(Posted from The Publeconomist, published 2/4/10)
"Available at booksellers everywhere except Amazon." This was the controversial addition to a Thursday New York Times ad that Macmillan took out on behalf of author Atul Gawande's "The Checklist Manifesto." If you've been following the e-book pricing wars, you've seen the news that Amazon.com has recently removed all Macmillan titles for new purchase (you can still buy used copies of Macmillan books on Amazon for sale by third-party sellers). The cause of the rift between Amazon and Macmillan? Selling price.
This week's edition of The Economist estimates that US e-book sales for 2009 are close to $350m, up from just over $100m in 2008. The e-book market's growth has been phenomenal, and the appearance of Apple's iPad on the market is sure to contribute to overall sales. The main problem that big publishers are experiencing along with the surge in e-book sales is the decline in the price of books. For large publishing houses equipped to sell numerous hardback books per year at prices in the $20-$30 range, a $9.99 new release is frightening. Hardbacks are a luxury market as it is. One doesn't need a hardback over a paperback, but it looks and feels nicer. Then come electronic books, which consist merely of text on a screen. Suddenly it's no longer a story of the thin price difference between a hardback and paperback.
From an economics perspective, this is really all just about value. And value is quite subjective. One can argue that e-books aren't the first book format that turned hardback and paperback books into a luxury market. There's a small case for libraries, although there's no individual ownership in the library books we borrow. There's another small case for the used inventory of booksellers, although this doesn't really affect new releases. The e-book is an entirely different animal. An entire market of consumers has risen up, and is in love with the $9.99 price point for an individually-owned new release. Publishers are expected to release not only a physical copy of new releases, but also an e-book, which creates a luxury market for physical copies. In both instances you're just getting text. So is binding and a glossy cover worth $10 or more for the same words?
Everyone has their own perception of value. For some people, owning the $22 hardcover version of a book is completely worth it. For others, $9.99 seems more efficient, for whatever reason. Maybe frugality, maybe that books take up too much space, or maybe an iPad will be a more efficient companion for frequent travelers than bulky paperbacks or heavy hardbacks.
So are the big publishers right for causing such a stir over the $9.99 e-book price point? Instead of complaining about price, I think that these publishers should be reevaluating ways to give their e-books more value within the Kindle/Nook/iPad market. Macmillan has just done this with author Kristin Hannah's book, "Winter Garden." They've released the e-book as a special edition, with some fun features that readers normally wouldn't find in an e-book or a print book. If publishers fear the $9.99 e-book price, then create a dual market! Release a $9.99 bare bones edition for the frugal readers, and a $14.99 (or greater) special edition with exciting features. Not only will this enhance profits, but it will give valuable statistics about consumers: how many people purchase based on frugality, and how many based on convenience.
Book publishing is an odd breed: an interesting dichotomy of business and art. While some lesser-known authors are giving their e-books away for free in hopes of attracting attention and future sales, large publishing houses cringe at $9.99 for their e-book titles. What it all comes down to is value. And value is measured by the consumer's tastes and preferences, not by how prolific or extraordinary a book's author is. There are ways to sell e-books for far more than $9.99, and I think Macmillan is catching on. My best advice to publishers: pay attention to other luxury markets, especially the ones that have undergone technological transformations. See how they've responded. See how they engage consumers, create value, and take control of markets. And maybe then we'll see a lot more e-books priced above ten bucks.
Anthony DiFiore, Publisher
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