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Customers Won’t Pay as Much for Digital Goods, Redux

Back before Christmas the Harvard Business Review published an article on recent research that showed that people valued physical objects for the act of possession more than for the use of said object.

 Participants valued a physical copy of The Empire Strikes Back more than a digital copy, for instance, only if they considered the Star Wars series to be films with which they strongly identified. Participants who weren’t Star Wars fans valued physical and digital copies similarly.

This is essentially a nonfunctional element of ownership – valuing something just for having it rather than what you can do with it.

Aside from price, that is the only thing keeping people buying print books over ebooks, which makes it all the more amazing when digital copies supplant physical copies in the marketplace as consumers choose to make the switch.

For example, much of non-fiction has been eaten by the web, and several genres (romance, thriller, SF) have gone digital to varying degrees. These are all categories where the use (reading) is valued more than ownership.

The researchers also helped explain why some creators profit off of memorabilia as much as from selling their content; it’s because fans value the physical good more than the digital, while non-fans do not.

This difference in ownership also allows us to identify when people will value digital goods no less than physical goods. Because ownership entails a link between a person and an object, we found the gap in their value increased when that link was easy to form and disappeared when that link was hard to establish. Participants valued a physical copy of The Empire Strikes Back more than a digital copy, for instance, only if they considered the Star Wars series to be films with which they strongly identified. Participants who weren’t Star Wars fans valued physical and digital copies similarly.

This in part explains why the collectibles market has waves where old toys suddenly become desirable and valuable, only to lose much of that value a decade later; it’s because the buyers for any particular wave are all of an age group that wants to recapture a memory from their childhood, so they all suddenly want to buy the same toy.


There’s also something this research doesn’t quite get at but is worth mentioning here, and that is the impact on print book sales versus digital.

All the industry trade press is trying to convince us that ebook sales have plateaued, and that the market is stable. This research, on the other hand. shows that there is little keeping people buying print books other than the artificially inflated price of ebooks from legacy publishers.

The book fetishists are wrong; people don’t value a physical copy more than digital except where they have an emotional connection to the story or creator.

That suggests that the market is less a stable equilibrium than ripe for another wave of disruption. All it will take is one really good reason, and people will switch to digital and not look back.

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Mark Ritchie January 3, 2018 um 2:01 pm

"This is essentially a nonfunctional element of ownership – valuing something just for having it rather than what you can do with it. Aside from price, that is the only thing keeping people buying print books over ebooks…"

I love reading your articles because of your robust defense of ebooks and poking holes in ridiculous assertions, but saying something like that makes me think you are living in a different world than me. What could be more ridiculous than putting it that way? Take "The Landmark Thucidydes." You just need to own the book AND the ebook if you want the advantages of each. Footnotes, maps, color, fonts — none of that is usable, or barely, in the ebook. For me, since I can’t afford both, it’s got to be the physical book. Ebooks are fine for novels, but for any thing, fiction or not, that has any physical attribute besides running text, books are the thing.

Nate Hoffelder January 3, 2018 um 2:05 pm

"none of that is usable, or barely, in the ebook"

that is a strike against the team that made this particular ebook, not an argument against the format itself.

Mark Ritchie January 3, 2018 um 3:03 pm

I don’t even own that ebook but I know it will be true. A map in a hardback book is the equivalent of about a 6MP picture. No ebook in the entire history of the world reproduces pictures at a reasonable resolution that would be usable for reading maps and stuff.

Neuse River Sailor January 3, 2018 um 6:00 pm

Depends on what you mean by an ebook. If you broaden the definition to include pdf format books viewed on a computer screen, 6mb maps and pictures are easy and common. If an ebook is just an epub or mobi on a 7 inch screen, I agree, that is not the best way to view a map or photograph. But I have seen some beautiful books of photography (John Harries' "A Voyage North" comes to mind) that show the potential for ebooks in large format. For reading in bed, no large format illustrated book is comfortable, either print or digital, but for reading at a desk, digital has a lot of advantages. Personally, just the storage issues have put an end to buying paper books for me, but that has not slowed down my perhaps obsessive accumulating of books.

Nate Hoffelder January 3, 2018 um 9:25 pm

or, web content

Mark Ritchie January 5, 2018 um 2:13 pm

Remember what my original point was. It was that Nate’s suggestion was utter nonsense: saying that "just for having it rather than what you can do with it" was the ONLY reason to favor printed books. You guys are right that PDFs and Web can easily render great maps and things, but that has nothing to do with my point. Nobody offers to sell you a PDF or Web version of a well-printed large hardback.

