Ebook pricing

In my view, which I’ve stated in Release Your Writing, ebooks have been subject to price-creep, with people charging a price based on a portion of the print book, or charging the $9.99 Amazon charges for Kindle ebooks.

Yet we know, without production costs, ebooks incur very low expenses.

Here’s an excerpt from BookBusinessMag.com by Peter Olson and Bharat N. Anand

Setting E-book Prices
Pricing innovations are inevitable in the digital world as well. Prices of e-books should be shaped by cost structures and customer demand rather than by comparison to traditional p-book pricing. A stand-alone electronic book business has radically different economics than the print business: If we assume that the average retail price of a print book is $10, then the average wholesale price is $5 (the $5 difference represents the retailers’ costs for store rent and personnel, including a profit of, at most, only 50 cents for the retailer); the costs of paper, printing and binding are roughly $1, the author’s royalties (15 percent of retail price) $1.50, internal publishers’ costs (including marketing, sales, warehousing, inventory management and distribution) of approximately $2, on average, leaving a publisher’s margin of 50 cents.

About half of these costs vanish in the e-book world since the store rent and personnel that make up much of the $4.50 are unnecessary; $1 of paper, printing and binding are not be incurred; and an estimated 50 cents of publisher costs related to functions such as warehousing, inventory management, production management and distribution disappear.

This analysis suggests that e-books could, as a stand-alone business, be priced far below Amazon’s current $9.99 pricing and dramatically lower than p-books. Beyond this, pricing is likely to take many new forms, if recent developments in music are any indicator. Portions of nonfiction works could be sold by bits—for example, to a reader who wants only vegetarian recipes from a book on Mughlai cuisine or a student who only needs the chapter on differential equations from a book on calculus. Backlist titles could be offered in a bundle at a steep discount to bolster demand and enhance library-building and format conversion. Additional offerings (an author biography, for example) could be added for incremental revenue.

Full article here