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Will Ebooks Rule?

The digital future, photo courtesy PhotoXpress.com

It is all the rage now to say that ebooks are the future of publishing. There is no better way to make yourself a predictable sage then to proclaim that ebooks herald the demise of paper books, and in a decade we’ll see scarcely a printed book around. Or something like that. While I have gone on the record to say that we are in the middle of a publishing revolution(1), I believe these popular predictions about ebooks are wrong. Ebooks will have a part of the publishing future, but they will not cause paper books to become nearly extinct. Ebooks will surely remain a minority player in the book publishing field.

I’m not the first to speak against the hype of ebooks. The typical arguments for ebooks are the litany of cheap, easy, convenient. The usual arguments against ebooks from doomsayers are the chants of difficult, inconvenient, and aesthetically displeasing. Depending on who is making the argument, different people lay stress on different points. Jason Epstein in his 2009 O’Reilly Tools of Change for Publishing speech laid a special emphasis on the aesthetic aspect of physical books.(2) Other people will complain about the lack of readability of digital screens, or the frustrations of handling ebooks. While there is merit to each of these complaints, none of them get to the heart of why ebooks will not take over the publishing industry.

The real reason ebooks will not conquer the publishing world is simple: The cost of reading ebooks is too high. This cost comes in two parts: The cost of ebooks, and the cost of ebook readers.

The Cost of Ebooks

Theoretically, an ebook could cost nothing. The cost of transmitting the digital bits of ebooks is nil. This is why you can find ebooks for works in the public domain available for free all over the Internet. But if sending an ebook across the world to a thousand people costs nothing, writing an ebook takes time, and most authors want some monetary compensation for their time. And if authors are getting something, publishers want a peice of it too. The problem is that publishing companies are damaging the prospects of ebooks by their standard practice of inflating the price for ebooks.

As of this writing, (June 2010,) if you go online to Amazon or Barnes and Noble you will see most popular and recently released ebooks priced in the range of $10. For example, today at Amazon the ebook of The Shack by William P. Young is priced at $9.99. There are several problems with this pricing picture. The most obvious is the paperback offering of the book for $8.47 with free Super Saver Shipping. You can purchase a paperback copy for less than the ebook copy. “Now wait a minute,” you think. “An ebook which costs nothing to print is being sold for more than a book which costs something to print?” This type of situation will not encourage the success of ebooks.

In its own offerings Amazon prices the paperback copy higher than the ebook copy of the same title–but only by a little bit (in this case 20 cents, for a price of $10.19). However, the fact that third party sellers can offer the new paperback for significantly less indicates that Amazon’s pricing is an artifical peg, neatly kept just above the desired price peg for the ebooks.

ebooks, photo courtesy PhotoXpress.com

The more we look at this pricing structure, the worse it appears. It actually costs something to print and ship a paperback book, but how much? To continue with our example of The Shack, there are third party bookseller selling a new paperbook copies for as low as $5.45 (with an addtional cost of $3.99 for shipping). This price tells us retailers can pick up this book for under $5.45. Since the cost of distributing ebooks is effectively nonexistent, if a paperback copy of a book can be sold for $5.45, then the ebook should be sold for at least that low a price. But let’s not stop there. Ebooks don’t require paper and ink to create. That should be an additional savings. Using POD I could print a book like The Shack for about $4.00. But it costs less to print a book in large off-set print runs, so let’s say it only costs the publisher $2.00 to print The Shack. Since there is no similar printing cost for the ebook, the ebook copy ought to cost no more than $3.45. Instead, we have the ebook priced at $9.99.

Why is there this huge price markup in ebooks? There are two basic reasons: Greed, and fear. Publishers are afraid they might ruin the market for paperback books if ebooks were made much cheaper, so the price of ebooks is inflated to just below the cost of paperbacks to make ebooks less attractive. This appeals to both the publishers and retailers of ebooks because it means they can make huge profits from ebooks. There is no cost to print or stock ebooks–all of the printing and distributing costs are turned into pure profit gravy.

This pricing structure is neither fair to the consumer, nor truly wise on the part of the publishers and retailers. If you want your product to be successful, make it as affordable as possible, and treat your customers right. Instead, what we currently have in the ebook market is a form of price fixing. Publishers and retailers can reap large profits from ebooks, but the over-pricing depresses the market for ebooks. Until publishers and retailers adjust their prices to a fair level, the market for ebooks will be severely stunted. People know a bad deal when they see it.

The Cost of Ebook Readers

Even if publishers and retailers reform their practices and begin selling ebooks at a fair price, ebooks still will not take over the entire publishing market. The issue of cost remains–the cost of ebook readers. To conviently read ebooks you need an ebook reader, and this will remain a prohibative cost for most people.

At any given time in the United States, between 13% and 17% of the population is below the poverty line, and within a ten year period 40% of the population will fall below the poverty line. Over half of Americans will at some point live in poverty.(3) I have lived in poverty, and from my own experience I can tell you that if someone is living in poverty they simply cannot afford a $200 ebook reader, not even a $150, or $100 ebook reader (much less the current price of $250+). Even those not in poverty, but with limited disposable income, will be reluctant or unwilling to invest in such a device.

For a large segment of the population, the cost of entry into ebook reading will remain unfeasible and this has a profound impact on the viability of ebooks.

If this were not enough, a bit of math quickly makes it apparent that for most people it makes no economic sense to use an ebook reader. Currently a Kindle costs $259, a Nook $259, and the Ipad $499. According to a poll taken by Associated Press-Ipsos in 2007, of those who read books the median number of books read was nine books per year for women, and five for men.(4) At $10 for a paperback book (mass market paperbacks are typically a few dollars less, a trade paperback possibly a little more) it would take the median woman reader in this survey nearly three years of reading on her ebook reader before she would have spent as much on physical books as it cost her to purchase on her ebook reader–and that without counting the cost of any ebook purchases! At these prices you are spending more money to use ebooks, not less.

For your average reader it makes no economic sense to use ebooks. More than that, it is not practical. What are you going to do–bring a $6.00 mass market paperback to the beach, or your expensive ebook reader? Most people will take a cheap paperback. What are you going to do–use one ebook reader for everyone in the family so only one person can read one book at a time, buy an ebook reader for everyone in the family, or buy one paper copy of each book so everyone can read whichever book they want? The affluent in society can afford to buy an ebook reader for every member of the family, and chance losing or destroying their ebook reader at the beach, but most people are not affluent. Most people are going to continue buying cheap paperback books for their recreational reading.

Do ebooks have a place in the future of publishing? Yes, ebooks have a place in the future of publishing, especially to niche markets. If publishers bring the cost of ebooks down to a fair and appropriate level the market for ebooks will expand, and if the cost of ebook readers declines the market segment will thrive. But will ebooks rule the future of publishing? No, because it will always cost more to produce a sophisticated electronic ebook reader than it costs to produce the bundle of paper we call books. For this reason ebooks will always have a minority share in the publishing world. How successful that share becomes depends on how intelligently publishers, and authors, develop the market.

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(1)Rundy’s introduction to the publishing revolution: http://creative-vapors.com/essays/publishing-revolution/
(2) Speech given by Jason Epstein at the 2009 O’Reilly Tools Of Change for Publishing Conference: http://www.ondemandbooks.com/docs/TOC%202009%20Speech.pdf
(3) Wikipedia article on povertyhttp://en.wikipedia.org/wiki/Poverty_in_the_United_States (The figures I quote appear on the page 6-23-10. Future changes to the page may alter the data presented.)

(4) MSNBC article on Associated Press-Ipsos poll: http://www.msnbc.msn.com/id/20381678/