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When people purchase ebooks on Amazon for the first time, a question often crops up: why are Kindle books more expensive than paperbacks? Surely a few hundred kilobytes of text should cost less than a printed copy.
We looked into this issue and discovered there’s a lot more to the pricing of books than you’d think. Read on to find out why ebooks can cost more than real books.
Why Are Kindle Books More Expensive?
When you compare the effort needed to make both a physical book and an ebook, the price difference can be insulting. Why are Kindle books more expensive than physical ones? A physical book requires printing, constructing, and shipping, whereas an ebook is uploaded to the servers and sold directly.
While some disgruntled readers are quick to call Amazon greedy over the pricing of Kindle books, there are legitimate reasons why ebooks are more expensive.
1. Physical Books Aren’t Expensive to Produce
It’s easy to imagine physical novels taking a lot of money to make, but that’s far from the truth. In reality, a physical book takes around $1-2 to produce. If this is true, however, then why are they priced a lot more than that?
Everything makes sense when you imagine all of the people who helped make the book who need paying. For one, the author has to get their agreed royalty cut from every sale. From there, the editors, proofreaders, cover artists, and marketers all need to be paid. These obligations don’t leave the publisher with a lot of money for themselves.
Of course, all of the above are involved in making the ebook, too. That means ebooks can’t be priced very low; if they were, the publisher wouldn’t have the money to pay for the people they employ. This problem explains why ebooks are sold at around the same price point as physical ones; but why do they sometimes cost even more?
2. The Agency Model Keeps Ebook Prices High
Another factor to consider is that ebooks use a different pricing model than physical books.
Physical books get sold to retailers at around half the list price. The retailer can then sell them for whatever they like. When Amazon sells books for lower than the recommended retail price, that discount is coming straight out of Amazon’s profit margin. Amazon is gambling that the low price will equal more sales, which will make up the lost profit margin.
However, ebooks utilize the agency model when sold. Instead of letting the retailer choose the price, the publisher states what they’re selling for. The publisher gets 70 percent of each transaction, and the retailer gets the remaining 30 percent.
Unlike with physical books, Amazon has no control over the price of ebooks. If someone has performed the steps required to publish an ebook via Kindle Direct Publishing, they set the price as they please, with no exceptions.
This constraint is the reason ebooks sometimes cost more than paperbacks. For example, a publisher can list the price of their physical book at $27.95 and the ebook at $20, which is a reasonable 30 percent markdown.
Instead of selling the hardcover for the list price, Amazon choose to sell it at under $20. They can’t touch the ebook price, so that stays the same. As such, the paperback will cost less than the ebook.
3. People Are Willing to Pay for Value and Convenience
On top of this, ebooks are very convenient for the readers buying them. Buying a physical book involves going to a bookstore and hoping they have it in stock, or ordering it online and waiting for it to arrive. For ebooks, you go to a website, click the “Buy” button, and download the book to your PC or reader.
This convenience often means that invested readers don’t care about the price. Once they’ve finished one book, they can instantly load the store page, buy the next book, and continue reading. For some, that level of convenience is well worth the asking price of an ebook, regardless of how it compares to the paperback.
4. Ebooks Don’t Suffer Wear-and-Tear Like Physical Books
If you’re an avid reader, you may know the pain of losing or damaging your books. Ebooks, however, don’t share this problem. As long as you back your data up correctly, ebooks can technically last forever.
As such, people do sometimes re-buy physical books from the same store due to their copy becoming damaged, lost, lent out, or sold second-hand. Ebooks, however, tend to be a single purchase. As such, they ask for a higher price to cover the fact that re-buying isn’t as prevalent as with physical books.
5. Pricing Keeps Paperback Books From Becoming Redundant
A lot of big publishers have ties within the paperback world—it’s how they became prominent in the first place. With the popularity of ebooks, the focus moved away from bookstores and towards online stores.
As such, big publishers aren’t fond of making their ebooks cheaper than paperbacks. If ebooks become the more affordable option, people will ditch the physical book in favor of saving some money, leaving paperbacks in the dust.
By keeping the price of ebooks high, publishers keep paperbacks as a valid option for readers. That way, the world of physical books isn’t under threat of becoming extinct due to ebooks.
6. Some Countries Tax Digital Products—Like Ebooks
Finally, as explored in this article on The Telegraph, 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 lack of exemption means that retailers are supposed to pay 20 percent VAT on any ebooks they sell—a cost they invariably pass along to the customer—and which they don’t have to spend on hardbacks or paperbacks.
Given that the production costs of physical books are about 10 percent of their list price, this extra 20 percent tax is more than enough to wipe out any savings. Amazon and other major retailers currently do their best to get around these additional taxes, but governments are closing the tax loopholes. Which means that in the future, additional charges like these will make a big difference to prices.
Breaking Down the Price of Ebooks
Given how ebooks are simply data, it’s easy to assume they “should” be sold cheaper than physical books. However, there’s a lot more to ebook pricing than the methods used to distribute them. These elements of publishing explain why ebook prices equal—and sometimes outprice—physical books.
Are you tired of paying a lot of money for ebooks? Then try visiting these free ebook download sites instead. And if you’re looking for the best books to read this year, here’s a big list that covers popular genres.
As a bonus, check out this free ebook for how to become a better negotiator!