Sunday, July 3, 2011

Ebook Pricing and the ‘Cost-of-Production’ Myth

'Cost-of-Production' May or May Not Have Very Much to Do with the Price of an Item

I just read an article in a computer magazine about the pricing of eBooks. The author assumed that the pricing of eBooks should be based on the cost of production. He was upset that the price of some eBooks are not only too high but sometimes are actually priced higher than the printed book!

The article missed the point. Pricing is based on supply and demand. Cost of production may or may not have very much to do with the price of an item. The cost of producing a barrel of oil is many times less than the price oil commands. The cost of producing an eBook may only be a few cents on a print book that is already in print. Does that mean it should be sold for just a few pennies?

The price will depend on what buyers are willing to pay for the book. Ebooks are not equivalent to print books. Ebooks can be delivered instantly. They do not have a delivery charge. They take up less room. Hundreds of eBooks can be taken on a trip in the space of a single print book. The type can be made larger with an eBook and there is also a useful search feature. For some buyers eBooks provide a far great package of benefits than a print book. These buyers are willing to pay more for the eBook version! 

The price of an eBook will be a factor of supply and demand. Price impacts supply and competition impacts price. With eBooks the supply is essentially infinite. But eBooks are unique to an extent. You cannot easily substitute a Harry Potter book with one by Mark Twain. As such, eBook prices will be subject to supply and demand while the  ‘cost-of-production’ will remain a minor consideration.

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