Vikarti Anatra January 4, 2018 um 2:33 am

>Footnotes, maps, color, fonts — none of that is usable, or barely, in the ebook.
It depends a lot on reading device (sometimes you really need that 10" tablet) and reading software (sometimes Google Play Books or iBooks renders epubs much better than Adobe-based readers). They are NOT equal in advanced functionality. Yes, this means you need to choose software and hardware based on what you read. Yes, this mean that DRMed ebooks are (solvable) problem.
Ebooks have some things pbooks doesn’t have – like search or ability to do notes without damaging book.

Quasar January 3, 2018 um 3:12 pm

That’s not really why I’m less willing to pay the same for digital copies of physical items. Share ability and resell ability plays a big part of that. And actual price competition amongst retailers of the physical version makes things worse for the digital one.

As for ebooks, there certainly are some kinds of books where I’m mostly fine with ebooks. But there I’m more likely to go with an unabridged audiobook. Or would if they all had one.

Mackay Bell January 3, 2018 um 3:49 pm

Yes, the traditional publishers have propped up their print market by making ebooks of the catalogue expensive. But they also have maintained flat sales because they focused on individuals who are attracted to print (I’ll call them print snobs, but don’t take that as a criticism). Some of those people own books they don’t actually read, but like to keep them around the house as nicknacks to show their sophistication.

Meanwhile, ebooks are growing rapidly among actual "readers" who, by larger majorities, are reading genre like romance, sci-fi and thrillers. Yes, some of those readers will collect print too, for the stuff they really like, but since their main goal is to actually read the books, rather than indulge in a print fetish to prove they are sophisticated, they’re happy with ebooks.

There is also a third category that is growing, and that is younger people who have absolutely no interest in print at all. But they are pretty much off the radar of the traditional publishers.

Print is not going to go away, but the percentage of people who buy a popular work in print rather than ebook is shrinking and will continue to shrink.

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Randy Lea January 5, 2018 um 1:02 pm

I know a few people that want to own print copies of their favorite fiction books, to collect them. Some people also don’t seem to like reading ebooks, but every one of them I know don’t use a tablet or reader, so reading on a phone or PC is a bad experience. Buying best sellers in ebook form at about the same cost as hardback really doesn’t make sense, especially for people that don’t read a lot.

I read a lot. I have a readers and 3 tablets. Ebooks are a far better experience for me.

I believe that the publishers see ebooks as an Amazon controlled business, which is silly, and they want to keep control. They could set up their own market, and save on the Amazon cut, but they choose not to do so.

I believe that they are willing to sacrifice profit to keep control of their business away from Amazon. Just to make up a number, say they are selling an ebook for $11 and a hardback is on sale at $15. The gross profit on the ebook is vastly higher than the print book. Say the hardback is $25, the ebook is still more profitable. The ebook sales are limited by these publishers by the very high price, which is what they want. At some point, an executive at one of these publishers is going to look at their quarterly profit and discover that they can increase ebook sales significantly by dropping the price to say $4.99, and still have more profit margin than hardback books. I think that many of the people that buy hardbacks, which they do because it’s what they want to own, will continue to buy hardback books, but they will bring in many new readers with lower ebook prices.

Sally January 6, 2018 um 1:53 am

I’m in Australia, and most of our books are printed here on low grade acidic paper. I’m an ebook fan now, but in the past I bought hard cover books from my favourite authors, e.g. Terry Pratchett. Looking at these now, books that cost me around $40 AUD only ten years ago, the paper is badly foxed and the spine glue is deteriorating. Obviously a terrible investment. The only books worth keeping are printed overseas where acid-free paper is used.

Thiago Margarida January 12, 2018 um 7:57 am

The problem with digital goods (books, songs, movies) is that you don’t actually OWN anything. You buy a license to use it on a specified service, and that’s all.
With print books, I can lend it how many times I want, to anyone, or I can even resell it. Can you resell an eBook?
Also, you have the problem of reading it. If you have a kindle and only buy on Amazon, ok, but if you have a Kobo and buy a book on Google Books (which they say is possible), you have to download it on your computer, install Adobe Digital Editions (a.k.a computer cancer), connect it to your reader, and then, read.
And you don’t actually pay less for this. There’s a small difference in price, and if you don’t read A LOT, when you consider the cost of the reader device (Kindle or Kobo), you’re just even…

Randy Lea January 12, 2018 um 7:10 pm

A fair value price for an ebook should reflect what you describe, that you can’t resell it, you have to fight with stupid DRM, and you don’t own it, etc. It also has a near zero marginal cost to produce.

With the current pricing for popular, major publisher ebooks, they make no sense really to buy, and people aren’t buying as many of these ebooks.

At an appropriate price, they will have value, and sell well.

All ebook readers should really get to know Calibre.

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