Why Do Consumers Think Book Prices Are Too High?

As Publishers and Bookstore chains fight for their lives and even just their relevancy, there seems to be some frustration with the public’s apparent desire for lower prices on books—especially ebooks. Ebook readers have protested the raising of prices, occasionally and erroneously targeting authors as being “greedy,” when authors have no control over the prices at which their books sell. In a recent New York Times article, the sentiment was summed up thusly by one author:

“The sense of entitlement of the American consumer is absolutely astonishing,” said Douglas Preston, whose novel “Impact” reached as high as No. 4 on The New York Times’s hardcover fiction best-seller list earlier this month. “It’s the Wal-Mart mentality, which in my view is very unhealthy for our country. It’s this notion of not wanting to pay the real price of something.”

Mr. Preston had recently been subject to reader protest because the digital publication of his most recent book had been “windowed” by his publisher to avoid undercutting hardcover sales. Windowing is the practice of delaying the release of a lower-priced version of the book. Mass market paperbacks are often windowed to appear a year after the hardcover edition of a book, for example.

But is his suggestion of “sense of entitlement” accurate? I was thinking about this and came up with a number of legitimate reasons why consumers believe ebook prices are too high:

1) “Books cost so much because of the price of paper!” For many years book buyers have been told, over and over again, that paper prices keep rising. I recall being told that the booming economy during the Clinton years meant that paper prices skyrocketed because so much wood pulp was being turned into cardboard for shipping containers. Most readers, upon hearing this news, shrugged and accepted it. After all, prices rise on everything.

But now, with paper being eliminated, and our being told that the printing costs were only ever 10% of the price of a book, we wonder what’s been going on. In fact, with that 10% number being bandied about, the fact is that paper prices cannot have been the reason book prices rose so sharply—not entirely, anyway. It would be logical to assume, then, that without paper, prices should be lower (at least by 10%).

2) Discounting Trained Us On The True Value of Books. This is one of turds that no amount of gold-leaf can gild. Bookstores have, over the last twenty years, used discount prices to eliminate competition and attract buyers. I’m old enough to remember when bestselling books actually sold for their retail price. It may be a trick of memory, but I don’t recall books being on sale, save for remaindered books—hardbacks left over after the paperback came out. Now, however, the question is not one of if a book will be on sale, but how big the discount will be. Heck, if I pick the right day and go into a bookstore, flash an AARP card, I get a discount. If I buy a card, I get a discount. If I open an email I get a discount. Discounts are everywhere.

The big problem is that when you spend two decades telling consumers that books are worth less than the cover price, consumers begin to believe you. Consumers are bargain-hunters because they’ve been trained to be bargain-hunters. In these economic times, they don’t have the money to be paying top dollar. And the problem with discounting—as the chains have seen over the last eighteen months—is that when you’re running on a slender margin, and if your product is not a necessity—yes, kids, contrary to public opinion, you will not actually die if you don’t have a book—you suffer when the economy tightens up.

Discounts have recalibrated the value of books down toward paperback price levels. It’s no surprise, then, that this lower price is what the consumers are comfortable paying.

3) Rotten Books Spoil It For The Rest Of Us. Every publisher puts out books that some consumers think are stinkers. Let’s be charitable and assume that the book actually isn’t bad, it was just not the right book for that consumer at that time. In his perception the book sucked. In that reader’s mind, he got cheated. The book didn’t deliver, so he’s not going to be so eager to plunk down the hardback price for another novel by a writer he doesn’t know.

Granted, if the reader had actually read a bit of the book in the store, or sampled it online, he’d have known what he was getting into and would have avoided the problem. Still, in his mind, books are not as valuable because he got nothing for something. Even if it is his fault, no one will be able to convince him otherwise, so he become very price-sensitive.

4) iTunes. With iTunes and songs going for 99 cents, we learned that the previous model for music sales could be broken. Lower prices benefited consumers and artists. Because of that new model, we have an expectation of the same fair pricing for fiction. And, curiously enough, the publishers are squawking much as the music companies did. We all know how that turned out.

