An American Editor

February 9, 2010

The eBook Wars: The Price Battle (IV) — Value

It seems like every post is about value. Low-quality books have low price values. We all agree on that. The question unanswered, however, is what value does a book have regardless of its form? That is one tough question!

What brought this to mind was an article in The Economist titled “The Lowdown on Teardowns” (January 23, 2010, pp. 62-63), which was subtitled “Ripping apart smart-phones reveals their true cost.” I tried to rip apart a book to find its true cost but didn’t have any success. Unlike the smartphone, a book is primarily intangibles.

But the article is intriguing. Not because I haven’t read similar items before, but because it hadn’t dawned on me before how differently consumers value smartphones and books and clamor for pricing closer to cost in books but not in smartphones.

The Economist gave this figure for the Apple iPhone 3GS 16GB smartphone: $170.07 for parts and $6.50 for assembly costs, a total of $176.57. But you can’t buy the phone for that price, not even for anything close to that price. The article goes on to say that there are other less tangible costs such as research, design, marketing, and patent fees, along with Apple’s profit. But to get the iPhone, you either have to pay a very high price or sign on for telco service at an inflated price.

Where is the hue and cry for a $250 unlocked iPhone that will work on any network? Where is the hue and cry for lower telco costs (after all, the network has already been built and paid for)? Isn’t Apple overcharging by hundreds of dollars for a device that will be outdated within a few years, that breaks easily, and can’t flush a toilet? What is it about Apple that legitimizes the huge spread between actual cost and sales price?

Compare this to the hue and cry over a $12.99 or $24.99 ebook. Supposedly the ebook will last forever, after all it is simply bits and bytes. The iPhone will be outdated in a few years. eBooks have DRM that restrict their use; the iPhone is locked into a specific network. The ebook has design, research, and marketing costs, just as the iPhone. Similarly, the ebook has manufacturing costs just as the iPhone does.

Yet, consumers willingly pay more than $2000 to own and use an iPhone but grumble about paying more than $9.99 for an ebook. The difference must be that authors have little value but Steve Jobs has great value, otherwise the market valuation is irrational.

The argument is that the iPhone can do so much more so it is worth more. Accepting that as true doesn’t validate the irrationality of being willing to pay the iPhone price but being unwilling to pay the ebook price. The disparity in price between an ebook and iPhone already recognizes the single-function utility of the ebook versus the multifunction utility of the iPhone. There is much more at work here.

There is more at work here than meets the eye. I think that ebooks are suffering from two problems. First, although ebookers tend to disparage print books, what they are really doing is comparing the ebook to the pbook in a more wistful way. The iPhone’s comparable was a less functional smartphone/cell phone; the pbook is as functional as the ebook — or is it? On a book-by-book basis it is, but an avid reader usually has multiple books at hand and ebooks are certainly more portable than pbooks. What ebookers are really saying is that there is no cachet in ebooks and thus no value. (Interestingly, consumers continue to spend the asked for price for the ebook reading device, taking their price rage out on the ebook itself, not on the device.) 

Second, publishers have assumed that readers will see value in whatever the publisher thrusts on the market. Apple, on the other hand, recognizes that consumers need to be led by the nose and so creates a sense of value that the consumer can grasp. Publishers continue to fail to either demonstrate an ebook’s value or convince consumers that the ebook is at least as valuable as the pbook.

The conundrum is this: Publishers undercut their value argument when they print a paperback version that sells for one-third the price of the hardcover. How can publishers win the value argument when they undercut themselves? Publishers need to address this value perception problem.

7 Comments »

  1. Hmmm, this is an interesting concept. I never thought of books as having a cost value in terms of their physical entities; their value to me has always been as something intellectual and/or emotional – I learn from books, I can take refuge in them, etc. I did think paperbacks were deservedly less expensive than hardcovers, just based on materials used to create them, but the books themselves – even the ones I keep and reread again and again – are valuable for their intangible contributions to my knowledge base.

