Ebook buyers ripped-off by publisher’s prices

by , Deputy Technology Editor Technology 15 December 2010
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Amazon sold more Kindles in 73 days of this year’s Christmas season than it did in the whole of 2009. It’s a massive success, and appears to have cornered the ebook market. There’s a problem, though – agency pricing.

Woman reading ebook

Normally retailers, be they online or high-street stores, set their own prices. Distributors and manufacturers can ‘suggest’ prices (MSRP), but retailers can ignore these if they so choose. It’s called competition, and it’s a good thing.

Until recently this was the case with ebooks, and Amazon had been selling them at prices slightly below hardback and paperback versions. As you don’t get a physical copy, just a digital file, this makes perfect sense.

Then ‘agency pricing’ came along. This is when publishers set the price. Big publishing names (such as Macmillan and Penguin) have catalogues large enough to make them powerful and they’ve demanded to set the prices. Unfortunately they’re high – too high.

Putting a price on convenience

A glance at Amazon’s bestsellers list is revealing. Some top-selling titles are set ridiculously high. For instance, ebook biographies from Stephen Fry (prices pictured below) and Michael McIntrye both sell for £12.99 – around £4 more than the paperback and hardback versions.

Prices of The Fry Chronicles

These are two extreme examples – there are still plenty of books unaffected by such practices, but look hard enough and you’ll find many ebooks, old and new, with unrealistically high prices.

So are the publishers to blame? Yes and no. Yes, the publishers are clearly using strong arm tactics here – they know Amazon wants ebooks to be successful, so have used this against them. However, Amazon isn’t totally innocent either.

It’s been the dominant player in book retailing for a long time, and by many accounts has misused this power in the past by demanding greater and greater discounts.

It looks increasingly likely that Amazon and the Kindle have corned the market in the same way that iTunes and iPod have with digital music. So it’s understandable the publishers are afraid of its power, even if their response is short-sighted.

The consumer is the loser

While Amazon, publishers and other ebooks stores (among them Waterstones and The Book Depository) squabble, it’s consumers who are losing out – doubly so given the restrictions put on ebooks. It’s conceivable the market will decide – Amazon insists affected ebooks have seen lower sales since the change – but it’s anyone’s guess how long this will take.

There are also legitimate arguments and discussions to be had about the future of publishing, and how to protect the income of authors.

One thing is for certain, though: agency pricing is not the answer.

34 comments

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Danny

Ebooks are also subject to VAT whereas hard copy books are not – I have no idea why.
This means they will increase in price even more in January.
I purcahsed a Kindle for a number of reasons and hoped I would manage (eventually) ro recoup the cost of buying it.
Doesn’t look as if that is going to happen anytime soon!
Frankly, I’m appalled at the prices of some ebooks – yes, there are freebies but most are books I read many years ago!

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richard

The reason I haven’t bought a Kindles yet is the price of both machine and files –

I have nearly 3000 books at home (avid reader) so I’ll never really get tired of reading the ones I have – and Ebay is an excellent resource for books – many either new or indistinguishable from new – some almost as cheap as their cover price of 2/6d – and includes post and packing.

I sometimes wonder why we need an electronic gadget to read a book – A real book is small – very portable and can virtually be read anywhere.

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cr0ft

Try traveling and hauling 20 books along and the book doesn’t seem like such a portable format anymore…

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Ellie Peabody

I bought a kindle because I have poor eyesight and the number of books available in large print is restricted. It is easy to increase the font size on a kindle. I used to be an avid reader but have had to access books via audio books in recent years. The kindle could be great for people with poor sight but the pricing of ebooks is disappointing.

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richard

Cr0ff – In all my long Uni days (several degrees) – and my far longer working days (over 40 years) – and my years in the Caribbean. I never had to transport 20 books at one time.- Exactly where do you need to carry 20 books?.

At uni – I bought the required books second-hand cheap – then sold them on when no longer used. The number of reference books I still have in Physics and Pure Maths is still less than 20 – not one is required to travel. At work the books required for rocket guidance systems were readily available in the Laboratory library. The same could be said for Uni Library for Lecturing purposes later.

On holiday I don’t read 20 books. The same for the Caribbean.

In all honesty – when I move homes – I don’t carry 20 books either.

So where is the need to travel and haul books?

As said previously – books both hard and paper back ( particularly second-hand) – are cheap and easy to carry – . And unless I can sell files on – just like books – I won’t be buying files for a Kindle.

I do agree that adjustable font sizes mentioned by Ellie is a boon for poor eyesight – but the price is off putting.
.

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Simon

I’ve recently bought a Kindle, and I simply won’t be buying any ebooks that have stupid prices. I wouldn’t even pay the same price as the print edition for one, let alone more than the print price. It’s partly because of the reduced type of usage you get with ebooks, and partly the fact that you know the ebook version costs basically nothing to distribute so it’s pure profit (and some VAT, as Amazon frequently reminds us).

So far I haven’t in fact paid for any books – I’ve just been reading free ones, of which there are many.

