Recently, ShortCovers announced that they’d be charging $9.99 US for eBooks from major US publishers on New York Times bestsellers. Great news, I guess, though Canadians continue to get the standard $2 shaft from publishers on digital content, too. Hurray for consistency!
ShortCovers front man, Michael Tamblyn, was good enough to respond to a couple of comments that I posted to the pricing announcement on the ShortCovers Blog. I have posted our exchange below and I think that it’s pretty self-explanatory. If you’d like to read the entire press release and the comments together please check it out here.
Here’s the exchange…
Great news! $9.99 for digital content is excellent.
Can you explain why digital content costs $2.00 more in Canada than in the USA? Is there some sort of warehousing surcharge or across the border electronic tax that justifies the difference in price?
Or is it just an unbreakable industry habit to charge Canadians more for content regardless of how it’s delivered?
2 Michael Tamblyn 08.06.09 at 1:46 pm
It’s far less nefarious than that. There are a couple of reasons:
* Canadian rights-holders set the prices for ebooks in Canada. As with print books, the Canada/US exchange rate makes the ebook list price a bit higher and we discount from there*. So yes, the Canadian Shortcovers ebook version of Bourne Deception is _only_ 61% off the hardcover price vs. 64% off the U.S. price, but…
* Did you notice that we include the GST as a part of the ebook price?! So there is 5% federal goodness rolled into the Canadian price, paying for healthcare, Canada Council grants, and Mountie uniforms. That’s another part of the $2. Not bad, eh?
*For now, publishers don’t re-price ebooks daily to reflect currency fluctuations (but wouldn’t it be interesting if they did!?)
3 Marc 08.06.09 at 2:12 pm
I like the new pricing, I always thought about $10 is the sweet spot for me. $11.99 CAD is close enough to start buying. Thanks.
Thanks for the reply. I appreciate it. I did take notice of the GST roll-in and as someone who has worked in the book trade for 20 years I can understand the price difference.
I think that I have refined my question – or maybe it’s more of a statement or opinion, bear with me. I’m only writing this because I care about books, the industry and the people in it.
It’s ingrained in the subconscious of Canadian book buyers that they must pay a premium for content purchased by the loonie. For instance, we all know what happens to publishers when the Canadian dollar is on par with the US dollar: not even tens of thousands of books sold in hard cover and paper back about a certain boy wizard can keep the doors open on a publishing enterprise when that happens. And we certainly wouldn’t want that same plight to ravage the rest of the industry.
So… we can agree that digital files are essentially infinite in terms of their ability to be copied and replicated and have nominal warehousing (server) costs, print and shipping costs associated with them, right? And that Amazon has set the currently agreed upon price at $9.99 USD and that publishers are now grudgingly agreeing that it works for them so that whole argument is settled (for now). And it’s a sign of increasing health for the publishing industry that Shortcovers is providing some much needed competition in the digital marketplace.
Does that mean that Shortcovers pays the publisher per purchase on an electronic file? So Shortcovers has been granted the privilege of selling this electronic file via the website for X price and to make that work in $ CDN it needs to be $2 more per electronic file? I guess that’s obvious now.
I made the mistake of thinking that an essentially infinitely abundant digital file would provide retailers and publishers an opportunity to pass deeper savings along to customers in the electronic marketplace. And I understand the need for publishers to include some kind of marketing/editorial/author payment into their digital pricing – I’m not saying that they should be free.
I guess the pricing structure just seems a little arcane to me and I’m not sure that I see the value even if I do understand the reasons.
I agree with your last statement, too, about publishers allowing their pricing to reflect currency fluctuations. That should happen but what I am more interested in watching is the pricing fluctuations as more competition enters the digital marketplace and as publishers begin to see the actual cost of digital content and how it can affect their P&L positively.
5 Michael Tamblyn 08.09.09 at 10:05 pm
A couple of things worth discussing in your post.
* I wouldn’t say that publishers are completely sanguine about $9.99 as the purchase price. Amazon, Shortcovers, and B&N are all still paying publishers a margin on their *list* price, and those list prices tend to be the same as print prices, so publishers have seen negligible erosion in revenue so far from ebook sales under those terms. Publishers are probably concerned that $9.99 could become embedded in the minds of consumers as “the fair price for a book”, leading to push-back on their paper-copy sales. That said, $9.99 is the competitive price-point that has become accepted by ebook consumers in the U.S. and we’re right there with them, while setting out $11.99 as a reasonable translation of that price for the Canadian market, given exchange rates, GST, etc discussed above.
* ebooks as “infinite” resource. I’ll take this before a publisher leans in. The print-paper-and-ship cost of a book is a relatively small piece of the total expense structure that goes into a book (I’ve heard 5-8%, plus another 10% in supply chain costs, but your mileage may vary – supply chain costs are higher in Canada, to be sure. Publishers, feel free to chime in.) But the bulk of the cost associated with producing the book, be it p- or e-, remain: author royalties, editorial, production, sales, marketing, retailer margin, etc. So there is a theoretical 15-18% of available cost reduction, but not really. It isn’t like a publisher can get rid of their warehouse just because they sell an ebook — all of those costs remain and have to be covered by both p- and e- sales. All that to say, the arrival of ebooks doesn’t radically change the cost structure for publishers*. For now.
* Side note: the publishers who are held up as transitioning so well to the digital space — Harlequin, TOR, a few others — are not surprisingly the ones who were already selling most of their books at the $10 price point. Everything about them — author advances and royalties, editorial and production processes, marketing and sales tactics — are geared to selling a book at <$10. But will an advance/royalty/marketing/sales structure that works for romance work for John Irving or Michael Ondaatje or Michael Chabon or Patricia Cornwell or Alexander McCall Smith? This is where publisher concerns about business models vs. price points start to coalesce.
I realize that we’re still very early in understanding the digital book landscape and that there are probably more questions out there – for publishers, authors, readers, everyone – than answers at this point. But it’s important to voice these questions.
It’s great to know that you’re willing to take the time to answer the questions as best you can so thank you very much.
There’s still so much work to be done in terms of finding the perfect price point for digital content… I’m just not sure that $10 is even remotely the right number, but patience and experimentation will hopefully lead the industry in the right direction.
Of course, it remains to be seen whether digital book content is actually subject to the same kind of commodification as physical books or whether there are better, more strategic and ultimately user-friendly ways to execute digital content in a way that gratifies the consumer and supports of the paper book. i think that there’s so much opportunity there.
Time will tell.
Thanks again for helping me wrap my brain around some of the rationale for current eBook pricing.
Sean Cranbury 08.11.09 at 3:39 am
Further to the point. I was just updating my blog when I came across this quote from Chris Anderson in conversation with Spiegel Online about print journalism and traditional media – and by extension book publishing.
I think that it adds something to this conversation so I’ll paste it here:
Anderson: I think we will discover that whatever the business model of the 20th century was, it will be different in the 21st. Maybe we realize that selling ads is not the business we’re in. Maybe we’re into selling online content to audiences, or in creating communities or into selling events — in a similar way to which parts of the music industry is making money from concerts. Maybe companies that were built around the old business model will go away and other companies will come up, in much the same way as old record industry labels may disappear but the Apples of the world, with their iPods and iPhones, will continue to do well.
SPIEGEL: One last thing, why isn’t your book free?
Anderson: You only pay for the hardcover version. The marginal cost for the digital file is zero, so I’ll give the digital text and the audio files away for free. However, if you want to have the abridged audio book in a 3-hour-version, then you’ll have to pay.
SPIEGEL: Because time is money?
The entire interview can be read here: http://www.spiegel.de/international/zeitgeist/0,1518,638172,00.html