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Why Everyone is Wrong: eBooks Can* be More Expensive

Earlier today I wrote a post on Frank Luby’s arguments about ebook prices, but as the day went by and I read the coverage and commentary (on TeleRead, here, and The Passive Voice) I have come to the conclusion that Luby may have been right and that much of the commentary was wrong.

This whole meta-discussion was sparked by a talk given by Luby yesterday at the OnCopyright 2014 conference where he argued that ebooks should be more expensive, and that publishers and retailers convince consumers that they’re paying for the convenience of immediate delivery.

While his arguments are being derided in some quarters as nuts, unworkable, or simply a bad idea, as the day wore on I began to realize that Luby wasn’t nearly as wrong as many assumed. In fact, if we change just a single word in his argument then it will make much more sense.

Rather than saying ebooks should be more expensive, let’s instead assume that Luby meant that ebooks can be more expensive. Rather than see his arguments as being in favor of an across the board price increase, let’s look at it possible to charge more in certain situations.

It turns out that Luby is not wrong in that publishers can charge more for the convenience of ebooks, and I can think of at least one publisher who already charges premium prices for early delivery.

Baen Books.

Yes, this small SF publisher may be synonymous with reasonably priced DRM-free ebooks, but they have also been quite successful in pursuing a premium pricing strategy and charging more for convenience.

For the longest time Baen Books has been selling digital Advanced Reader Copies to those fans who simply could not wait for the publication date. Each ebook costs $15, and you can get one months before the official publication date.

I don’t know how many copies Baen Books has sold, but I do know that I have succumbed to temptation at least 3 times. And I also know that I am paying extra for the convenience of immediate delivery.

How is that not a point in support of Luby’s argument?

Sure, it’s not quite what he said, but it is close enough that for all I know this is what he meant when he gave that presentation.

At the very least it proves that ebooks can be more expensive, and that means we cannot simply write off Luby’s talk as nonsense.

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Maria (BearMountainBooks) April 3, 2014 um 4:55 pm

You make a good point. If the ebook and print book are very close in price, I’ll pay a few cents more for the "right now." Or if I’m about travel and want to load my kindle with a particular book, I will pay more for the ebook. HOWEVER, in general, I weigh the two and if the print book is less, I generally buy the print book. I can resell it or give it away so it has a bit more value in that sense.

Chris Meadows April 3, 2014 um 5:55 pm

As I posted on Passive Voice, you could tie this back to that oft-half-quoted hacker mantra. Stewart Brand once said:

On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.

So here we have information wanting to be free, because it’s so easy to get…and we have information wanting to be expensive (or at least, this consultant wanting it to) because having access to it right when you need it is so valuable.

At the moment, the balance seems to be swinging closer to “free” than “expensive.”

(Personally, I think what information really wants is to be anthropomorphized.)

Nate Hoffelder April 3, 2014 um 6:01 pm

And what about the gripping hand? (I couldn’t help myself, sorry)

fjtorres April 3, 2014 um 7:05 pm

On the gripping hand, if content owners don’t want to meet consumer terms, the darknets will.

Valentine April 4, 2014 um 2:47 am

It’s about competition.
In a free market, no matter the value of the product, the price will keep going down.

And because it’s a free market, publishers will have to compete with self-publishing. Not just in content, but price as well. Meaning, the publisher’s authors will get even smaller shares than before, smaller than the self-published ones.

igorsk April 3, 2014 um 6:15 pm

Actually, if you buy a Baen’s eARC, you get the full thing immediately. The installments is how you can read the "final" (non-ARC) ebook, if you purchase a monthly book bundle (previously known as WebScriptions).

Nate Hoffelder April 3, 2014 um 6:22 pm

Thanks. It’s been a while since i did either so I must have gotten them confused.

fjtorres April 3, 2014 um 6:58 pm

Problem is, the "wise consultant" isn’t talking about enhanced ebooks, eARCs, or other premium products but rather routine editions.
And unless you add value through preferential early access or multimedia or other means consumers will look at the product, look at the price, and walk away.
I’ll betcha BAEN sells the bulk of their eARCs in the first month of availability, with sales declining strongly as the webscription release date approaches.
Common sense: If you really want to read a book, getting it 3 months early might be worth the $8 premium, but 3 weeks early? Five? Each reader will make their own value calculation but most people will either buy early or wait for the webscription.

Publishing consultants routinely deprecate consumers, as if we are dumb sheep that will swallow whatever silly story they cook up. As if we are too stupid to see past their self-serving pretensions.

Since you saw the comments at TPV, you know that indie publishers mockingly welcome this proposal and hope the BPHs adopt higher prices. Just as indie publishers welcomed the higher prices of the Agency conspiracy. Traditional publishers have already lost a third of ebook transactions; if they try this approach they might give up another third.

