Don’t fear rising Kindle prices, don’t accept arbitrary pricing

Aaron Pressman blogs that “As feared, Kindle prices appear to be rising.” Kindle prices are certainly changing, but the increases don’t mean any of us have to buy the books being offered. It only means that diversity is inevitable in this marketplace, because the increasing number of higher-priced mainstream titles will be met by growing numbers of alternative offerings at other prices. Some folks want to boycott anything that costs more than $9.99 on Kindle. Let’s be clear, the format isn’t what determines pricing, it’s the cost of the research and writing that went into the book.

Indeed, the statistics Pressman points to indicate that while more books are being priced over $9.99, 69.5 percent of all the books on the Kindle store sell for $9.99 or less. Only 10 percent of those books are the sea of public domain books that are repeatedly copied and uploaded in poorly formatted version for $0.99 or less. In that margin between 99 cents and $9.99, a majority of books published for Kindle are delivering value to readers at a very low cost, because there is no longer the cost of production and inventory associated with paper books. The cost of the book’s production itself is actually a small share of the cost of a book at retail, it’s the massive return rates of books—typically over 50 percent—that keeps prices high.

Then, it is the discounting of books that cleaves most of the profit from even the biggest bestsellers. As Pressman notes in his posting, a copy of Big Russ and Me, by the late Tim Russert, is available in paperback for $5.58 in paperback, $9.18 in hardcover (originally $24.95) today, because they have been remaindered. In electronic publishing, where a copy of a book is never produced until it is sold, there is no remaindering. So, Russert’s book in the Kindle edition sells for $9.99 all the time.

Big Russ and Me Kindle edition is an "excluded product"
Big Russ and Me Kindle edition is an "excluded product"

What’s especially interesting to me, as someone interested in how books will be sold in more egalitarian ways, the Kindle edition of Big Russ and Me is an “excluded title” in the Amazon Associates program. A blogger who is an Amazon Associate cannot link to the Kindle version, but can link to the paper or hardcover editions. That’s a subtle but important level of control that skews the sales of books few people acknowledge.

Is $9.99 for the Kindle edition of Tim Russert’s book an arbitrary price? The reason the paper and hardcover editions of Big Russ and Me are available for less is that they cost money to keep on hand. They actually eat away at profits while sitting on the shelf of a warehouse somewhere or, at least, that is how publishers do bookkeeping. What would make more sense is a situation where the Kindle version, because it is not competitively priced with other editions of the book, were repriced to make it more attractive. That would require, though, that the publisher to have not created this big pile of remaindered paper copies it would rather sell. So, the pricing is arbitrary, but “justified” in the publisher’s business calculations. The reader gets stuck with the bill for the publisher’s inefficiency.

However, if another author had spent, say, ten years working on a comprehensive history of the Gulf War and had assembled an electronic book that included all the writing, photos and archival data she’d collected, why not price it higher than $9.99? The paper edition of such a book, which could be thousands of pages long and include high-resolution photos sell for much more, not because it was printed on paper, but because it was an artifact of great scholarship and beauty. The project may have cost her $60,000 in travel and research expenses, let alone what it cost in time to write the book. For argument’s sake, let’s say it cost $120,000 to produce this richly documented history. At $9.99 a copy, she would have to sell about 18,000 copies (given the 45 percent share of revenue paid to Amazon) just to break even. But at $24.95, break-even would come at approximately 9,000 copies—and all this assumes she self-publishes. A publisher would only add costs that increased the break-even point into the 30-, 40- or 100-thousands of copies.

Since we can assume that people do not publish to lose money, although they may freely write without compensation for love or dedication, it would be against the reader’s best interest to demand that any title they purchase be priced at $9.99. More than half the time, at current price distribution, they’d be paying more than the price the author sought and in cases where a book’s costs were high but the rewards for the reader comparably high, the reader would be underpaying for the book and likely preventing the author from working on her next title. Spending ten years paying back the cost of a book isn’t the way writers want to live; it’s like having to build a house from scratch on your own dime, then letting someone else live in it while you pay back the cost of the materials.

Pressman points at the “horrendous” price of ScrollMotion’s books for iPhone, but at least there are 100,000 new titles for the iPhone to choose from because of those prices. If you don’t want to pay those prices, find one of the obviously plentiful alternatives to the Scrollmotion version of those books. Don’t tell others that they can’t buy them. Call them foolish for paying those prices instead.

If we demand that anything formatted for an e-reader be no more expensive than $9.99, the real opportunity of the “long tail,” which describes a market where a small readership can sponsor highly focused writing that serves their interests or a hit can grow by word of mouth among grassroots readers, will be lost. A while back, I addressed how the real cost of journalism could be covered by readers dedicated to getting great reporting could be covered at a relatively low cost per reader. That means putting the premium on the ideas contained in a book.

Pressman says he wants the Kindle to succeed, which puts a premium on the device and format. I want to see publishing change and diversify, which means there will be many price points for myriad titles that were never before available to readers. A $9.99-only world would lead to less diversity of ideas, even as it looked like greater fairness to readers.