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Some Problems with the current E-Book Model

May 11, 2010 By

Sony's base reader is extremely affordable.

Recently, I picked up a Sony Digital Book Reader PRS-300.  I found a great deal on Craigslist, and am ready to begin reading everything I can find.  The only problem is, it’s pretty hard to find reasonably priced e-books.  Fortunately Google Books has all the classics, but what if I want to read new books?  A look at bestsellers runs around $9.99 a book, sometimes even $14.99.  This is more than a paperback copy would cost, and definitely more than Half.com or E-bay searches would return.  So not only are e-books more expensive than regular books (sorry I refuse to consider paying for hardcover books), but they are not really yours.  Tablet computers (and the iPad) are going to revolutionize where and how we use computing resources.  Portable consumption, most notably e-books, is going to be a huge part of that, but only if they are distributed properly.

Something that is yours (ie: a physical object) is shareable, resale-able, and generally yours to do with as you wish.  Barnes and Noble’s Nook allows you to share a book with a fellow friend (they get it for two weeks) but for some friends (and books) two weeks is just not long enough.  My thoughts are, if I bought this, who is the publisher (or distributor) to tell me what to do with my own property?  That is the problem with e-books, you might buy them, but you do not truly own them.

If I do not actually own it, what is the reason to pay the up-charge from physical to digital edition?  Purely because it is more convenient?  I think that answer will be enough for some consumers, who have the extra funds, but that justification will not fly with most.  The initial selling point of the Kindle was $300 upfront and $9.99 for every ensuing book, creating both a savings in book costs, and ease of reading/portability.  However, Apple recently gave publishers clout to change the pricing structure, citing that they are not making enough money.  This push-back is bad for the consumer, because it will decrease price competition.  Instead of publishers looking for efficiencies to lower costs, they will just pass on to the consumers, potentially creating fewer consumers (or increasing demand for piracy).

The first successful online media consumption outlet was the iTunes store.  Apple offered every song for $.99, so consumers did not have to pay $20.00 for a CD, and consequently only listen to 4 songs.  This allowed users to get the music they wanted, and easily transfer it to their consumption devices (iPod, or burned CDs).  It is estimated that 25% of all songs sold in the US are sold in the iTunes store, so obviously they must be doing something right.  iTunes allows users to have the songs on up to 5 computers, and 5 devices.  There is some sharing enabled, but the low-cost really allows users to buy any songs they want (or at least a lot of them!).

The $.99 model is probably not right for e-books, but one digital audio distributor has a model that could work.  Currently, Microsoft offers their ZunePass.  For $14.99 a month you have unlimited listens, and the capability to keep 10 songs a month.  This model is probably not perfect for e-books, but could be close.  NetFlix’s subscription style delivery system is outperforming all expectations and almost all other video content delivery systems.  People like subscriptions, you can count on guaranteed service, for a known (non-fluctuating) price.  Corporations also like subscriptions (they help forecast demand, resources, and income).

I know I would pay $20-25 for unlimited books, and I am sure that I am not the only one.  A tiered pricing strategy could allow just 1, 2, or 3 books at a time.  These plans would probably be amenable to a whole lot of consumers – who could sign contracts enabling subsidized device costs.  Not only would this sell e-book readers, but it would sell contracts.  I believe until e-books are available individually for less, or as a plan, they will not gain widespread support, and publishers will continue to look for ways to make more money.

Simple economics would state that with supply and demand curves, eventually publishers would realize the proper pricing system, and adjust.  I don’t foresee that happening without a powerful market changing event.  What are you thoughts with the e-book situation?   Is there a way to rectify e-book prices with the prices that users are willing to pay?

Filed Under: Books, Gadgets, The Future
About RyanKamauff

Ryan Kamauff is an ITIL-certified technology research associate with experience evaluating technologies and performing due diligence assessments on a wide variety of firms. He is a writer at CTOvision.com and a business school graduate with US Army operational experience both CONUS and in Iraq.

  • Jon

    Agreed. I can't believe the book publishers are fighting the same battle as DRM-ed music. DRM-free music won and both the customers and the music industry are happy. Sell your books DRM-free (or include a free e-version when I buy a physical copy) and let the market determine the average book price. Doing games like the various ebookstores are doing only adds cost and delay to what will be a satiated market.

    • http://crucialpointllc.com RyanKamauff

      It's pretty interesting that they haven't realized this battle is futile. I think a lot of the Film Industry folks have realized this when they started packaging "Digital Content" editions of movies with the hard copy. People want to bring their content with them, and consume at their leisure, so how do we do that? Netflix is doing so well with their digital downloads, based on a subscription model, whereas Amazon isn't doing so well selling movie downloads. I think people are getting away from books anyways, and the barriers to consumption are just making it harder.

  • http://www.thejuliagroup.com/blog/ ANNMARIA

    I would pay for a service like O'Reilly books where I could read all I wanted. It's a great deal and I used to pay for it myself until I got it through work. I'm surprised that isn't available yet.

    I have both a Sony Reader and a Kindle. Both were presents and I love them. I have the New York Times delivered wirelessly every morning and can read it in bed. I also buy at least a half-dozen books a month plus another two or three I download from Google books.

    I've gotten a few books from my favorite authors for under $3. Often, these will be one in a series, like a loss leader.

    So… for me, the total price of the books I buy has gone down and the convenience has gone up. But I would jump on a subscription plan in a heartbeat.

    I do like the convenience of being able to share books in paper format but usually if I want to share something on my Kindle or Reader it is with one of my children, so I give the device to them and just get it back when they are done.

  • kjohnse

    I agree with you about the pricing of ebooks. However, it seems the rest of the public doesn't mind paying more for less. There are no production costs with ebooks, so why do they cost so much? I'm baffled as to why people are willing to pay $100-$400 for an ereader, and then pay MORE, the same, or barely less for ebooks than they would cost for hard copies. Doesn't make sense at all to me.