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jrep

Crucial point, that: ebooks come with significant restrictions (e.g., can’t lend a Kindle book to a friend). And they carry an inherent risk: if the sponsoring company goes out of business, you could lose some or all of your bookshelf simply because their servers go away. They *deserve* a lower price.

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Michael Mason

Just to correct JREP – there is now an Amazon application that allows you to lend your Kindle books (for up to 14 days I believe) during which time you won’t be able to read that book yourself. Just like a real lent book in fact – except you will always get it back :)

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Nigel Whitfield

VAT is one element, but the agency pricing is the main issue; sure, they don’t want Amazon to sell below cost price, but refusing to allow any discounts on eBooks, while still allowing them on hardbacks and paperbacks is just plain silly.

It’s also worth pointing out that, thanks to a 2009 EU decision, eBook prices don’t have to go up in January. They are one of the categories of products that the harmonisation rules allow (but do not insist) can be sold at a country’s lower VAT rate, which in the case of the UK is 5% (as on heating fuel, for instance).

Sadly, though, I suspect the chances of the government moving anything to the lower VAT bracket at the moment are slim.

I think the problem here is that ebooks would have to be made specifically exempt from VAT. That way, MP3s (and other digital downloads) would still be taxed, and ebooks not. Getting an exemption for one kind of product is quite difficult – it’s not exactly a political hot potato.

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Nigel Whitfield

Nope, ebooks wouldn’t have to be made specifically exempt;the EU has already agreed that books (along with other things) can be rated at the lower rate in each country, and has clarified that the somewhat obscure textw

Agreement is there, already. It’s entirely up to individual member states to decide whether or not they want to rate eBooks, audiobooks, and anything else, at their lower rate (ie 5%, not exempt, which is a whole different ballgame).

It’s Directive 2009/47/EC, amending point 6 of Annex III to Directive 2006/112/EC.

So, there’s nothing (other than cost, and political will) in the way of eBooks and/or audio books having their VAT reduced in the UK from 20% to 5%, without affecting any other products.

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Nigel Whitfield

Note sure what happened there; they have clarified that the text in the Directive does indeed cover eBooks.

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Albert Lewis

Old news. Got anything new?

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Neil

I read a guide to eBook publishing, dated 2005. It said “eBooks are typically priced at half of their paperback equivalent”. This looks sadly dated now.

It’s a sad fact that consumers and authors are being ripped off by large publishers that no longer can justify their existence and are frankly ******** themselves. How ironic that the only way these businesses can defend themselves is by blackmail and extortion.

The sooner authors take matters into their own hands and self-publish and self-advertise and put these outdated dinosaurs out of business the better.

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two pi

>The sooner authors take matters into their own hands and self-publish and self-advertise and
> put these outdated dinosaurs out of business the better.

That’s easier said than done. I’d love to do that (I’ve written a dozen tech books with major publishers.) I’m as much a fan of open information as anyone, but I’m simply not sure I can reach as big a market as the publishers can yet. When my material is even easier to copy and distribute than it is now, will I make anything at all? Right now at least I earn my advance. If I move to a self-publishing model, I won’t even have that… It’s a huge risk for an individual author to work for months writing a book, not knowing if there will be any payoff.

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Neil

I forgot to say that, as a musician I believe strongly that I should be compensated for the value you’ve received from my work. As a result I always pay for music, software, – essentially, for the value I perceive I get from a given product. I always have when possible.

eBooks priced higher than paperbacks is the first time as an adult I have been driven to theft for the following reason- it is commonsense that paperbacks should be (simplistically, ignoring overheads) priced thus (value to me + physical cost of manufacture). For an eBook I wish to pay just the price of the perceived value to me, the intellectual property value, without the premium for physical manifestation. So I would happily pay £6 for an electronic version of a paperback priced at £10.

If I go to Amazon and see this priced at £14, then I don’t even have the option of paying £6 for it, what I consider a fair value, and thus I will pirate the book.

This has nothing to do with my ability to buy at £14- it’s to do with the perceived value, what I am prepared to pay, and what my options are to pay.

I am absolutely prepared to pay a fair price but I don’t have the option to, so the publisher will get zero money from me.

What a crazy situation.

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Terry Farrell

I agree completely. It is the same for books and DVDs. This is the 21st century and I don’t want to have shelves full of unwanted CDs, DVDs, books (many of the DVDs full of extra garbage that the publisher thinks we want). The artists and authors seem to get a very poor percentage of the sale price when surely they are the most important element.

No, I just want to be able to download music, movies and books at a reasonable/fair cost. The sooner that happens, the less sympathy I will have for piracy.

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Grr

Neil – I’m sure you mean “rewarded” rather than “compensated”. It wasn’t really compensation that The Beatles received, was it? Aren’t you confusing the value of an artist’s work with that of a plumber? The difference in value is determined on the basis of “want” rather than “need”. What you say about pirating has always applied to music as to writing, probably more so. So the middlemen muddy the waters, but usually their interests are the same as their clients.

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Ernie

Would you like to let me know HOW to pirate an e-book please?

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Dave Evans

It looks to me like they are merely setting it at the price that people are willing to pay which gets the maximum amount of profit. Blame customers willing to pay this much, not the publishers.

