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Why are ebooks more expensive than real books?

Have you noticed that sometimes when you go to buy a book on Amazon, the prices seem a little low? Maybe the Kindle version costs more than the paperback, or maybe more than the hardcover too.

At the time of writing, that is the case with The Mirror Thief. by Martin Seay in the US Amazon Store and The Girl on the Train by Paula Hawkins in the Amazon UK store, to name just two examples. Others are easy to find if you look at best-seller lists.

So how does an ebook end up being more expensive than an actual book? Surely a few hundred kilobytes of text should cost a lot less than an inch-thick stack of paper that you can hold, sniff, and even throw to the cat?

We decided to investigate this phenomenon. And we discovered that the price of the books is much more than you might think..

Physical books don't cost much

It seems logical that physical books cost much more than ebooks. Publishers have to print something on real paper, package it up, and ship it to a warehouse. With an eBook, publishers simply upload a text file to a server and the job is done.

For publishers, however, the physical production costs of publishing a book are only a small part of the total cost. Let's grab an imaginary book, Because I'm awesome by Harry Guinness (received a rave review in the New York Times ). The publisher sets the list price for the hardcover at a fairly standard $25. Let's take a look at how it breaks down.

First, a retailer pays the publisher about half the recommended retail price for the book. In this example, Barnes &Noble (or one of Amazon's physical bookstores, Amazon Loves Bricks and Mortar, Trump rated a loser... [Tech News Digest] Amazon Loves Bricks and Mortar, Trump rated a loser... [Tech News Digest] Amazon plans to brick- Donald Trump is a, Microsoft acquires SwiftKey, your Kindle gets a new update, and LEGO Star Wars:The Force Awakens gets an awesome trailer Read More) pay $12.50. The other $12.50 goes toward costs, profits, future discounts, etc.

I, as an author, get a royalty for every copy sold. With a typical offer, that will be about 15% of the list price, or $3.75 on a $25 book.

The publisher is also not going to handle distribution to thousands of small bookstores. They're going to turn that job over to a wholesaler, a wholesaler who also needs a cut. Let's give them a typical 10% of the list price, so about $2.50.

Printing costs are not an important factor

So where does that leave our editor? They haven't even started doing the book and their cut is already down to $6.25. From there, they have to pay for marketing (my book tour isn't cheap), proofreading (I spell color “color”), editing (you should see my early drafts), and so on. They also have to make some kind of profit.

When all is said and done, the publisher's production cost for a hardcover book is about $2.50, or 10% of list price. For a paperback, the cost is between $0.75 and $1. The other expenses, which the ebooks share, eat up most of the rest of the money. The details may change a bit depending on the format of the book and the type of agreement the author has, but, for the most part, these numbers fit the pattern above pretty well.

All of this means that the cost of producing a physical book isn't really a major factor in the price, and that's without touching the specific digital production costs and the opportunity cost of having hundreds of thousands of dollars tied up in inventory. /P>

The agency model

Another factor to consider is that eBooks are priced differently than actual books.

Physical books are sold to retailers for about half the list price. They can then sell them for whatever they want. The Mirror Thief The publisher recommends selling the hardcover for $27.95, but it's available on Amazon for $17.91. That $10 discount is coming directly out of Amazon's profit margin. Amazon is betting that the additional copies it will sell will more than make up for the lost profit margin.

Why are ebooks more expensive than real books?

However, e-books are sold under the agency model. The publisher sets the price and gets 70% of each sale, and the retailer gets the remaining 30%. Amazon actually has no control over how much each Kindle copy sells for.

This is the reason why e-books sometimes cost more than real books. The publisher has listed the hardcover of The Mirror Thief at $27.95 and the e-book at $20, which is a reasonable 30% discount. Amazon, instead of selling the hardcover at close to list price, has opted to sell it at a deep discount, so much so that it now costs less than the originally cheapest ebook.

People pay for value and convenience

When you buy a book, you are not buying the physical pages. You're really just buying the content The End of Ownership:Netflix, Spotify, and The Streaming Generation The End of Ownership:Netflix, Spotify, and The Streaming Generation Streaming media is convenient, but you're giving up something important:media ownership digital. Read more . If that wasn't the case, all the books would be tradable. But they are not. Try to give someone The Bible instead of Harry potter for Christmas if you don't believe me.

With e-books, customers have already shown a willingness to pay for reading material. Kindles start at $69.99, and the Kindle Oasis is $289.99 3 Compelling Reasons to Buy an Amazon Kindle Oasis 3 Compelling Reasons to Buy an Amazon Kindle Oasis Once you get past the Kindle Oasis price shock, you'll find that it actually offers a lot bang for your buck. Here are three reasons to consider purchasing one. Read More

Publishers know that eBook users are some of the most voracious readers of What's the best way to read books in 2016? What is the best way to read books in 2016? Reading remains a popular pastime – people are using a wider range of devices than ever before. So with that in mind, let's take a look at the best way to read books in 2016! Read more . They will pay for the books they want to read, whatever the cost. With the Kindle, in particular, they also don't have a decent alternative way to get e-books. How to Manage Your Amazon Kindle eBook Collection with Caliber How to Manage Your Amazon Kindle eBook Collection with Caliber The biggest problem with an e-reader like the Amazon Kindle is that it requires unreasonable effort to move books between different devices. . Before Kindle, I fell in love with Calibre. A bit heavy... Read More In other words, e-book buyers are a captive audience that has shown that they are willing to pay the best price.

Digital tax products of some countries

Finally, some countries, like the UK, tax digital products differently from books.

Physical books, newspapers and magazines are exempt from VAT in the UK. Digital products, however, are not. This means that retailers must pay 20% VAT on all e-books they sell, a cost they pass on to the customer, and that they do not have to pay on hardcovers or paperbacks.

Since the production costs of physical books are about 10% of their list price, this additional 20% tax is more than enough to wipe out any savings. Amazon and other major retailers are currently doing their best to avoid these additional taxes, but governments are closing the tax loopholes. So in the future, extra charges like these will make a big difference in pricing.

Does the price matter to you??

To me, an extra dollar or two doesn't really matter when I'm buying a book. I'm happy to pay for the convenience of it arriving instantly, and also not having to get dressed and go out in public. I also don't mind supporting authors I love. But you can disagree.

Would you ever buy an e-book that costs more than the hard cover? Do you accept that the prices of physical and digital media are different? Please let us know your thoughts in the comments below!