5) There’s All This Free Stuff On The Web! There is no getting away from the fact that a lot of writers—many of them very good—are giving stuff away for free. This blog, for example, is one of many that folks can spend their time reading instead of burying their noses in books. And with the iPad and other devices like Sony’s recently announced dash device, accessing web content becomes even easier.

Free doesn’t mean good, nor does it necessarily mean bad. What it does mean, however, is that if someone doesn’t have the scratch to buy a book today, there is free content that will entertain him until such time that he can afford to buy a book. Urgency goes out of the equation.

Ultimately, however, price comparisons between zero and an ebook price does tend to favor lower prices.

6) We Can Do The Math. There are many analyses of book prices being published these days, and more will come. It doesn’t take a genius to figure out that there are some constants in the equation from the publishers’ side that aren’t shifting. The cogent question, if asked on an SAT test, would be phrased like this:

Chaos Group Publishing has a headquarters in Manhattan where they pay $45.00 a square foot per month. Flint, Michigan is full of empty buildings and warehouses that will go for $6.50 a square foot. Given that shipping companies operate nationally and internationally, that the cost of living is much less in Michigan, and that many of their workers (copy-editors, writers, artists) telecommute, how much per month could the publisher clear off overhead by moving?

With books being returnable—so half of the books printed are being destroyed—and unnecessary other expenses like expensive office space, the whole overhead portion of the equation can be lowered significantly—and not by firing employees. I think New York is a lot of fun, and moving there would place me closer to publishers as well as my parents in Vermont, but at the prices they want? I’d be bankrupt fast.

I love books. I love the feel of them. I love how they smell. I love how they look on my shelves. I even kind-of groove on the fact that the damned shelves bow beneath the weight. And I’ll gladly pay top dollar for a book I want to keep. But very few books rise to that level, in part because the price is too dear. Publishers are pricing themselves out of the market by hiking prices on consumers and lowering payouts to authors. The Internet is allowing authors to reach their audience directly and that is why the current business model is crumbling.

One other point that has to be addressed and really thought about when publishers complain about ebook prices. In all of the pricing scenarios, publishers make more off ebooks than they do off print books. Publishers complain, however, that since ebook sales are only 5%-10% of the market right now, that an immediate transition to ebooks would not allow them to sustain their business model. They are afraid that lower priced ebooks, which are more profitable, will undercut sales of the higher priced, less profitable hardbacks.

The argument is that ebook sales cannibalize print book sales.

But no one has produced a single study (to the best of my knowledge) that indicates cannibalization takes place. And yet, if it did, this would be to the benefit of publishers, since they could reduce warehouse space and would make more off each individual sale, as well as saving the cost of processing returned books.

The gaming industry has, for years, sold PDF versions of their books before, after and at the same time as very expensive print editions of their books. I’ve spoken with folks at the companies who do this. Every single one of them has told me the same thing: ebook sales do not cannibalize print book sales. And, mind you, the game industry is small enough that we don’t have the economies of scale that larger publishers do, so the price of the print books are very high.

In terms of fiction, I only have anecdotal evidence, but readers have told me many times that they like having the ebook version of stuff because “I can have my library with me wherever I go.” They still buy the print books, often to sit on their shelves in their collections, and use the ebook as the reading copy.

More importantly, however, no one is asking for an immediate shift from print to digital publishing. We know it will be a gradual process, but since digital is more profitable, instead of slowing the process, book publishers should accelerate it, to their own benefit, and that of the reading public.

Ultimately, I think readers have every reason in the world to be skeptical of the level of pricing on ebooks. We’ve been trained to accept discounts. In a parallel industry—music—we’ve been presented a very workable model that lets us get what we want for lower prices through iTunes. We’ve been fed half-truths for years, and there is a lot of competition out there with an industry that is intransigent in their willingness to address the need for change in their business model.

It’s going to be a buyers’ market. Anyone who thinks otherwise should get into another business. (And just a clue, though it might feel familiar, don’t start making buggy-whips… )