Mark your comment that "I want cheap ebooks and I don't care much about the delivery chain" caused a cold shudder to go down my spine. People ask me everyday how I can support the nook when I love bookstores so, aren't I causing them to go out of business? I give my reasons why I think not, but if most people feel the way you do B&N and Borders will go out of business and Amazon will inherit the earth.

Supply and demand right? I think eBooks are a game changer and disruptive to the industry.

From a consumer like me, I buy everything on the internet. Anything digital is definitely going to be bought over the net. I want my books at the best prices from the any online store and I don't care if it's the publishers site or B&N. If I can get it without sideloading and have B&N host it for easy access anytime I'll do that, but not for a lot of extra cash.

By embracing open standards and a common DRM tools the eBook market just opened really wide. I can get a Sony, nook, Alex, Que and buy books from anywhere that sells Adobe based ePubs. Amazon had the Kindle lockin with the Kindle format, that's not effective for them moving forward. If they offered every Kindle book as a Adobe DRM book people would flock to them. They have the best prices and the best online store. Now there are things that can change the equation. I got a nook instead of a Kindle - why? I wanted to take advantage of Overdrive, and get my books and PDF files from anywhere. I like the nook as a device. I like my local B&N and they give me deals, free in store reading, etc. So B&N changed the equation for me. As prices go up, I'm happy to buy direct from the publisher or anyone that can get me the Adobe DRM download so I can sideload. At the end of the day it's me and my books and the best price wins.

What's more "scary" is the textbook market. There is a lot of $$ there and already a big deal with the pubs and the major distributors. Think of the whole buyback market! Should be very interesting to watch.

Sorry for the shivers

Shannon, we can't tailor our purchase decisions on what's best for the business. If consumers did that we would still have the Pony Express and the horse and buggy business. Businesses need to change with the times. If ebooks are the wave of the future, Barnes and Noble, Borders et al. have to change.

They can charge more but that will lead to buying less. I, like Mark, make most of my purchases over the internet. While I like book stores I'm not going to go there solely to keep them in business. Produce a product the American public wants and you don't have to worry about price fixes or squashing competition.

You know the saying, "Build a better mousetrap and the world will beat a path to your door". We have the mousetrap, but now they don't want to sell us the cheese for it.

Shannon, I'm surprised you don't see that publishers are the real driver in eBook prices when your sourced links specifically say that. Google is offering 63% retail to the publishers for book sales, Apple has got on board offering 70%. Amazon has been the big disrupter in that they only offer 30% of the eBook sale to the publisher [nytimes ref] (which is why publishers are up in arms and Amazon has taken new stance with their latest venture [ techcrunch.com/2010/01/20/amazon-royalty-kindle-dtp/ ]). I do make an assumption, but I believe it's a logical one, that Barnes and Noble place themselves somewhere in between these programs. Based on these items, the publisher have control over their profits based on the how much money they want out of that % cut.

The second reason I say prices are publisher dependent is because of the long-term logistics of a eBookstore. You can draw similar parallels mp3 stores. In order to sustain a massive collection of books to sale, B&N will have to remove as much of itself from the process of adding books to the system and spending its resources in curating. You'll see B&N moving to a model like Amazon's Digital Text Platform. Where publishers add titles to system themselves while B&N police them. It's a much more sustainable and scalable platform, and it also gives them the power to curate the horrible mess that is the Google Books section (Why do I need to see 15 copies of Sherlock Holmes?). Publishers will have the power to set their prices, get a bigger cut from the sale, and see that as almost direct revenue as opposed to factoring manufacturing costs as well.

Amazon's new model (link above) is a step in the right direction.

- The author or publisher-supplied list price must be between $2.99 and $9.99 This is a failing in the philosophy, price range will be controlled by the next bullet.
- This list price must be at least 20 percent below the lowest price for the physical book The is great although I feel it should be closer to 25%.
- The title is made available for sale in all regions for which the author or publisher has rights A must!
- The title will be included in a set of features in the Kindle Store, such as text-to-speech I like this move, forcing publishers into these types of features by giving them more profits.
- Under this royalty option, books must be offered at or below price parity with competition, including physical book prices Again solidifies my point of eBooks should always be cheaper.

