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Have you noticed how sometimes, when you go to buy a book on Amazon, the prices seem a little off? Maybe the Kindle version costs more than the paperback, or maybe more than the hardback as well.

At the time of writing, that’s the case with The Mirror Thief by Martin Seay on Amazon’s US Store and The Girl on the Train by Paula Hawkins on Amazon’s UK Store, to cite just two examples. It’s easy to find others if you look through the bestseller lists.

So how does an ebook end up being more expensive than a real book? Surely a few hundred kilobytes of text should cost a lot less than an inch-thick stack of paper that you can hold, sniff, and even throw at the cat?

We decided to investigate this phenomenon. And we discovered there’s a lot more to the pricing of books than you’d think.

Physical Books Don’t Cost That Much

It seems logical that physical books should cost a lot more to produce than ebooks. Publishers have to actually print something onto real paper, package it, and deliver it to a warehouse. With an ebook, publishers just upload a text file to a server and the job is done.

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For publishers, though, the physical production costs of releasing a book are only a tiny part of the whole cost. Let’s take an imaginary book, Why I’m Awesome by Harry Guinness (it got a rave review in the New York Times). The publisher sets the list price for the hardback at a fairly standard $25. Let’s look at how that breaks down.

First, a retailer pays the publisher around half the recommended retail price for the book. In this example, Barnes & Noble (or one of Amazon’s physical bookstores Amazon Loves Bricks and Mortar, Trump Branded a Loser... [Tech News Digest] Amazon Loves Bricks and Mortar, Trump Branded a Loser... [Tech News Digest] Amazon plans brick-and-mortar stores, Donald Trump is a Loser.com, Microsoft acquires SwiftKey, your Kindle is due a new update, and LEGO Star Wars: The Force Awakens gets an amazing trailer. Read More ) pays $12.50. The other $12.50 goes towards costs, profit, future discounts, and so on.

I, as the author, get a royalty for each copy sold. With a typical deal, that’s going to be about 15% of the list price, or $3.75 on a $25 book.

The publisher isn’t going to handle distribution out to thousands of tiny bookstores either. They’re going to farm that job out to a wholesaler — a wholesaler who needs a cut, too. Let’s give them a fairly typical 10% of the list price, so around $2.50.

Printing Costs Aren’t a Big Factor

So where does that leave our publisher? They haven’t even started making the book and their cut is already down to $6.25. From that, they’ve got to pay for marketing (my book tour isn’t cheap), proofreading (I spell color “colour”), editing (you should see my first drafts), and so on. They also have to turn some kind of profit.

When everything is said and done, the publisher’s production cost for a hardback book is about $2.50, or 10% of the list price. For a paperback, the cost is between $0.75 and $1. The other expenses, which ebooks share, eat up most of the rest of the money. The specifics can change a little depending on what format the book is and what sort of deal the author has, but, for the most part, these numbers fit the above pattern pretty well.

This all means that the cost of producing a physical book really isn’t a major factor in the price — and that’s without touching on digital-specific production costs and the opportunity cost of having hundreds of thousands of dollars tied up in inventory.

The Agency Model

Another factor to consider is that ebooks are priced differently than real books.

Physical books are sold to retailers at around half the list price. They can then sell them for whatever they like. The Mirror Thief‘s publisher recommends selling the hardcover for $27.95 but it’s available on Amazon for $17.91. That $10 discount is coming straight out of Amazon’s profit margin. Amazon is gambling that the extra copies it will sell will more than make up for the lost profit margin.

Mirror Thief on Amazon Book Listing

However, ebooks are sold under the agency model. The publisher sets the price and gets 70% of each sale, and the retailer gets the remaining 30%. Amazon actually has no control over how much each Kindle copy is sold for.

This is the reason ebooks sometimes cost more than real books. The publisher has listed the hardcover of The Mirror Thief at $27.95 and the ebook at $20, which is a reasonable 30% markdown. Amazon, instead of selling the hardcover for anything near the list price, has chosen to sell it at a serious discount — so much of a discount that it now costs less than the originally-cheaper ebook.

People Pay for Value and Convenience

When you buy a book, you’re not buying the physical pages. You’re really just buying the content The End of Ownership: Netflix, Spotify, and The Streaming Generation The End of Ownership: Netflix, Spotify, and The Streaming Generation Read More . If that wasn’t the case, all books would be interchangeable. But they’re not. Try giving someone The Bible instead of Harry Potter for Christmas if you don’t believe me.

