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Comment by ghaff | Hacker News Reader

"Customers are not stupid, they understand that e-books are a lot cheaper to produce/distribute than a physical book, and they should be priced accordingly."

If customers "understand" this, they mostly understand incorrectly. While it may make intuitive sense that printing and distributing a book should make up a lot of its cost, that's not actually true. I haven't looked at the details for a few years but this is something I wrote a while back on the topic: http://www.cnet.com/news/why-e-books-arent-cheaper/

(To summarize that post, printing plus the take of wholesalers who handle distribution is only about $5 for a hardcover.)

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When a publisher sells an ebook, they receive wholesales not retail price. Wholesale prices in the book businss range from about 35% of list (if you use a full-service distributor) to about 5o% of list (if the publisher sells directly to the retailer). You present an example where the list price is about $28, which means the publisher will get at best $14. But your calculations are based on the supposition that the publisher would get the full list price.

Here's another huge cost you don't include for the publisher with print books -- they are returnable and often get returned. If a publisher gets 25% of the books sold returned, effectively the publisher is getting only about $10 for a list price of $28 / wholesale $14. (Return rates can be higher or lower, but there are always returns.) Using the cost figures you use on your referenced example, the publisher loses money on the print book. And, you omit other costs incurred by traditional print book publishing, including shipping, warehousing books and fulfilling orders.

With ebooks there are no returns (a huge factor in the analysis), no printing, no shipping, no warehousing. Wholesale prices are a higher percentage of the list price. We publish ebooks and get about 65% of list from Amazon, Apple and Barnes and Noble (it's a bit higher or lower depending on which vendor) So it's obvous that our costs are lower for ebooks and the share of revenue we get is higher. In other words, list price of ebooks indeed should be far less than print, and ours are.

>And, you omit other costs incurred by traditional print book publishing, including shipping, warehousing books and fulfilling orders.

In the figures that I quoted, I believe that those are rolled into the wholesalers cut.

Ebooks can certainly be priced so prices are lower to consumers than hardcovers (as well as PoD) while the author/publisher makes at least as much. My point with the figures--which seem to be surprisingly difficult to nail down authoritative sources for--was that printing/distribution isn't the lion's share of what someone is paying for when they buy a hardcover book.

It's much more than you are saying. If you start with the retail price of the book (which your referenced article does), there's 50% off the top generally for wholesale discount (that is, the retailer pays about 50% or so). There's an additional 15% for a distributor's share (this means a company that has a sales force, generates orders, etc.; if you don't use a distributor, you need your own internal sales department which will cost almost as much). You don't need a distributor for ebooks. You have returns -- at least another 20% or so of your revenue will be eaten up there for most titles.) No bookstore returns for ebooks. There is printing, shipping, warehousing. (Normally estimated at about 15% of the cost of print books) No printing, etc. for ebooks. There's capital costs associated with doing print runs -- you put money up front and then have to wait for return while books sell, and also you run the risk of printing books that never even ship to stores. Hard to estimate but another cost that doesn't apply to ebooks. If you add it up, 15% for distribution. 20% for returns. 15% for printing etc. These print book only costs come to about 50% of the wholesales price. It's just not so that ebooks cost almost the same as print books.

Traditional publishers still have a business model that depends upon bookstore sales. The real problem for traditional publishers is, if ebooks are priced much lower than print books, it's an obvious problem for an important part of their business model. So they struggle mightily to keep ebook prices high and to persuade people that the costs of ebooks and print books are the same. As the article indicates it's not working -- self publishers and non-traditional publishers can produce ebooks at a much lower price point, because the ebooks cost less to produce.

It's still a $5 difference. If you look at most recent books, there won't be that difference between prices. In some cases, the ebook is even more expensive. That's just greed.

Prices are not linked to costs but to what the market will bear; in an electronic media market where prices will always be anchored to zero at one end (thanks to piracy and intangible goods), what the market will bear is inevitably less than what it used to be.

Customers understand this more intuitively than media producers who grew up in very different times.

Right, so taking that out your 14.99 hardcover is... 9.99

Which is what customers seem to want.

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