A Response for Modelmaker

Yesterday our friend Modelmaker posted to his blog about e-book pricing (http://www.pensbykris.com/ponderings/?p=155). I was going to leave a response there, but I’m running into some odd issues with doing so (his WP blog wants me to log in to leave a comment, but it won’t accept my free WP login, and I don’t see a way to create one for his blog), so I’ll post my comments here.

First up, Modelmaker said “I would guess (I have done no research) that the profit margin on an ebook is MUCH higher than the printed version.”

From what I’ve read, mostly during the Amazon/MacMillan spat, the cost differential between paper and ebooks is in the 20-25% range: the cost of paper, printing/binding, and warehousing/shipping is something the big publishers have been dealing with for a very long time, and so they’ve figured out how to get it down to a surprisingly (to me) small fraction of the total.

Why would a publisher charge $2 more for an ebook than a paper book? Because the market will bear it – or at least they think it will.

Although some of us geeks have been reading ebooks for a decade (Project Gutenberg on my Palm Pilot…), in terms of the mass market and the general public the ebook market is a fairly new thing. Both sides are still trying to figure this new thing out. As such, publishers and distributors* are trying different price points to see where on the curve the optimum is.

To break it down to the simplest interpretation: If the majority of ebook purchasers won’t buy ebooks that are more expensive than paper, ebook prices will end up below paper. If the majority are like me, who don’t compare to paper prices and just go by “looks reasonable”, ebook prices may end up being higher than paper books.  Where will prices end up?  My WAG is that the market will settle down to a model where ebooks are around hardback price on first release, eventually dropping to about paperback price.

My profit margin on belts is greater than that on pouches. Should I drop the prices on belts so that they match the profit margin of pouches?

* People knowledgeable about the industry say that Amazon is more interested in selling Kindles than ebooks, and so are willing to sell ebooks at a loss in order to drive Kindle sales.

1 comment so far ↓

#1 modelmaker on 03.28.12 at 3:41 pm

sorry about the comment thing, it seems that I had it locked down and forgot to fix it when I reinstalled. I host my WP on my site so that’s why the FreeWP login didn’t work.

I think the profit margins is entirely different on tangible goods like your belts and pouches (which I may contact you for Sporan (sp?) soon) becuase you have to produce it, store it, display it, etc… whereas an ebook there is a “master” copy stored on a server and when it is sold, the system just copies the original and sends it on it’s way. I know we have been reading ebooks for a long time (guttenburg and a Nintendo DS that I hacked) and they are fairly new to the General Populous, I think that if they really want to get them to take off the need to figure out their pricing. Amazon, B&N and all those are interested in selling devices more than the books at the moment, but I can see it getting to the point that printers are at now. It’s cheaper to buy a new printer than to replace the ink cartridges. I think that this would be an extremely bad example to follow.
I guess until then I’ll just show my “unhappiness” by searching the publishers sites and guttenburg (which I think they need a better way to browse the books) for the freely available books.