Digital Book Economics

kindle_2_-_frontI got a Kindle recently and have so far enjoyed it. In almost every respect it beats the experience of reading the dead tree version. It is light and portable. I read non-fiction more than fiction and I hate lugging around the heavy hard cover. Turning pages (no paper cuts!) and bookmarking are both better. It seems to be perfectly designed to be read while working out on an elliptical. Font size control is a boon for those of us over 40. If you want a new book, buying it and downloading it wirelessly is dangerously simple and quick. I foresee bigger contributions to the Amazon.com empire from the Pradhan family.

There are a few disadvantages of course. The biggest one is the price. At $360 or so you don’t want to leave it on the airplane! You can’t loan a book to someone else. Books with illustrations won’t offer the same experience for a while (no DC comics on the Kindle so far). You are forever tied to amazon.com as your supplier of books. Much like the lock-in that music downloads from iTunes created for the iPod until Apple also moved to mp3 downloads. Funnily, the DRM that the publishers insist on creates a lock-in that benefits the device manufacturer the most.

Kindle, and hopefully other e-books, will change the economics of the book publishing industry. I can’t say if it will be for better or for worse for the publishers (probably worse) or authors (probably better). But the readers will certainly have more choice. And this can be very, very good for Amazon’s shareholders.

The marginal cost of a book is quite a bit more than a for a music album or a DVD. I would put at about 20 to 30 %. It would be somewhat less for hard covers and technical books with specialized readership as compared to paperback and popular fiction.

With e-books that marginal cost goes down to zero. This allows the price of the book to be lower, even while (I suppose) Amazon makes a higher % margin though perhaps a similar dollar amount per book. A lower price can seriously expand the market.

Then there is the convenience. To be able to instantly gratify the need for a new book can only mean more sales of new books.

The marginal cost being zero means a few other things as well. Classics whose copyright has expired are available for next to nothing. The entire collection of Dickens is available for $1, for instance. A Raja Sharma has a whole collection of summaries of classics for around a buck each. I’m sure there are thousands of high school and college English lit students who will plump for the summary.

The reason why the summaries are interesting is much more than the genre of summaries itself, which existed before the e-book. It is interesting because it totally bypasses the publisher. The author gets a 33% cut of revenues from Amazon, regardless of the price. Amazon keeps the rest. Might this become more of a trend in the future? It just might. New authors can avoid the publisher entirely with a combination of Kindle and Print on Demand. You’d have to do your own marketing, but then if you are a new author, it’s not as if the publisher is spending millions on marketing your book anyway.

Question – are summaries of books that are still copyright protected, an infringement of the copyright? Business book summaries are regularly advertised in the Economist and given that the summary almost always will eliminate the need to read the book it seems reasonable to assume that there is some contractual arrangement between the summarizer and the publisher of the actual book. On the other hand can ‘remixing’ a book be deemed an infringement?

In an earlier post Paperbacks in India I wrote about how publishers were releasing cheaper paperback versions of books in India simultaneously with hard cover releases in the US. With an e-book release that won’t be possible, which means that publishers will lose the ability to geographically price segment the market. Which hopefully means that the book will cost less everywhere. Although it’ll be a long time before e-books become a factor in India. The readers just cost too much today. But get some real competition going and the prices should come down quickly. Maybe from Sony, or maybe these guys.

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5 Responses to Digital Book Economics

  1. Pingback: 6 AM Pacific And Digital Book Economics | Foolscap Daily

  2. Krishna says:

    Basab,

    Barring the economics and this somewhat post Gutenbergian revolution isn't really up. Graphic illustrations and tables suck on the gray screen. Page numbers are gone, so indexes often don’t work. Cook books / Recipes will wreak havoc when you try a new dish to see if the outcome tallies with the order. To quote from a book you’ve bought, you have to quote by location page range ( not just the part of the quote you remember) !

    Then the text to speech feature. It reads the word *miss* as *Mississipi* even if the character is longing for his wife.

    Bring it out in the sun, the letters fade. Keep pressing Alt + G. You can’t gift a kindle or lend it or or sell it or even print it. They are closed clumps of digital code that only one purchaser can own. A copy of a Kindle book dies with its possessor.

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  4. Sachin says:

    Have you noticed that when you order books on a kindle, the contract with amazon is to "lease" those books and not really buy them? what do you think about that?

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    • I had not noticed this but it does make sense. When you buy something it comes largely unencumbered by Digital Rights Management. You can do pretty much anything with a book that you have bought – lend, resell – but you can do almost nothing with a Kindle book except, well, read it!

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