With ebooks, customers have already demonstrated a willingness to pay for reading material. Kindles start at $69.99, and the Kindle Oasis costs $289.99 3 Compelling Reasons to Buy an Amazon Kindle Oasis 3 Compelling Reasons to Buy an Amazon Kindle Oasis Once you get over the shock of the price of the Kindle Oasis, you'll find that it actually offers a lot of bang for your buck. Here are three reasons to consider buying one. Read More  (£269.99), which would pay for a lot of second-hand paperbacks.

Publishers know that ebook users are some of the most voracious readers around What's the Best Way to Read Books in 2016? What's the Best Way to Read Books in 2016? Reading is still a popular pastime -- people are just using a wider range of devices than ever before. So, with that in mind, let's look at the best way to read books in 2016! Read More . They will pay for the books they want to read, whatever the cost. With the Kindle, in particular, they also don’t have any decent alternative way to get ebooks. You can sideload ebooks from other platforms How To Manage Your Ebook Collection For The Amazon Kindle With Calibre How To Manage Your Ebook Collection For The Amazon Kindle With Calibre The biggest problem with an eReader like the Amazon's Kindle is that it requires unreasonable effort to move books between different devices. Before Kindle, I fell in love with Calibre. A bit on the heavy... Read More but it’s an awkward workaround that most users won’t ever even attempt. In other words, ebook buyers are a captive audience who have shown they’re willing to pay top dollar.

Some Countries Tax Digital Products

Finally, some countries, such as the UK, tax digital products differently to books.

Physical books, newspapers, and magazines are all exempt from VAT in the UK. Digital products, however, aren’t. This means that retailers are supposed to pay 20% VAT on any ebooks they sell — a cost they pass along to the customer — and which they don’t have to pay on hardbacks or paperbacks.

Given that the production costs of physical books is about 10% of their list price, this extra 20% tax is more than enough to wipe out any savings. Amazon and other major retailers currently do their best to get around these extra taxes but governments are closing the tax loopholes The Doom Of The Double Irish, And How It Affects You The Doom Of The Double Irish, And How It Affects You Technology companies currently using a tax scheme known as the Double Irish will soon have to look for other ways to reduce their tax burdens. Read More . So in the future, extra charges like these will make a big difference to prices.

Does Price Matter to You?

To me, an extra dollar or two doesn’t really matter when I’m buying a book. I’m happy to pay it for the convenience of having it arrive instantly — and also not having to get dressed and go out in public. I also don’t mind supporting the authors I love. But you may disagree.

Would you ever buy an ebook that costs more than the hardback? Do you accept that the pricing of physical media and digital media is just different? Please let us know your thoughts in the comments below!

Image Credits: pathdoc/Shutterstock

  1. Joe Wissler
    November 16, 2016 at 8:12 pm

    I would not pay more for an ebook.

  2. Stephen Osterday
    October 17, 2016 at 5:40 pm

    For me it's cost. If a physical book costs less I'll take it any day. I prefer the physical book, but only buy digital when it's cheaper. I do like the benefit of searching for something on the digital book.

  3. Sean McCready
    October 17, 2016 at 5:24 pm

    In my neighbourhood we spell colour correctly as well.

  4. Peter Litchford
    October 17, 2016 at 5:05 pm

    Coming up on mt 86th birthday and a voracious reader, i need to read on a budget. In my mind the e-book price is stupidly high so I rarely buy anything newly published. I have acquired most of my e-library through sales and waiting for prices to lower. I read more than 50 books a year so I watch prices carefully. Recent price increases have been damaging so I price my reads through multiple suppliers. Just juggling my sources is almost a hobby and much too time consuming. The publisher business model is bad, e-media should not require as many "middle men" as print media!

  5. Timothy Betts
    October 17, 2016 at 4:25 pm

    Used books are a bargain! If you don't need a just published item, buy it used. Hardbound are often cheaper than paperbacks, and they hold up better. A "very good" hardbound is usually equal in quality to a "like new" paperback. Textbooks can be a problem, undergraduates tend to mark them up and mistreat them. Professional books on the other hand are often gems. Books with $100+ list can sometimes be picked up for less than $5, and other than an owner's signature are perfect. For additional discounts look for previous editions. Publishers like to re-issue classsic texts to "milk" them for more revenue. And finally, sometimes - just sometimes - the e-book version will be the cheapest. Bottom line, don't just buy the advertised book - check the "all editions" category and potentially save yourself big $$.

