The Argument for Dirt-Cheap E-Books

Last Updated Feb 23, 2010 11:27 AM EST

Television and publishing companies are terrified of downward pressure in the prices of e-books and digital TV shows. Whether it's $1 shows on the iPad or $9.99 books on Amazon, big media are worried that consumers will come to believe that, while media production and distribution prices have dropped, the retail price of media content hasn't.

Not everyone will admit this disparity actually exists. Columnists like Gordon Haff at our sister site CNET have argued that e-books are actually no cheaper to produce than hardback books. And that's true -- if the book publishers refuse to update their operating structure to reflect the new economics of the Web. One example: nearly 10% of the overhead Haff cites is "marketing." Having watched the traditional book marketing machine at work, I know that most of this is wasted on ineffectual, immeasurable methods: newspaper ads, mass-mailings to reviewers, and so on. Media companies need to cut the fat.

Book publishers would like you to believe that if e-book prices drop, all hell will break loose. They've even circulated specious talking points to combat consumers' common sense. Earlier this month, Executive Vice President of digital publishing at Simon & Schuster Mark Gompertz made this passive threat in the New York Times.

There are people who don't always understand what goes into an author writing and an editor editing and a publishing house with hundreds of men and women working on these books. If you want something that has no quality to it, fine, but we're out to bring out things of quality, regardless of what type of book it is.
Can you spot the bluff? There is, quite frankly, no need for "hundreds of people" to work on any book, even the most encyclopedic, when the final product is digital. And the argument that quality will suffer is also nonsense; even if cut to the bone, a given house would simply produce fewer books and make bigger bets on each book. In fact, that's exactly what they've been doing: paying ever more astronomical advances to books they hope will hit it big. When those books don't, they make even bigger bets on subsequent books, hoping to earn back what they lost on prior ones. The publishing industry has a gambling problem, not a digital problem.

To some authors, it's ludicrous that a consumer -- once willing to pay $25 for a physical book -- should change his or her standards when the product is digital. Author Douglas Preston was recently maligned by his readers for this kindly nugget, also in the New York Times:

The sense of entitlement of the American consumer is absolutely astonishing... It's the Wal-Mart mentality, which in my view is very unhealthy for our country. It's this notion of not wanting to pay the real price of something.
Realizing his stupidity, he later recanted. But the notion that an e-book is in any way the "same" as a paper book is fundamentally flawed. When you buy an e-book, you are not getting the "full package" of information in its readable form, so there's no reason you should pay for it. This apples-to-oranges reality isn't just true in the arena of pricing, but also in the literal experience of reading. In a sadly confused post on BoingBoing, Cory Doctorow makes a fuss over the fact that e-books have digital rights software, or DRM, and printed books don't. He says:
... Amazon's DRM and license terms on its Kindle... are markedly unfair to readers. Amazon's ebooks are locked (by contract and by DRM) to the Kindle (this is even true of the "DRM-free" Kindle books, which still have license terms that prohibit moving the books). But today, we have a much more permanent, and graver risk: contracts and DRM have the power to lock readers and writers into legally unbreakable shackles. There's no such thing as a proprietary book.
I would argue that a printed book is no less "shackled" than a DRM-protected book. Why? Because with a real book, you're shackled to the book itself. You cannot access the information inside the book without the book in your hands. A Kindle book, by contrast, is readable on your Kindle, your iPhone, your PC, your Blackberry, and (coming soon) your Mac. If you lose a real book, you're screwed; that information is gone forever. If you lose your iPhone, it doesn't matter; the book does not live on the iPhone alone. It's more portable than a book, even if not between e-readers like the Sony Reader and Kindle (although common formats do exist).

To attack Amazon for trying to create a platform with standards is, technologically, akin to attacking a traditional publisher for shackling their printed words to a physical piece of paper. Amazon (like the publisher) must have control over formatting, presentation, reliability and accessibility if it's going to offer a decent reading experience. If this proves unworkable for consumers, they simply won't buy digital books, and Amazon will change it's policy. But how about we let Amazon save the publishing industry first, and squabble about formats later?

Of course, there's no guarantee that cheaper e-books will prompt more sales, or that Amazon's digital model can, in fact, save an industry that doesn't seem to want saving. But equivalent experiments in music (witness iTunes) and gaming have shown a promising correlation between small drops in price and massive increases in sales of digital media.

Even so, it's too early for book companies to be worrying about profit; they should be concerned with making consumers amenable to the idea of reading digital books. In the name of encouraging such a behavior-shift, they should be willing to take a temporary loss -- as frightening as that may sound to any public company. (This is also why I've argued Amazon should start a digital book exchange, in which readers can trade in paper copies for digital copies.) The reward would be a classic virtuous cycle: improved efficiencies, lower prices, and economies of scale.

Amazon understands the importance of this push for ubiquity; that's why they reportedly take a loss on every Kindle book. Clearly, consumers want to read digitally; the opportunity just needs to be frictionless and reasonably priced. How do I know people want this? I'd point to the success of online tools like Tumblr and GetGlue as early symptoms. The growing popularity of these sites (which I'd dub "Hey, I like this!" tools) shows that people are interested in collecting (or as the Tumblr folks put it, "curating") collections of digital material they like: photos, songs, movies, and bookmarks. It's like any collection, but without the requirement of physical space. People are interested in forging a digital library of everything they like, and books should be included. (Buckminster Fuller would be proud.)

There are ways for the book companies to survive this "dry period," as readers make the transition to digital, besides, as I've suggested, "cutting the fat." As Billboard explains, there are stop-gap monetization options that any media company can utilize to survive a temporary drop in sales: bundling deals, variable pricing, extras, and so on. The leap of faith those corporations will have to make is the belief that the drop will, in fact, be temporary.