The mainstream ebook market is a value market and pretending otherwise is not going to do publishers any good. Niches and specialty products may or not successfully command higher prices but mainstream titles will be laughed off the market if they try to sell the idea that the current, restrictive ebook licenses are worth a premium over current ebook prices, to say nothing of higher-than-print prices.

Nate Hoffelder April 3, 2014 um 8:57 pm

"Problem is, the “wise consultant” isn’t talking about enhanced ebooks, eARCs, or other premium products but rather routine editions."

Or perhaps you’re not speaking the same language.

And I think you would be surprised by the number of times people have misinterpreted something I wrote in ways that were actually smarter than what I intended to say. The opposite could be happening here.

fjtorres April 3, 2014 um 7:10 pm

Try this analysis, from TPV:
A year or two ago, I tried to work out what would be a competitive price for ebooks compared with paper books, all other factors being equal. Normally you can buy a second-hand paper book (if you can find it) for about half the cover price, and you can sell your old books to second-hand stores for a store credit worth about half of that. So 25 percent of the cover price represents resale value. Then I knocked off another chunk for the capital factor: To read ebooks, you need to invest in a special piece of equipment, whereas a paper book has its own reader built in. And without special software and permissions, you can’t lend the data off your reader to someone else’s reader: which takes another bit off the value.

My conclusion: If an ebook sells for more than two-thirds the price of the cheapest print edition, it’s probably overpriced.


That aligns with BAEN’s 33% hardcover to ebook discount.

Maria (BearMountainBooks) April 3, 2014 um 7:18 pm

That’s about the way I figure it, although I will add back in the convenience and immediate delivery of ebooks as a plus. So really, I’ll pay paperback prices –but certainly not more. If the paperback (used) book is available for half the price of the ebook, I usually just get the used copy, but that is harder to come by these days because of rising shipping costs. I don’t count used bookstores because I so rarely visit them anymore; it would actually be more of a hassle and I too often don’t find the book I am looking for.

puzzled April 3, 2014 um 7:50 pm

Using Baen in this argument leads you down a false trail. The Baen ARC buyers are committed to the new book (and author), to the point of being willing to get a non-proofed version a little earlier than everyone else. There aren’t that many authors that attract that level of fanaticism, especially outside of SF or vampire books.

Secondly, Baen’s ARC buyers know exactly what they are getting. Complaints about the quality of the product don’t have to be handled. They don’t have to deal with Mildred Smith buying the latest Harlan Corbin book without knowing what an ARC is and clogging up customer service trying to return it because of the number of typos and bad grammar.

Thirdly, Baen has an infrastructure in place to sell the ARCs. The other publishers would have to do so through on-line booksellers (Amazon, B&N, a dwindling collection of motley independents), who would then take on the liability of returns/complaints.

Fourth, Baen obviously isn’t trying to control access to the books before the release date.

And lastly, using Baen as an example for anything except DRM-freeness tends to lead to trouble, as they are not a typical publisher. They are a niche publisher. They publish and print physical and ebooks. They sell their ebooks on their own website. They have a large, dedicated and committed clientele. They give away books for free. They don’t use DRM, never have. They allow people to share ebooks, looking at this as marketing rather than lost revenue. In other words, they break all the rules.

Nate Hoffelder April 3, 2014 um 8:52 pm

I don’t see any of that is relevant to the fact that a publisher found a way to charge a premium for convenience. I showed that it can be done; I didn’t claim to prove repeatability.

Yes, Baen is a special case but many publishers are special. And there are so many publishers serving so many markets that no single example would fit them all.

All publishers are special.

Peter Winkler April 4, 2014 um 2:34 pm

But, but, but …

Luby is making the argument that publishers should raise the price of ALL ebooks, justifying it to the consumer on the rationale of increased convenience. Of course a publisher can charge a higher price for a particular book, whether it’s a print edition or an ebook, if the book is distinguished by some special characteristic, but that is not what Luby was arguing. You and he are making different proposals.

Nate Hoffelder April 4, 2014 um 3:49 pm

So you’ve seen the video? Good.

I just watched it again, and I don’t think he is arguing that "publishers should raise the price of ALL ebooks, justifying it to the consumer on the rationale of increased convenience" is an accurate description. That’s not what I took away from it.

Nate Hoffelder April 4, 2014 um 4:48 pm

And another thing …

No publisher has a single price point or policy for all of their ebook products. A variety of products are charged a wide variety of prices, and no single product stays at the same price.

With that in mind, the assumption of a blanket increase doesn’t make any sense, and I am not going to assume he intended to say something so stupid.

Q April 4, 2014 um 9:29 am

I’m sorry, but this is still a horrible idea for a few reasons:

1.) We need to get more people reading more stuff. Scientific study has shown time and again that people that regularly read are better thinkers than those that don’t. We have to stop dumbing down society, and get those people reading! Making books less accessible (through pricing) is a terrible idea because less people will be reading.

