eBook pricing: learning from other people’s mistakes

My second piece for FutureBook, raising concerns about ebook pricing that we still haven’t resolved, and – three years before Amazon’s announcement of Matchbook – proposing bundling as a possible solution. Rereading this in 2013, I belatedly realise that the person who gave that very impressive presentation at Tools of Change Frankfurt in 2009 was actually the same man who has always impressed me at Kobo (and not just with his legendary parties) – Michael Tamblyn.

I spend far too much of my time thinking about the music business. It’s partly the emotional attachment formed by spending my formative years listening to jangly guitar bands on scratched black slabs of vinyl. It’s partly professional too, though: I work in a similar industry, and if it’s wise to learn from your mistakes, it’s even wiser and less painful to learn from the mistakes of others.

The depressed state of the music industry today is widely ascribed to such mistakes. The explosion in digital piracy at the turn of the millennium demonstrated a demand for downloadable digital content to which the industry signally failed to respond. The loss of much of its market first to Napster and then to legitimate but non-traditional players such as Apple followed directly from this failure.

Yet there was also an earlier and perhaps more significant cause. When the CD format was launched in the early 1980s, it seemed to offer the music industry two key benefits. Firstly, it doubled at a stroke the price of a new album from the £6-7 you’d pay for vinyl to around £13 for a CD; secondly, it enabled the music industry to increase its sales by reselling consumers music they already owned, first as a shiny new digital copy of the original release, then as a repackaged and reissued deluxe edition, remastered, and with extra tracks.

Since the average CD now costs considerably less to buy than it did when the format was launched, even without taking inflation into account, it’s probably fair to say that the first of these benefits did not prove an unqualified long-term success. But persuading customers to pay several times over for music that they felt they already owned may – in combination with the price hike – have had even more negative consequences. A customer who doesn’t feel that he’s getting a fair deal is far more likely to take advantage of the opportunity to get hold of his music for free. By the time that Napster made large-scale digital piracy possible, the music industry had created a mass of disenchanted customers who felt that record labels owed them something.

As the publishing industry approaches a similarly critical point in its history, it needs to make sure that it doesn’t make the same mistakes. Not only do digital formats make piracy much easier, but as ebooks move into the mainstream, they bring with them an irresistible downward pressure on prices. Largely unaware of all the costs in publishing aside from print and distribution, the book-buying public expects ebooks to be cheaper than print: after all, wasn’t that part of the deal when they bought that expensive electronic device to read them on?

The fact that it doesn’t cost much less to produce an ebook than a print book doesn’t really matter; what matters is that the book-buying public doesn’t believe it. And if readers feel that they’re being ripped off, then that same sense of resentment and entitlement that fuelled the growth of piracy in the music industry will have the same effect on publishing.

There’s no single solution to this problem. At the Tools of Change conference in Frankfurt last year, however, Michael Tamblyn of Shortcovers made some excellent suggestions as to how publishers might begin to persuade bookbuyers that an ebook was worth just as much as a paperback: by making it possible to lend ebooks to friends, for instance, or by limiting the buyers’ risk of being stuck with an electronic shelf-full of unreadable ebooks in an orphaned format.

Perhaps the most promising of all the possibilities that Tamblyn proposes, though, is bundling print with electronic. Putting a code in the back of a book that would allow the reader to download an electronic version, perhaps for a small additional charge, might help satisfy the significant proportion of readers who appreciate the convenience of electronic formats – when travelling, for instance – but whose preference is otherwise for print. And, since the majority of the costs of creating a book are common to both formats, it would also help sustain – or even increase – the current price point without incurring much in the way of additional costs for the publisher.

Finding a price point for ebooks that satisfies both publisher and reader will require engagement by both parties, and experimenting with possibilities like the above will have an important part to play. The risks to the industry of not engaging in that dialogue, however, are plainly visible in the example of the music industry. We simply cannot afford to create a mass of customers who feel they’re being cheated just as piracy becomes an easy alternative to buying books.

Written for FutureBook on 13 July 2010

2 Comments Add yours

  1. Ravi says:

    Wow. Three years later and publishers have somewhat alienated readers, but it hasn’t approached music industry levels. Ironically the reason it isn’t worse is due almost entirely to the player publishers almost universally love to hate: Amazon. There’s a lesson in that somewhere.

  2. I don’t entirely disagree, but I think Amazon’s contribution to perceptions of publishers is a lot more ambiguous than that: actively trying to turn readers against publishers has always been a part of its strategy, as seen by its prominent “this price was set by the publisher” messages for readers when agency pricing came in. The problem for publishers is that they’re not, for the most part, ripping off readers: the savings on manufacturing, warehousing, distribution etc are still small, and – in the UK – outweighed by having to pay VAT. They therefore have to tread a fine line between alienating readers and actually remaining financially viable.

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