    While I agree that it seems nuts to spend something like $2,000 (PLUS the continued phone-line expense) for something like an iPhone and gripe about $9.99 for an e-book, I’m guessing that people who like e-books resent paying for a book after spending a lot – or anything – on the device to read the book. It’s like people who spend a small fortune on a computer and then resent spending any more on software to run on the computer, and only want free or shareware programs.

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    Comment by Ruth E. Thaler-Carter — February 9, 2010 @ 3:14 pm | Reply

    • I agree that the value of a book is really intangible, but saying that doesn’t address the perceptions about the value = price equilibrium that has to be found. I consider Michael Burlingame’s Abraham Lincoln: A Life to be a very valuable biography and well worth the $125 asking price (2-volumes, print version), and so I bought it, but I find myself hardpressed to view Dan Brown’s latest novel worth $9.99 regardless of format. But in comparison to an iPhone, I think Brown’s novel is easily worth $14.99 as an ebook, although I wouldn’t buy it, just as I wouldn’t buy an iPhone.

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      Comment by americaneditor — February 9, 2010 @ 3:28 pm | Reply

  2. […] and production services to publishers and authors. This is reprinted, with permission, from his An American Editor blog. PB Digg us. Slashdot us. Facebook us. Twitter us. Share the […]

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    Pingback by The eBook Wars: The Price Battle (IV) — Value | TeleRead: Bring the E-Books Home — February 9, 2010 @ 3:43 pm | Reply

  3. Some people may look at this pricing from an oversimplified view of supply and demand. Ebooks and pbooks aren’t going anywhere. For all intents and purposes, there is an unlimited supply of books, especially the good ones that are more likely to be reprinted or immortalized as digital ebooks. Some people see an e-book as just a single file that can, on its own, meet any amount of demand for it by copying itself. The idea of everyone paying for the same file over and over again seems absurd because the precedent for that type of sales structure is about as old as e-books themselves (unless you count taxes as a precedent for continually paying to get the same thing).

    But as you said, there’s no sense of the intangible costs of creating that e-book.

    I do think, though, that e-book pricing should mirror the cost of movies, though with a longer schedule. A family of four can see the latest movie in a theater for about $40. About 6 months later, the DVD comes out, and you can buy it for $18-$25. Some time after that, it’s on TV at no cost to the consumer. As it stands now, the no-cost analogue to movies on TV starts when the book enters the public domain.

    Of course, showing the movie on TV isn’t really free. It’s paid for by advertising. And maybe that’s what we’ll eventually get around to: free e-books paid for by advertisers, with an ad or coupon or discount code to start every chapter?

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    Comment by 4ndyman — February 9, 2010 @ 5:40 pm | Reply

    • Just one point of disagreement — nothing on TV is free, at least where I live. If you don’t pay for cable or satellite, there is no TV. And as the recent price war between a cable TV content provider and a cable TV operator demonstrates, we pay for the privilege of both watching and not watching. It costs me a small fortune every month so that my wife can occasionally watch a couple of channels (I haven’t watch TV in years) — we never watch sports channels or programming, religious programming, or foreign language channels, for example, yet we pay every month a fee to, for example, ESPN. Unlike with an overpriced book that we can decline to purchase yet still purchase some other book, there is no such option with TV where it is take it all or leave it all. There is no “public domain” equivalent when it comes to TV.

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      Comment by americaneditor — February 9, 2010 @ 6:51 pm | Reply

  4. […] a Book: How Do Publishers Decide on Value?, On Books: Deciding to Buy or Not Buy (III), and The eBook Wars: The Price Battle (IV) — Value) and is likely to be broached many times in the future. It is a worthy topic that just won’t […]

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    Pingback by Valuing eBooks: Is it a Sensory Problem? « An American Editor — July 8, 2010 @ 6:57 am | Reply

  5. […] a Book: How Do Publishers Decide on Value?, On Books: Deciding to Buy or Not Buy (III), and The eBook Wars: The Price Battle (IV) — Value) and is likely to be broached many times in the future. It is a worthy topic that just won’t […]

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    Pingback by Valuing eBooks: Is it a Sensory Problem? | The Digital Reader — July 8, 2010 @ 7:05 am | Reply


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