2.) Just because you CAN charge more for something doesn’t mean you SHOULD charge more for it.

3.) There are niche situations where people are willing to pay more for content (your example with Baen is excellent), but I guarantee that the general population is not willing to spend that extra cash (generally). Sure, they might pay for an early viewing of the next Star Wars movie or a new Harry Potter book, but those are exceptions to the rule.

4.) The "Netflix" example is particularly horrifying. I want to OWN my books. I buy them because I like to collect them, and generally re-read them at some point. I don’t want to have to worry about content being pulled because a publisher no longer wants to support some subscription (or the service can’t afford to keep the content). This movement in recent years to take away actual ownership of things from the consumer is scary. Very, very scary.

5.) I’ll go back to paper if eBooks become more expensive. Simple as that–I like paper anyway, but I buy eBooks to save cash and to save the environment a bit. But if eBooks became significantly more expensive than paper, I’d almost be forced to switch back.

6.) Switching back to paper will expand my home library, which my wife will NOT like. You don’t want her angry. You wouldn’t like it when she’s angry. 🙂

Gary April 4, 2014 um 12:08 pm

The publisher’s ONLY consideration in setting a price for an eBooks should be how to maximise the profit earned by the publishing company, both in the short term and in the long term.

Setting a low price for eBooks will increase eBook sales, but the profit per copy is reduced. Setting a high price increases the profit per copy but sales are reduced. At some price point, you make the maximum possible profit.

Having different prices among hardcovers, audiobooks, eBooks, and paperbacks, and different distribution channels for physical vs digital copies creates a confusing situation. Customers can buy one format or another based on their individual values and biases.

I value the portability of ebooks, and I will pay a premium over the paperback price to get that portability. But I don’t value portability so highly that I will pay ANY price to get it. If the eBook price gets too high, I will go back to buying paper books. Other customers will make their own value judgements and will buy what best suits them.

What does irritate me about ebook pricing is that I don’t really think that the big traditional publishers are completely focused on maximizing profit. Instead they seem to be trying to protect the "value" of books from being debased by selling eBook copies too cheaply, and they seem to be trying to protect and support the traditional distribution system. I just wish that they would get over it, and focus on making money.

William Ockham April 4, 2014 um 2:04 pm

I think you are confusing two separate issues. There is nothing in the Baen example that is exclusive to ebooks. Baen is charging more for earlier access/higher fan prestige. That’s exactly the same strategy publishers use when they window the paperback release of the same book.

If that’s what he meant, he is just as wrong as before.

Andrew April 4, 2014 um 4:44 pm

The thing is, until piracy is reduced to zero, which will probably never happen, media companies are competing with free. There are enough honest people who want to support artists (music, books, movies, games, whatever) that they make good money selling to them. However, trying to crank up prices will result in more people either not buying (still on the side of the angels there) or downloading from pirate websites. The smart play is to offer good products and competitive prices.

Please, no one get into an argument about piracy, copyright infringement or moral relativism, I am just pointing out that there is a free option they are competing with for the same product. There are also free legal alternatives that also provide competition – it is not a closed market, or a small one.

Q April 7, 2014 um 8:47 am

I do agree with you on one point: higher prices = pirated materials. That’s not fair to the authors or us as consumers.

Chris Backe April 28, 2014 um 4:46 am

There’s also the third option: the reader passing on both the print version and the e-book version, disgusted that a publisher is going for the jugular. This is not unlike the argument for the $5 bottle of Coke at the amusement park.

Readers are also pretty aware that e-books can and will change prices, especially if the launch of an overpriced book doesn’t go as well as expected. It’s akin to waiting for the paperback instead of paying a hardcover price.

Value calculation for myself, as one data point – reading a book early is usually worth about $1 per month. It’d have to be a very special book or something I need to know *now* to be worth much more than not.

Barry Davidson August 31, 2014 um 11:36 pm

I just found this article because I was trying to understand why Baen was charging 8.99 or more for the ebook version of an already released book.

I like the convenience of being able to get a book online, but 8.99 is crazy. I’ve seen the arguments, but the bottom line is that ebooks do not cost as much as a print run on a physical book. Even at a lower price the author and publishing company is making more because they can eliminate the cost of printing and sending the books to distributors.

I’ve had to settle for flea markets and second hand book stores because I cant afford new ones. I used to buy ten or more books a month, but not at these prices. I imaging that there are quite a few who feel the same way. Baen Books in particular has pretty much lost my business because they’re charging so much. It’s a shame because I love supporting some of their writers.

Nate Hoffelder August 31, 2014 um 11:53 pm

Baen used to sell ebooks for a lot less, but their pricing policies changed after they started distributing to the Kindle Store.

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