Randomize

Carolyn K. Reidy, chief executive of Simon & Schuster, was recently quoted saying of Amazon’s $10 standard pricing for books on the Kindle:

“We do not agree with their pricing strategy. I don’t believe that a new book by an author should ipso facto be less expensive electronically than it is in paper format.”

Fortunately for us, the market decides the price of products, not Ms. Reidy. This past week, there have been various other rumblings in the publishing industry, from Macmilan’s dispute with Amazon over pricing to the sky-is-falling predictions at recent publishing conferences, to the fearful reactions to Apple’s impending entry into the market.

Here are six reasons I do think that ebooks should be less expensive electronically than in paper format:

1. Cost of typesetting, printing, and returns is zero. This is the obvious one — electronic books cost nothing to produce, once you’ve converted the book to the appropriate formats. This impacts the publishing industry’s bottom line both for successful books (where there is a cost of printing and distributing each), and greatly reduces the financial risk of publishing an unsuccessful book (since bookstores aren’t returning unsold books for credit). These savings can and should be passed directly to consumers in a fair marketplace.
2. Electronic books can’t be shared or sold. We have, quite unfortunately, given up as consumers on forcing publishers to give us title to the books we buy electronically. Unlike a paper book, DRM technology locks up the books so we can’t resell them, give them to libraries, borrow them from libraries, or even share them with a friend for a few weeks. Publishers should realize that when they sell us a locked product that denies us the right of first sale, they are selling an inferior product with no residual value. That must be represented in the sale price, and should affect everyone’s profit up the chain, from the vendor to the publisher to the author. You can’t sell me a $20 electronic book over a $20 hardcover because the hardcover book has real residual value should I choose to part with it in the future. This goes double for textbooks.
3. eBooks allows publishers to reduce risk. While publishers still have to take on the risks of marketing, editing, carrying, and potentially providing non-refundable advances to the author, ebooks don’t require the same degree of risk planning to produce just the right number of books. Thus, electronic publishers can take on unknown authors (at lower royalty percentages) and works in niché subjects without the same risks as before. With long-tail economies, publishers can make more total profit on more works that sell, individually, much fewer copies than the big-name authors. This, in turn, will put publishers in a better position to negotiate with big-ticket authors.
4. Electronic publishing is green. Electronic books have a fraction of the environmental impact costs of paper books. This isn’t just about greenhouse gas, electronic publishing is also much more efficient when it comes to resource depletion (wood, water, and petroleum), acidification, and waste disposal. While our current lop-sided economic models rarely realize true environmental costs in the costs of goods sold, publishers should expect that these costs will hit them in the future in the form of regulations and pressures from forward-thinking distributors (like Wal-Mart), and the technologies they are either already putting in place or are planning to in the future to reduce environmental impacts can be side-stepped by paperless printing.
5. Cheap is the best way to combat free. Like it or not, paper books are getting easier to copy every day. Over 10 years ago, when I was in college, a number of students were known to all chip in to buy a textbook, run to Kinko’s and make $10 copies, and resell the original book. Now, they don’t even need the $10 apiece, just a few bucks for scanning. Textbook publishers were the first to be victims of piracy due to their ridiculous prices and the limited residual value of their books after the semester (due to an artificially-high rate of book revisions). Mass-market books and magazines are going to repeat the same mistakes as the music industry if they don’t learn the lesson that the easier way to combat piracy is to make it painless and inexpensive for people to obtain electronic versions of their works. Fortunately, competing with free doesn’t mean you have to be free–it just means you have to be “virtually free.” You have to hit people emotionally at a price that competes with frivolous entertainment and grande mochachinos. This is the reason that 30% of Amazon’s sales are electronic already, and iTunes sells more music than Wal-Mart.
6. The number of distributors is increasing. With Apple coming to the market, it’s time for publishers to not whine about the total price, but push for better deals from Amazon. Amazon’s costs for distribution are pretty cheap, and the more choices publishers have to reach people, the more distributors will have to do to court publishers. The best deal for consumers and publishers alike will be if Apple, like with iTunes, supports users putting works they didn’t publish through Apple in their iBooks library. While publishers not using Apple would lose the comfort of DRM, they would be able to keep access to Apple customers without being forced to take Apple’s deal. So, publishers should start now to push Apple to allow consumers to add unprotected EPUB files to their iBooks library, and thus keep themselves from becoming sharecroppers on Apple’s field, as they have been with the Kindle market.
7. Adapt or die. Number 7 is free of charge ;). Publishers have traditionally been the powerhouse for finding quality authors, funding their work, marketing it effectively, and managing the supply chain. Electronic publishing is already breaking down walls for independent publishers, who can contract with cost-effective contractors (a little plug for my brother’s company there) to produce quality ebooks, sell them directly (through Amazon or other web sites), and self-market them online. Sure, they may never sell a million copies, and 80% of self-published work aren’t worth the paper they aren’t printed on, but they are the new competition. If independent authors consistently meet or beat the prices of “published” works, new technologies will emerge to sort the wheat from the chaff, and people will find interesting independent authors to take up some of the relatively-fixed number of books they buy.

So, I encourage publishers to put some thought into where they want to be in 5 years. The reality is, it simply won’t involve nearly as many dead trees and ink-stained fingers, and they have an opportunity now to avoid the fear-driven missteps and heel-digging of the music and movie industries. Instead, they should focus on creating a marketplace with new profit opportunities and larger markets for themselves, while understanding that they simply must provide a better value for customers to survive.