by Tiffany Jansen

Last Friday, we dicussed the cost of print books. Why do they cost so much and where does all your money go? Reader Michelle Baker made an extremely good point in the comments:

“It seems to me that digital books cost too much and too little simultaneously. Some are selling for $0.99 and others for $24.99. How can that be, particularly when the infrastructure to produce them is nothing like that to produce a physical book…”

I spent this week doing some research to try to answer Michelle’s question. Here’s what I found out…

First, you have ebooks from publishers

In last week’s post, I mentioned all the costs the publishing house acrues when publishing a book: editors, galley copies, printing costs, cover designers, illustrators, layout designers, printing, marketing, distribution, and author royalties. Many of those costs are also taken on by publishers for e-books (with the exception of printing costs and printed galley copies, of course).

E-books come in multiple formats and not all e-readers are created equal. This means that layout requirements are different for the Kindle than what they are for the Nook, which is differs from epub and so on and so on. Making the book available in all these various formats costs money.

Because the publisher covers all the costs involved in producing, marketing and distributing an e-book, they require royalties (roughly 70%).

This is where it gets tricky

Amazon, in its attempt to take over the publishing and book retail world, played some pretty dirty tricks when it introduced the Kindle.

To aquire titles, Amazon would pay the publishers 50% of the hardcover copy to sell the book as an e-book. So, should a hardcover cost $24.99, Amazon would purchase the book for $12.50. Then, Amazon would turn around and sell it as a Kindle e-book for $9.99. Yes, Amazon was actually taking a loss in order to sell Kindles.

Other retailers could not compete, Amazon was gaining power, and customers were being given completely new ideas of what books should cost.

Enter Apple with the iPad, bringing with them the App Store model in which publishers had complete control over the price. The publisher would get 70% of the sale and Apple would get 30%. This upped the price of e-books without giving e-booksellers (i.e. Amazon) the ability to discount those prices.

These days, Amazon keeps its foothold on the market by pricing print books lower, taking a loss of roughly $2 per book. Hence the print books that are priced lower than e-books.

Then you have the self-pubbers

Self-pubbed authors cover all the costs out of their own pockets, hiring professionals to do the bits they can’t do themselves (i.e. editing, layout, cover design, formatting, illustrations, etc). But where you see the difference is when you cut out the publisher. Whereas the publisher takes up to 70% of the retail price, uploading a self-pubbed title to an e-bookseller costs as little as 30% of the retail price.

For a $2.99 e-book, the self-publishing model gives the author a whopping $2.10 per sale, whereas the traditionally published author is left with only $0.89 per e-book sold.

I’m sure by now you’ve heard of Amanda Hocking and J.A. Konrath, the self-published giants who sell their e-books for as low as $0.99 (if you haven’t, you’ve got some serious catching up to do!). They do this because they can. They’re not losing 70% of each sale to a publishing house. What they make off of each book sold is enough to cover their overhead and production costs. And because e-books don’t need to be reprinted, once enough books have been sold to cover the inital costs, all sales after that are money in the bank.

These authors are the exception, not the rule. But what they have done is devalued the worth of books in general. Customers see these cheap buys and think “why should I pay $9.99 for a book when I can get books for as little as $0.99?” To compete, publishers and self-published authors are lowering their prices as well.

And what we as consumers are left with is a line of products that vary tremendously in price.

If I’ve just totally confused you or gotten something not quite right (or drastically wrong – hey, it can happen!), check out these posts by agent-turned-author Nathan Bransford (Why Some E-books Cost More Than the Hardcover, Amanda Hocking and the 99-Cent Kindle Millionaires)

Why do you think there is such a discrepency in e-book prices? What do you typically pay for digital books?

Photo Credit: zebramaedchen, courtesy Flickr