Great follow up on my post about the economics of the $9.99 ebook

I have no trackbacks here (I know my blog template sucks. I am working on a new one).

However, there is blog post at zerobeta that talks about why prices of books (and in general arts) will face pressures to decline.

Below is an excerpt:

When certain types of art such as music and literature/books become digital, the cost to produce such a work rests mostly on the artist. In addition, the Internet has made it easier to discover new artists and for artists themselves to market their work. The result is that the economics of the publishing is dead and the economics of art takes over. To the dismay of the publisher, the economics of art is much different.

The one argument you keep hearing is, “If the artists don’t get paid, how do you expect them to produce the art?”. Art is something that is timeless and will be produced for the sake of art itself. The artist effectively bootstraps him/herself in order to produce it the same way a web publisher with an art for programming can cheaply and quickly make a website or application. Thus the supply of art is much larger than the demand will ever be. An artist just wants to be heard, not bought. Heck, some of the greatest artists that ever existed produced art in their lifetime that they unfortunately never got to “cash out” on. Art will always be mass produced by the masses who wish to express themselves artistically. People find art entertaining and are willing to pay a market price for that. When the production costs rest solely on the artist, the market should clear at a much lower price, and there is nothing to say that this price isn’t “free”.


Do read the entire post here. I find it thought provoking.

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A reply to my post on the economics of the $9.99 ebook

A great comment by one of the Hacker news community. A perspective from the publisher. I wonder if it strengthens my argument or weakens it.

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This is such an uninformed argument, publishing has a narrow profit margin. These companies aren't trying to extort you at 2000% profit like other companies.
The entire publishing process is designed to filter out the chaff. First you need an agent (this is undeniable when some publishing houses won't accept a submission without one) whose job it is to first find publishers that are interested and then to make them pay every penny they're willing for it. When a first time author like Stephanie Mayer gets handed $750,000 for a series, that's because their agent just got handed 75,000-112,000. If you go it alone you'd probably get less than what your agent alone would get.


After the books in the publishing house, it is usually reviewed by like up to 5 editors who give their opinion before it's handed over to one editor who they believe is the best for it. You then get an editor, who through multiple revisions helps the author get the book to a better standard and quite often to more closely resemble the authors original idea.


I've worked with editors, and they're very passionate and put a lot of themselves into the work. This isn't something you're going to get at some slapped together organization. The argument that they're being replaced by digg (in the disaggregate link) is completely laughable, I'm sorry but digg and HN link mostly to articles at websites that all have editors. Just because people aren't committed to one information source and choose their own news (hence why some people get several news papers in the morning) doesn't mean the editors job is done.


Then he argues that it's help authors by allowing them to produce more books... Some authors release a book every few years and some release one nearly every 3 months (Stephen King). This isn't an efficiency model that can simply be stepped up by a new technology. It's an entirely ignorant argument.


This article is just plain bad. No one should sell their work at $9.99 a copy if it isn't going to cover the costs. In the publishing world especially, you should never release a copy for such a low price when the majority of books make most of their money in the first few months to a year when the book is priced the highest.


I hate these articles, because they're always written by people who are so uninformed on the issues. They're by people who assume the end is nigh for corporate publishing, despite the fact that there's been little to no effect on traditional publishing media, in fact global book sales have been on an increase over the past years.

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The economics of the $9.99 ebook

The NYtimes wrote about the issues of the downward price pressure faced by the book industry as a result of the rising popularity of ebooks:

“I love Baldacci’s writing,” wrote one reader, who decided not to buy. “Sorry Mr. B — price comes down or you lose a lot or readers. I’ll skip your books and move on!”

Publishers, of course, object to the lower pricing, citing the reason that printing and shipping are not the main components of a book's costs.

publishers argue that those costs, which generally run about 12.5 percent of the average hardcover retail list price, do not entirely disappear with e-books. What’s more, the costs of writing, editing and marketing remain the same.

Within that paragraph lies the reason why traditional publishers will not survive the digital disruption. They have not change their operating structure to leverage on the new economics brought on by the Web. Each of the functions cited (writing, editing, marketing) should not be bundled within the same organisation. They should be replaced by light weight services that are loosely connected to each other. Only with such a structure can the $9.99 price point be sustain.

Beyond new structures, we will also see new genres or formats of books that are more light weight and easier to produce. These will enable authors to produce more books. The volume sales will potentially offset the decline in prices. This is what we are seeing in music and mobile applications.

Finally, book sales will likely be only part of an author's revenue. More and more, ancillary revenue sources will reduce the reliance on book sales. This BillBoard article, for example, examines what types of revenue are replacing the loss in CD sales.

The answer is a piecemeal collection of marketing and pricing strategies, multi-rights contracts and performance royalties paid to the owners of sound recordings. Also on the horizon are revenues from multi-rights contracts (currently immaterial but expected to be of consequence in a few years), in-house artist services, and acquisitions or market share gains in music publishing.

I suspect we will begin to see similar situation happening in the book industry, although it is too clear at the moment what are the ancillary revenues accruing to books.

$9.99 might be the new price point that authors have to contend with. The way forward is not be to fight this new price but to reinvent book publishing's value chain to align with this new economics.

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