I don’t think this has been proven. More likely they want to test consumers to see how much they will pay – and they hope it’s more. If we stay resolute, they’ll have no choice but to respond.

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Paul

The publishers are pricing this high to protect the legacy formats, completely ignoring what consumers want. Hopefully if we keep voting with our wallets they will wake up and smell the coffee … but I won’t hold my breath. The publishers *should* be looking out for their client’s best interests. Pricing ebooks at a reasonable price is looking out for their interests because it will increase sales, and as a result, profits. How they can justify charging more for a distribution process that has almost no costs is beyond me!

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iridesce

@ two pi

Cory Doctorow has proven that one can give away ebooks and still have a thriving business

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Jem

I dont underdstand why they have been so successful. Why buy a Kindle for £100, a file for £8+ when you can buy the same book for half price or less new or if its older, 2nd hand for 1p + postage on Amazon. They arent any different to a book but you have to charge them up. Its just clever marketing at present.

By the way I think books are expensive too. How much does it actually cost to print and whats the profit margin?

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Grr

What I still don’t understand is why a buyer would pay 40% more for a Kindle version than a paper version, when he can quite clearly see the difference in price. How can that be called “ripping-off.”? And why does the agency do it? Presumably the profit margin on an ebook even at a price slightly lower than the paperback is higher, so they can only think that there are plenty of Kindle owners out there who are mugs. Either that, or the publisher is banking on enough Kindle owners wanting the book now in ebook version, and prepared to pay more, as has long been the case with hardbacks against paperbacks.
Indeed, I have seen many cases where the Kindle price has come down over time, and wouldn’t be surprised if that happens in the case of Stephen Fry’s autobiography. It is only the book trade behaving as the book trade always has – strike while the irons hot.

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Em

For once I have a little sympathy with the publishers, at least in relation to Amazon. Like Apple (and many other large corporations) Amazon are inherently monopolistic and it seems that they have already used their power in squeezing publishers (and ultimately, authors). And clearly they have their sights set on being publishers through their self-publishing operation. But the fact is, publishers are more than distributors, they (usually) improve the quality of the books which they publish. So why should publishers give their business away to a competitor such as Amazon?

Consumers also have reason to be wary of Amazon. One reason I bought a Sony ereader rather than a Kindle is that I didn’t want to be locked in to buying books from Amazon. Try buying a book for Kindle from Waterstones or The Book Depository (the same is true for iPad, but no surprise there). No wonder Amazon sell Kindles cheaply when they are guaranteed book sales in the future.

As for the pricing of ebooks, I can see that it’s not as simple as it seems. Yes, there are savings on paper, print and transport but there is the extra cost of VAT. Against that however, when I buy an ebook I am buying less than when I buy a paper book, and not just because it weighs less. When I buy a paper book I can share it, give it away or sell it, but not so with an ebook. I’m getting less for my money. All I have is the right to read an electronic text.

But there is one more puzzle in all of this is. Why is Which? is not doing more to challenge the monopolism of Amazon and Apple? In the end, however good the hardware, consumers will suffer from lack of choice. Come on Which? !

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Chris

Firstly – as CroFt says – try hauling along 20 books in physical form…. WHY?
Even as an undergraduate and again as a medical scientist – this has never happened, never needed or will be – so that point is mute and dead.

Secondly – isn’t retail price fixing against the law?

Did not various publishers try and sue high street shops (including Waterstone’s) when they tried to sell books cheap?

This is a DEFINITE CASE FOR the WHICH! LEGAL TEAM.

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richard

Totally Agree. The only time I had to carry 20 books was when I bought in 20 books for 20 students for my class.

At all other times it has been 2 or 3 at one time. – plus I can sell on the books after use – not so for e-files.

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burnsid3r

Checkout your local library many have introduced e-book lending You simply download & have use of it for a set time. Other links here
http://www.sony.co.uk/hub/reader-want/6/2

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Peter

I bought a Kindle to avoid carrying heavy books especially when flying. Overall, it fulfills my needs but pricing is ridiculous. Some ebooks 20% dearer than even hardbacks, even old books, I’m a fan of the ‘golden age’ of science fiction, are close in price to paperbacks. That said, there are plenty of bargains but in no way do ebook prices reflect the manufacturing and distribution costs.

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Ernie

Maybe the current law does allow agency pricing, but what is Which doing to lobby our MPs to change that? (Or is it an EU law that we just have to put up with?)

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the duke

E books for hols whatever the price and paperbacks in between would appear to be the route for now.

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Don

I bought an ipod touch as an Ereader which has worked well but I have never bought an Ebook, just read free ones. I am not prepared to be ripped off and when one considers the costs of printing, distributing and selling a book as opposed to storing it on a server somewhere and downloading it the current pricing must be one of the biggest rippoffs going at the moment.

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Paul Rouse

The books I enjoy are far cheaper in paperback, and so I wasted my money buying a Kindle, and am back to reading paperbacks. However, what I do not understand is why the publishers are allowed to get away with this when we are all supposed to be conserving the Worlds resources.

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