  6. VC Nickels
    October 17, 2016 at 3:54 pm

    Amazon et. all most definitely sets pricing for eBooks. They just do it on the sly.

    Last time I checked, which was a while ago admittedly, iTunes/Apple take a 30% cut off the top of all transactions sold through any app. For comics sold through Comixology (now an Amazon service) or any other comicbook marketplace that used an iTunes App this led to a situation where some small press and indie comics ended up losing money on digital comics sold on "i" devices.

    For Amazon, their cut is similar (25-30%) but just try and put something on Amazon at a price-point they don't like. Amazon requires certain guarantees from all titles. If they don't feel your price-point will net them what they feel is adequate, they just won't carry your title.

    As for Google, I'm sure they work in a similar fashion to Amazon and iTunes.

  7. Jose Moreno
    October 17, 2016 at 3:45 pm

    I wait for the my local library 's ebook copy to read an ebook if it costs more than $6.00.
    The original idea behind purchasing an e-reader was that ebooks would be less expensive than the printed copy. I guess greed became the driving force for the publishers.

  8. Al Adams
    October 17, 2016 at 3:16 pm

    I read lots of eBooks (and a Small Number each year of Dead-Tree versions) and I am "voracious" I Do Not have to have Certain Titles Right now, and I always have books I want to read available, and add to my Kindle/nook (Android Tablet apps) Library when I see a Bargain ( ie. .99 $1.99 or Free), I want to Read at some later Date. This one area where it pays to be Tech-Savvy, and Know how to install the OverDrive Library Borrow an eBook from a Local Public/School or other Service on a Compatible Device, the Kindle Fire Can Do Most of this, I even Figured out how to "Side-Load" the Barnes & Noble Nook app on a Kindle-Fire 5th Generation 7-inch Tablet that I Paid $30.00 for Two Years ago !!! So Much for the One-Hundred Dollar { or More } eReader ...

  9. Dragon
    October 13, 2016 at 2:41 am

    No I won't pay more for digital products compared to a physical product I can take home. I read a lot both physical books,magazines and digital of course I don't us Kindle. Or Google for my reading.

  10. R Scime
    October 12, 2016 at 10:32 pm

    I not only would not buy an ebook if it was more expensive I do not buy at all. I use the library. I have an e reader and prefer to get the digital version, if available. I am not adverse to keeping a reading list, searching the library on line and placing a hold from the library's web site. No matter how much I read and I am "voracious" I do not have to have it now, and I always have books I want to read available.

    • Harry Guinness
      October 14, 2016 at 9:31 am

      Good call! If you're prepared to wait, the library can be great.

    • Michele
      October 17, 2016 at 2:31 pm

      I also do the same. I never pay for a book that I can read for free. I also keep a "wish list" and I'm willing to wait for a book. I don't have to read it right away.

  11. Lou
    October 12, 2016 at 3:06 pm

    Harry Guinness:
    From your article: "However, ebooks are sold under the agency model. The publisher sets the price and gets 70% of each sale, and the retailer gets the remaining 30%."
    Those two sentences makes the rest of your article redundant. By your own figures, publishers get about 25 percent (before expenses) of the hardcover price. The agency model means publisher gross return on sales triples, once you factor in no printing costs.
    Ebooks retail price is as much (or more) than paperbacks (the majority of books printed) because publishers want the increased profit margins.

    • Harry Guinness
      October 14, 2016 at 9:30 am

      Yep, and also because price is never based on costs when it comes to books. It's based on value. A hardcover costs an extra dollar or two to produce than a paperback but retails at 4x the price.

  12. jasray
    October 12, 2016 at 2:42 pm

    I've found prices for digital much cheaper than trade or mass market paperbacks. The article provides one instance, but I find my hobby of reading a "real" book that I can dog-ear, highlight, write margin comments, smell, touch, listen to as a page turns to be financially prohibitive.

    All the Pretty Horses

    $11.12 for a paperback versus $3.33 for Kindle. It's across the board.

    Maybe the article would provide more validity with more examples: Take the top 100 novels read in universities across the nation and average the cost--digital versus "real."

    • Harry Guinness
      October 14, 2016 at 9:29 am

      Hey Jasray, you'll find it more with newer books where there isn't a healthy used market yet and Amazon has cut prices hard. It's far from all books, but there are plenty of cases where it's true.

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