Sunday’s Seattle Times ran an article about showrooming, a practice wherein the shopper goes to a local bookstore, browses the merchandise, makes a selection and then walks out of the store and purchases it online, thereby both using and abusing the bookstore. This practice is hurting bookstores and is going to help in the demise of many of them. You can view the Times article here. It’s worth reading and, if you’re guilty of showrooming, perhaps this will change your mind. I’m not. I’m more of the go-straight-to-the-online retailer kind of guy —just because it’s easier and less time-consuming and I live in a small town far from any large bookstore — which is also bad for bookstores, both the national chains and our friendly independents.
There were some interesting facts in the article which I’ve verified —- online. Thomas Jefferson: The Art of Power is selling in bookstores for $35.00. The Kindle version is $17.99. Amazon sells the hardcover for $20.71. I’m not sure how much of a hit Random House is taking by allowing Amazon to sell the hardcover for $20.71, when they’re asking $35.00 for it at independent brick-and-mortar bookstores but big publishers have been discounting bestsellers forever. Let’s look at how much of a hit they’re taking on the Kindle version.
Amazon has two different royalty rates for their Kindle books and unless my information is incorrect, they’re ruthlessly strict about it, even with New York publishers. Here’s how it works. The publisher selects the price of a Kindle book. Price a Kindle book between $2.99 and $9.99 and the publisher earns a royalty of 70%. Price a book below or above that range, and the publisher takes in 35% of the cover price. It’s obvious from this structure that a book priced at $9.99 is going to earn more money for a publisher than one priced at, say, $12.99, because the former is earning at a rate of 70% of cover price, while the latter is only earning at 35% of cover, a net profit of $6.99 vs $4.54.
In the case of Thomas Jefferson: the art of power, Random House is selling the hardcover on Amazon for $20.71, the Kindle version only slightly less at $17.99. One can assume the Kindle version is priced thus so that it doesn’t look too much more attractive than the paper version. Paper books have a pricing structure New York wants to keep inviolate. And, because they’re the only ones who can do it, big publishers have a vested interest in keeping books in paper.
A simple calculation shows the 35%, the Kindle version of The Art of Power is netting $6.29 per copy. Had Random House priced the book at $9.99 they would have earned at the 70% rate and would have pulled in $6.99 per copy. By pricing their Kindle version eight dollars higher than they might have, they’re losing 60 cents per copy sold, and they’re doing this by charging the book buyer eight dollars more than they might have. Where does that extra eight dollars go? It doesn’t go to the author or to Random House. It goes to Amazon.
Random House and other publishers have, in the past, made their money on paper products. When large pricing differentials show up between the electronic version and the paper version, the paper version begins to look like a poor value. I can only guess Random House and others are trying to preserve their domain, one being invaded by the electronic book publishers. Without the overhead, the shipping costs, the paper costs, etcetera, electronic books are always going to be cheaper and easier to produce. The hardcover publisher with their huge distribution network and hundreds of employees is beginning to look obsolete.
To make matters worse, while Random House knows it’s battling Amazon for supremacy in the book market, by pricing in this manner, they’re not only depriving the reader of a cheaper reading experience, one that might be available to more people, but they’re dumping money hand-over-fist into the Amazon coffers. Priced at $17.99, the Kindle version of The Art of Power dumps $11.70 into the Amazon purse. At $9.99, it gives Amazon a mere $3.00. They’re actually making the customer pay eight dollars more while losing $.60 a copy. They’re clearly doing this to bolster paper sales, where their margin of profit is much greater and where they, until now, had a monopoly.
Think about e-book titles priced at $12.99, and there are a lot of them. You pay $13.00 for the book. the publisher earns$4.54. If they’d scaled the asking price back to $9.99 and taken the better royalty rate from Amazon, they would have earned $6.99 a book. And you would have saved three dollars!
I’ve read a lot of speculation concerning the seemingly bizarre pricing structure for ebooks, but this is the most straightforward, and most likely to be true of any.
That said, it is still truly bizarre. The paper publishers being willing to hand that much (basically the readers) money over to Amazon, in order to protect their dominance in paper. I do not see this as a brilliant strategy, nor do I see it succeeding for long.
The pros and cons for digital vs paper is a long list, but digital conveniences won that fight with me a long time ago. I haven’t bought a paper book in many years (well, maybe some used paper books, that I wanted that were not yet in digital form).
On the contrary, I have purchased them multiple times. Paperbacks, firsts, and Kindles. When my wife and I divorced, I gave my firsts to Goodwill. When are you going to write???
Sorry, I meant your series. My mistake.
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