What Amazon’s e-book numbers are and aren’t telling you

How much should an e-book cost? Publishers set the retail price for a current e-book, like James Patterson’s “Invisible,” at $14.99. That’s a lot less than a hardcover copy of the book ($25.50), but it’s still more than Amazon thinks a reader should be paying for an e-book; Amazon says the price tag should be $9.99.

“A key objective is lower e-book prices,” Amazon wrote in a blog post last week. The company made its case for $9.99 e-books, explaining that “For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99.”

Certainly publishers would like to sell 1.74 times as many books as they do now. And Amazon provides an example that sounds very tempting: “if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000.”

What author doesn’t want to make $1.7 million? But before running to cash that hypothetical check, let’s look at what Amazon, which declined to respond to our questions about the statement, is and isn’t saying.

“[i]f customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99.”

Hmm. Doesn’t this depend on the book? There might have been an extra 74,000 readers waiting for Liane Moriarty’s “Big Little Lies” to drop to $9.99, but she’s a hot new bestseller. Would “The Informed Air,” a new posthumous essay collection by the Scottish writer Muriel Spark be able to attract the same number of buyers? Probably not.

Amazon’s statement is poorly phrased. It’s making a generalization about e-book prices, not claims about how a specific work of art will sell. Unless, in fact, it tested a specific work of art -- information it has not revealed.

As Farhad Manjoo writes in the New York Times, “while it may be true that $9.99 is better than $14.99 in general, certain books might make the most money at $10.99, $11.99, $12.99 — or even $2.99.”

Readers respond to different kinds of books differently. Some -- say, the works of philosopher Martin Heidegger -- may not have as wide a sales appeal as others. The relationship between a book’s potential audience and its pricing isn’t clear.

The assumption underlying Amazon’s statement is that 1.74 more books will be sold for any and all books. In the real world, it would be delightful if this could work, but it implies that if only publishers dropped the price of e-books by $5, millions more books would be sold. In fact, the book-buying pool probably isn’t that expandable. At some point, readers are going to reach the end of their book budgets.

Amazon adds, “Any author who’s trying to get on one of the national bestseller lists should insist to their publisher that their e-book be priced at $9.99 or lower.”

This might have worked yesterday, but there’s no guarantee it’ll work tomorrow. Making bestseller lists is relative -- to chart, a book’s sales are compared to other book sales that week. When more publishers drop prices, they lose the competitive advantage of the $9.99 price tag.

If every e-book released Tuesday is priced at $9.99, readers have no incentive to buy the $9.99 e-book. Bigger sales are not guaranteed. If Amazon’s logic holds, seeking the competitive advantage of bargain e-books, publishers should lower prices still more.

Amazon argues, “With an e-book, 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 -- e-books cannot be resold as used books. E-books can be and should be less expensive.”

It’s true that these material costs are removed from the equation of e-book costs. But most publishers are still publishing print books, so those costs remain part of their bottom line. Publishing e-books adds costs: making design adjustments, encoding in multiple formats, creating metadata methodology, etc. Making an e-book is not cost-free.

The main cost behind a book is not its printing or its shipping -- it’s the creation of the work, from inception to publication. Most important, this means, as Harlan Ellison famously (and profanely) said, pay the writer. In addition to the author, there is the author’s agent, as most authors who make it to publishers have one; there is the editor who works on the book, an assistant editor, a proofreader, a copy editor, a fact-checker; a cover designer; a layout person; a marketing department; a dedicated publicist. Whether a book is printed or digital, all those people are still involved in bringing the book to market.

Additionally, the cost of production isn’t the same thing as the retail price. As author John Scalzi writes, “many people decide to opine that the cost of eBooks should reflect the cost of production in some way... if you’ve ever paid more than twenty cents for a soda at a fast food restaurant, or have ever bought bottled water at a store, then I feel perfectly justified in considering your cost of production position vis a vis publishing as entirely hypocritical. Please stop making the cost of production argument for books and apparently nothing else in your daily consumer life.”

Amazon writes, “Keep in mind that books don’t just compete against books. Books compete against mobile games, television, movies, Facebook, blogs, free news sites and more. If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive.”

While most readers would agree that many kinds of entertainments and online engagements compete for their attention, it is not logical to conclude that lower e-book prices will make them more compelling. Amazon’s list of books’ competitors includes several distractions -- “Facebook, blogs, free news sites” -- which are absolutely free. Book buyers buy books because they want to read books, not play Candy Crush.

Like passing notes in class; I’m @paperhaus on Twitter