With an eBook, there's no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market — eBooks cannot be resold as used books – eBooks can be and should be less expensive.
More than that, they provide some figures to back their point, too — pointing out that eBooks are highly price-elastic:
This means that when the price goes up, customers buy much less. We've quantified the price elasticity of eBooks from repeated measurements across many titles. For every copy an eBook would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular eBook at $14.99, then customers would buy 174,000 copies of that same eBook at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000.
In other words, if Amazon's figures are accurate, at the lower price, the publisher's total revenues increase by 16 per cent, authors receive 16 per cent more in their paycheque, and customers pay 33 per cent less. "At $9.99, even though the customer is paying less, the total pie is bigger and there is more to share amongst the parties," they write. Wins all round, if Amazon is to be believed.
And it feels pretty strongly about the call, too, suggesting that it would happily accept 30 per cent of digital book revenue—that's the same percentage it currently receives from Hachette—if the publisher dropped digital prices to $9.99 across the board. Of course, Amazon isn't really suggesting all this for us, or writers—it's doing it to keep its own pockets lined. But it's a compelling argument for all concerned, so it'll be interesting to see what Hachette makes of the idea. [Amazon via WSJ]
Image by Noelas under Creative Commons license.