I can see both sides, but in the end, I coming down in @Amazon’s corner.

I had decided not to post this when I wrote it last week, mainly because I felt I was arguing for something that wasn’t even Amazon’s end objective, but given Jeff Bezos’s statement yesterday on Amazon, I hit the nail right on the head regarding ebook pricing.  Mr. Bezos, I applaud you.  😉

Anyone who has anything at all to do with the publishing industry is well aware of the pissing contest happening between Hachette and Amazon.  Now, I say pissing contest, but that isn’t a completely accurate assessment of how I view this situation.  I can see both sides, but in the end, you’ll find me over in Amazon’s corner, and here’s why (keep reading for more):

To understand why someone chooses the pricing they do, you have to go back to Econ 101.  When you run a business, you choose your pricing based on your overhead costs.  Nobody sets out to run a business and lose their money.  You’re in it to hopefully make bank.

For someone who sells screen-printed t-shirts, overhead costs would consist of the t-shirts themselves, inks, screens, frames, and squeegies (there’s more but this is just an example and I don’t feel I need to go into rent/mortgage, electric bill, etc.).  When you are figuring out your pricing structure, you factor all of those costs in and average it out over the number of shirts you’re going to sell, and that’s how you establish your pricing.

It works the same way with books.  If you are doing print books, you take the cost of the production of the books (editing, artwork, printing, etc.), average it out over the number of books you want to make your money back with (i.e. – if your goal is to recoup all costs by the 100th book, you average the cost out over 100 books).

Obviously, this is done on a much larger scale for the Big Six (still can’t say the Big Five and you can’t make me  *digs heels into the dirt*).  For indies, you don’t have to pay for the space of having hundreds of thousands of book in stock.  That is most definitely an extra cost the Big Six has over indies, and it certainly justifies the high cost of new release print books.  All of that production cost is completely justifiable.

However, the inflated cost of eBooks is bullshit.

When a print book is being made, the cover art and the document the books are printed from are already created.  That cover art and document are then formatted into an eBook (something that can be done for the one-time cost of $40 to buy the software or an average cost of $30-$50 to pay someone to do it for you).

One file.

One electronic file.

They don’t have to manufacture millions of copies.

They “manufacture” ONE FILE.

If they sell 10 copies, it’s still one file.

If they sell a billion copies, it’s still just that one file.

To top it off, they don’t even have to pay for the server space to HOUSE that file while it is for sale.  The eBook retailer uses their own servers and pays for it out of their cut of the sales.

The overhead from the production of that one little file is quickly recouped in the physical book sales.  Therefore, there is absolutely no valid reason to price an eBook at $12-$14.

Personally, for one of my favorite authors, I will pay $7 – $8 for an eBook.  One time, and one time only, I paid $14 and that was because I was desperate to read the book on release day.  That happened exactly one time and it hurt my soul a little bit, especially saying as I still went out and purchased the physical book for my home library.  I literally paid the same exact price for the print copy as I did for the eBook copy and that’s not right.  It was my choice, but I would have felt a lot better about it if the eBook had been $3 – $5…..AS IT SHOULD BE.

As an author, I can honestly say I would feel bad charging $5 for an eBook because I know what the cost was to actually make it.

If you’ve been following this fight at all, you know there’s been a lot of speculation on the basic idea behind it.  Some claim Amazon is looking for a higher cut of the sales percentage.  As I stated in the previous bullet point, they host the file, they process the payments, it’s their customers who buy it.  As an author, I can tell you the break down for percentages is this:

If I sell an eBook for $0.99 – $2.99, Amazon makes 65% of my unit price (I keep 35%).

If I sell an eBook for $2.99 and up, Amazon only makes 30% of my unit price (I keep 70%).

From this Forbes article, which I am guessing has accurate figures, it appears the Big Six have the same type of arrangement.  Only, they’re not doing any of the work after they upload that ONE SINGLE FILE.

Some may argue that Amazon shouldn’t get a higher percentage, and that is certainly left up for debate.  I certainly don’t think they should be allowed to flip the scale, giving themselves the majority share, but without their customer base, you would probably find your sales plummet.

My personal feeling is if you don’t want to pay Amazon what Amazon wants, then stop peddling your wares on Amazon.  Simple as that.  They stop collecting their percentage of your sales, but you must know that you will lose a huge piece of the readership pie.

The bottom line is they ARE one of the world’s biggest online retailers and us Kindle freaks out there (REPRESENT!!!) are loyal to our one-click addiction.  You wont catch me dead rockin’ an iPad.  I love my Fire!  All those loyal “fans” of Amazon’s (can we call them Amazonians?  Or is that somehow not politically correct?) don’t shop for their eBooks anywhere else.  Aside from iTunes exclusives, I even purchase all of my music on Amazon MP3.  From personal experience as a consumer, I wont ever go anywhere else.  I’ve had great devices from them (I have owned 8 Kindles in total and 4 of those are Fires currently being used daily in my household) that all performed they way they were supposed to.  The few times I have had to call their customer service, they quickly resolved my issue with no questions asked.  As a consumer, they have earned my loyalty.

And lots of other people feel this way.

I don’t know what the current count is, but as of March 2012, there were 17,400,000 active Kindle Fire users, and that is JUST the Fire device, none of their other devices.  Assuming that number only increased by 5% every year, that’s still over 800,000 new users every year.  Also, assuming there are 4 devices on all active accounts (like in my house), of the 17.4 million, that’s still 4.3 million potential book sales.

As an eBook publisher, that’s a big mutha effin’ pie to walk away from.

I think this whole battle could potentially be the tiff that wakes the Big Six up.  Pay attention, people!  Ereaders aren’t hurting your sales, archaic pricing structures are!

I will gladly pay between $0 – $5 for an eBook, as evidenced by the thousands of books in my Kindle library, but, as I said toward the top of this post, I simply can’t justify the amount of money the Big Six are charging for eBooks.  I know a lot of other people who feel the same way.  They would rather forego the book, or get a copy from their local public library or used book store than go pay what equates to a king’s ransom when you’re talking about one electronic file.

I would bet my eye teeth that if the Big Six dropped their prices to what the consumers at large found to be a reasonable price for an eBook, unit sales would quickly make up for the lost dollars in the price reduction.  They’re so afraid of dropping the price for fear of missing out on the almighty buck that they’re missing the big picture.  The only reason your sales are lower than expected is plain and simply because you charge too frikkin much.  In the long run, you’d be in much better shape if you got in line with the rest of the publishing industry.  All those extra sales would make Amazon’s supposed demands for a higher percentage seem a little less scary on your balance sheets.

UPDATE:  AMAZON’S STATEMENT FROM TUESDAY 7/29