a $5 hardback or a $9.99 download my decision gets harder.  The idea of having a 3,500 book library on my Kindle is cool, but not when I think it will be $35,000.

I’ll never need 3,500 books on my Kindle.  I read about 50 books a year, and even if I live to be 90, that’s only about 1,600 books, but still $16,000 at $10 each.  I could save a lot of retirement money by going to the library or shopping for used editions.  But what if used editions disappear?

Here’s where the pricing of ebooks will effect me.  I want the latest yearly edition of The Year’s Best Science Fiction, edited by Gardner Dozois.  At Amazon, it’s $26.40 for the hardback, $14.95 for the trade paper, and $9.99 for the Kindle.  If I wait it should show up at Edward R. Hamilton for $2.95-4.95.  Amazon has for years stopped me from buying it from my local bookseller because of the huge discount.  The trade paper is $21.99 locally.  If I want this year’s edition now, the ebook is $9.99, which is $12 cheaper (not counting tax) locally, or $5 cheaper from Amazon. That’s a pretty good deal.

But book publishers are balking at selling new books for $9.99.  If the Kindle edition was the same as the trade edition, wouldn’t it be logical to get the paper edition?  I could give it to a friend when I’m through, or donate it to the library.  But would I pay the same just for the convenience of having it on my Kindle?

Authors are flocking to agents to get special deals for their back list of books.  Royalty rates are 25-70% for ebooks compared to 8-12% for printed editions.  I wonder if writers would prefer to sell a million digital editions or a million hardbacks if they ended up making more on the digital edition.  I’m sure hardbacks will always be the most prestigious format.  Or will it matter?  I’ve bought hundreds of hardbacks I no longer own, maybe even over a thousand.

I’m starting to meet people that didn’t buy books before that are buying ebooks because they can read them on their iPhone.  That might be a novelty thing, or it might be a trend.  You have to carry your phone everywhere, but carrying a book everywhere can be a pain.  And if you are in the mood for a book and don’t want to wait for Amazon to mail you one, or find it at a local bookstore, will you just take the easy way out and buy a digital copy?

But look what happened to audiobooks.  Years ago about the only kind of audiobook that were for sale were miserable 2 and 4 cassette abridged editions that went for $25-35.  If you wanted unabridged editions you had to pay $50-$150 from a specialty seller.  Or rent them for $20-30.  Now I get digital audiobooks, unabridged for $9.56 apiece.  That’s how digital audiobooks have changed the economics.  But I buy my audiobooks from Audible.com (owned by Amazon.com) in 24 credit packs.  If I got them one a month they would be $16.  Audible is forced to sell a few titles for 2 credits per book, but I won’t buy those books.

You have to be crazy to buy CD audiobooks nowadays.

I’m thinking ebooks will shake out the regular book business too.  Non-fiction might hang in there because beautiful picture books look horrible on ebook readers, even the iPad.  Bookstores might focus on non-fiction.  And non-fiction books are the kind I like to see before I buy too.  I’m more likely to buy non-fiction locally, rather than order from Amazon.  Unless it’s $50 locally, and $22 from Amazon.

There are several economic revolutions going on at once with books.  When they come out with a digital ebook reader that makes non-fiction books look better than paper, that will cause another revolution, especially with textbooks.

Amazon is making deals with writers to sell classic old books for $9.99 for the Kindle.  Here’s a list of some titles to consider.  These are famous literary titles like Midnight’s Children by Salman Rushdie or The Naked and the Dead by Norman Mailer.  $9.99 seems too high for these old titles.  But the cheapest paperback of the Mailer book is $12.24.  Amazon also sells used paper editions starting at $4.86, but most sellers want $3.99 shipping. 

Thus $9.99 becomes a very interesting price point.  It’s cheaper than new paper, but slightly more expensive than used paper, but it conveniently goes on the Kindle.   If I searched around at used bookstores I might find a copy for $2-3.  But if I buy the $9.99 copy, Mailer’s estate gets a royalty, and Amazon and the publisher make money.  It stimulates the economy.  Plus it will sit patiently in my Kindle library not taking up any shelf space, not requiring any effort to move if I move, so it’s sort of appealing at $9.99.

Will low price and convenience kill off printed fiction?  But then, with ebooks, fiction should never go out of print.  In the end I predict ebooks will kill off the mass market paperback, seriously hurt sales of the trade edition, and hardback sales will be geared towards book collectors and libraries.  Slowly, the used book trade will retool for selling to collectors.  I think new books will sell for more than $9.99, that books that were sold as trade editions will sell for $9.99, and that as sales fall off ebooks will migrated down in price to be lower than the average cost of today’s mass market book.  We’ll eventually see $.99 – $2.99 specials.

JWH – 8/10/10

2 thoughts on “Ebook Economics”

  1. Used bookstores, which are my favorite kind of bookstore, will probably be the first to disappear. If people only infrequently-or-never buy physical books then the used book stores will have little influx of new product and also no one wanting to buy them.

    But what will really be the game changer will be if the next generation of kids grows up not reading physical books. If they have the philosophy of “You used to read books printed on paper?!” well then, books will be a thing of the past or a specialty item, like when bands today make about 1000 vinyl records just as a collector’s item.

  2. I self-publish my books and I used to prepare and release them on paper first in POD format. Then I’d release them through Smashwords in all kinds of e-book formats. But my last book, an anthology of short stories was released on e-book format only. I have no plans to make a POD version of it.

    Going forward, with my next novel Tyrmia, I will be releasing it digital first, POD second. In fact, I may not release it in paper until after it starts selling well as an e-book. I like to have a POD version for book signings and to give my local bookstores some business. But I don’t sell enough to justify type-setting for a book.

    The POD version of Tyrmia might not come out until the following year. If the e-book fails to generate sales, I may never take the time to generate the POD version.

    An author friend of mine had her fist book released first through a small press as an e-book only. A year later, it was released as a small press paperback. Essentially a POD book. I think this digital first and POD second will remain popular with small presses and self-publishers.

    If I knew I could sell a thousand hardback books, I would pre-order them and do up a special edition with fine artwork and fancy gilding. But only best selling authors like Scott Sigler can manage that sort of thing.

    As a reader, I find it discouraging when I can’t find my favorite old SF books as e-books. Heck even some literary fiction is more expensive as an e-book than a mass market paperback. It may be that books released in the future will always be cheaper than books released in the past. That is a disturbing trend.

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