Digital books on the Kindle, Nook or Kobo are way more expensive now, than ever before. Major publishers who control the vast majority of the market, control the prices and users end up paying more than the paperback and in some cases, the ebooks are more expensive than the hardcover. Why are ebooks so expensive now?
Agency Model Keeps the Prices High
Digital books used to be really affordable and this helped the e-reader industry grow. Amazon pioneered the concept of paying $9.99 for a new ebook, from a major publisher the day it was released. This made ebooks way cheaper than paperbacks and significently more affordable than the hardcover. Amazon was losing money on every ebook sale, but they did this to grow their ebook business and spur Kindle adoption. This created a price war between Amazon, B&N, Kobo, Google and other players.
All good things come to an end. When Apple launched their iBooks Store, Steve jobs met with the heads of all of major publishers. He wanted them to gain more control over the digital publishing business and create a uniform pricing structure. This was known as a cartel, which is illegal. This created a multi-year saga with the US Justice Department vs Apple and all of the publishers. In that case, the five publishers settled for $166m (£120m), while Apple lost at trial and was order to pay out $450m in 2016, after a lengthy legal process that ended when the US supreme court declined to hear the company’s challenge.
The lawsuit could not stop agency pricing that the publishers created. Every ebook would have its own price, and bookstores had to charge that price and could not change it. This is why when you visit the Amazon product listing it always says, that the price is determined by the publisher. The thought behind the agency model is that all bookstores would charge the same amount of a particular ebook, so nobody would have the advantage. The problem, is that Amazon had such a giant head start, that they utterly control the ebook market.
The only control over prices that Amazon and other retailers have, is when independent authors self-publish. Kindle Direct Publishing for example is the most popular way that authors can submit their ebooks to Amazon and have them listed by side by side with all of the other books on the store. Some of them sell really well, but most of them are never sold. Kobo has a similar program with Kobo Writing Life and Barnes and Noble has Nook Press.
How much money do publishers and retailers make selling ebooks? Generally, the publisher gets 70% of every sale and a company like Amazon would gets the remaining 30 percent.
What about Print Books?
Physical books get sold to retailers at around half the list price. The retailer can then sell them for whatever they like. When Amazon sells books for lower than the recommended retail price, that discount is coming straight out of Amazon’s profit margin. Amazon is gambling that the low price will equal more sales, which will make up the lost profit margin. Retail bookstores are in the same boat, they keep the hardcovers high when a book just comes out and then a couple of weeks later, they reduce the price by 25% to help clear the inventory.
Do ebook prices ever go down?
It is very rare that publishers ever reduce the price of an ebook. When a new ebook is released and the publisher sets the price, they hardly ever discount the ebook at a future date. This is because they would have to go back and manually edit all of the prices and this creates more work, for lower revenue on a per title basis. This is why the price today on a new ebook is the price you will pay a year from now, ten years from now and so on. Paperbacks and Hardcover books are frequently on sale, when you visit a bookstore, you can often get them far below market prices. This is often why the price of an ebook is more than a paperback, which doesn’t sit well with people who read lots of ebooks.
Are people willing to pay more for convenience?
When you place a pre-order for a new digital book, it is automatically delivered to your Kindle at midnight and you can read it all night long. You can buy ebooks directly on your Kindle or shopping on the Amazon website in your pajamas or boxer shorts. Amazon basically pioneered the concept of the “Buy it one click” button, and this makes buying books so easy.
Does this convenience mean that customers really don’t care that the prices have dramatically increased in the past ten years? Don’t forget, ebooks used to cost $9.99 and now you can easily pay $20.00 for the same book. Do people care anymore on how cheap they used to be and how expensive they are now, or has enough time passed where the price is what it is and nobody can really do anything.
Does the high price of convivence drive users to subscribe to Kindle Unlimited, access Prime Reading or use a service like Scribd, or even switch to the public library?
Digital books don’t suffer wear-and-tear like Print
Digital books never get damaged, whereas print books, so many things can go wrong. They can get dusty, moldy or infested with bugs. If you have ever dumped tea, coffee or water on a book, it can double in size and become extremally unwieldy. When you buy an ebook, it stays in pristine condition, but sometimes there are spelling mistakes or gramatical errors. When this is brought to the authors attention they can make the corrections and push out an update and users will automatically download a revised copy. Most of the time this is good, but sometimes the cover art can change too, which is not good. For example, when a book gets a Netflix or a movie adoption, the publisher will change the book cover, so it advertises the movie. In other cases, such as Harry Potter, they will constantly issue revised editions with all new cover art and images inside of the book, but since they are limited, you have to buy the whole collection. Print book cover art also changes, but you can stick with the one you have if you don’t like the revised one.
Ebook revenue keeps on falling, but publishers don’t care
Digital Book sales in the United States have been declining all year long. This is likely due to the pandemic being a thing of the past and bookstores have been opened all year long. Ebook revenues were down 6.3% in June as compared to June 2021 for a total of $83.0 million. Year-to-date ebook revenues were down 8.5% as compared to the first six months of 2021 for a total of $500.4 million.
In terms of physical paper format revenues during the month of June, in the Trade (Consumer Books) category, Hardback revenues were down 10.9%, coming in at $181.3 million; Paperbacks were up 9.0%, with $253.9 million in revenue; Mass Market was up 16.9% to $21.4 million; while Special Bindings were down 23.8%, with $11.0 million in revenue. Year-to-date Trade revenues were down 0.8%, at $4.2 billion for the first six months of the year. Hardback revenues were down 7.9%, coming in at $1.4 billion; Paperbacks were up 9.0%, with $1.5 billion in revenue; Mass Market was down 20.9% to $95.5 million; and Special Bindings were down 1.0%, with $79.8 million in revenue.
You can really see from these statistics that ebook revenue is a drop in the bucket. From January to June 2022, the format generated $500 million whereas hardcover sales along were $1.4 billion and paperbacks were $1.5 billion, so you can see where publishers priorities are. Print is King.
Maybe ebook prices will change, for the better?
What can people do about the high prices? Well, recent The lawsuit, filed in district court in New York on Thursday by Seattle firm Hagens Berman, on behalf of consumers in several US states, names the retail giant as the sole defendant but labels the publishers “co-conspirators”. It alleges Amazon and the publishers use a clause known as “Most Favored Nations” (MFN) to keep ebook prices artificially high, by agreeing to price restraints that force consumers to pay more for ebooks purchased on retail platforms that are not Amazon.com.
The lawsuit claims that almost 90% of all ebooks sold in the US are sold on Amazon, in addition to over 50% of all print books. The suit alleges that ebook prices dropped in 2013 and 2014 after Apple and major publishers were successfully sued for conspiring to set ebook prices, but rose again after Amazon renegotiated their contracts in 2015. This case is still ongoing and whoever wins, it will likely get appealed to various upper courts.
Michael Kozlowski has been writing about audiobooks and e-readers for the past twelve years. His articles have been picked up by major and local news sources and websites such as the CBC, CNET, Engadget, Huffington Post and the New York Times. He Lives in Vancouver, British Columbia, Canada.