Amazon's approach is exactly what I'm asking for. eBook should always be cheaper than physical copies, somewhere around 20%-40%. $9.99 isn't the end-all-be-all of eBook pricing. It should simply be controlled by current market prices. I hope this clears up my stance.

NYT just published this article that talks about eBook pricing: www.nytimes.com/2010/03/01/business/medi...tner=rss&emc=rss

Again, this emphasizes that a structured pricing plan is good all around when it come to eBooks. Here's the way it breaks down:

Hardcover - $26 (consumer's cost)
Publisher's Paid: $13
Author Royalty: $3.90
Printing, Storage, Shipping: $3.25
Design, Typesetting, Editing: $0.80
Marketing: $1
Publisher's Profit: $4.05

eBook - $12.99 (consumer's cost)
Publisher's Paid: $9.09
Author's Royalty: $2.27-$3.25
Digitizing, Typesetting, editing: $0.50
Marketing: $0.78
Publisher's Profit: $4.56-$5.54

eBook - $9.99 (consumer's cost - Amazon model)
Publisher's Paid: $6.99
Author's Royalty: $1.75-$2.50
Digitizing, Typesetting, editing: $0.38
Marketing: $0.60
Publisher's Profit: $3.51-$4.26

All this shows that the Publishers make more money from the eBook market (although Authors are getting reduced royalties). And what the NYTimes doesn't employ is the change based on when the book goes to paperback. Where Design, typesetting, editing are once again needed for the paperback, the eBook is still ok in it's current form. Also assuming that the paperback needs little to no marketing as well, prices fall dramatically.

Mass Market Paperback - $8
Publisher's Paid: $4 (per 50% model illustrated in NYT's article)
Author's Royalty: $1.40-$2
Printing, Storage, Shipping: $.8-$1 (assumed % from NYT model, dropped 20% for reduced shipping [arbitrary])
Design, Typesetting, editing: $0.75 (assumed similar since design is complete rework for MM Paperbacks)
Marketing: $0 (no marketing done for paperbacks)
Publisher's Profit: $0.25-$1.05

eBook - $5.99 (consumer's cost for a $7.99 mass market paperback)
Publisher's Paid: $4.19 (based on NYT's 70% price point)
Author's Royalty: $1.05-$1.50 (based on NYT's 17.5%-25% numbers)
Digitizing, Typesetting, editing: $0 (done during hardcover release, no changes necessary)
Marketing: $0 (assumed none for paperbacks)
Publisher's Profit: $2.69-$3.14 (Much higher profit margin!!!)

I think most people here don't mind the higher prices up front (ie $12-$14 for brand new books) that's only expected. But sticking to the $9.99 as a blanket need is a joke. And if publishers looked at things in the big picture I can't believe they wouldn't see this too. Right now they'd be making more off the eBook than their print books. The only people that get screwed regardless are the authors, which is a shame and I'd assume that they'd renegotiate their royalty structure in eBooks became the dominate form of delivery. Which would put the profits to the publishers once again around what they are getting for print books.

BUT, again what's not thought about is the market for used books and the ability for eBooks to take product away from the used book market. I (as in me) want cheap books. Let me give you a for instance. B&N had Shutter Island for cheap (~$4) the other day. I bought it for my wife to read (and probably me later). My wife is a huge library fan, so if it wouldn't have been so cheap she'd have found it at the library and read it. But now, B&N, William Morrow (pub), and Dennis Lehane (auth) got a little scratch from me instead of the nothing they'd receive from our library visit. Or if I wanted purchase the book, a trip to Half Price Books or a Amazon Marketplace purchase second hand. I might be a little in the dark, but with the data I've seen this is a win-win-win-draw for publishers, retailers, consumers, then authors (meaning authors will need to renegotiate so it's not a loss).

Trae, nice job on the research. Very well done and makes the point perfectly.

Now personally, as a laissez faire capitalist I have no problem with either the publisher, authror, or distributor making a profit. They should try to make a profit. However, we as consumers, through our purchasing decisions, are the driving force behind their prices. Information is key.

They can raise the prices all they want, that's their right, it's their business. However, if we continue to pay these prices we have nobody to blame but ourselves when they stay high.