Did You Just Pay Too Much for That eBook?

By all accounts the new Parade's End mini-series is a swell costume drama about the Great War, but the 1924 novel is also the perfect illustration of how shortsighted publishing industries are shooting themselves in the foot.

The BBC/HBO co-production is airing in Britain at the moment and getting rave reviews for everything from the costumes, to Tom Stoppard's script, to stellar performances from Benedict Cumberbatch and Rebecca Hall. It's due to air in the U.S. and Canada later this fall, so I went in search of the Ford Madox Ford quartet of novels in anticipation of dresses that stepped out of a George Barbier illustration.

That was when I discovered the ridiculous pricing scheme that makes me wonder if the people running big publishing corporations are acquainted with such basic economic concepts as supply and demand?

Parade's End is one of about a million copyright-free texts available online, and that wealth of free content has led to a host of eBook publishing companies that package classic books for under $3. Since the content is free, they're charging you for the convenience of easy access to a book tailored for your eReader.

So as a consumer on the hunt for Parade's End I had the option of getting a free PDF copy via Project Gutenberg, a neatly packaged iBook via Vigo Classics, or the Random House Digital version of the novel, connected to the paperback tie-in with the mini-series.

PDFs don't read smoothly on my iPod, so I passed on the freebie. Vigo packages the book for iGizmos for $2.99 and was easy to find in iTunes. Meanwhile, Random House Digital had two prices in iTunes -- $8.99 or $13.99 -- for exactly the same book Vigo sells, albeit with nicer covers. Over at Amazon.com it cost $15.92 to read the Random House version on a Kindle.

Guess which one I chose? That is after I got over the shock of a company that thought it could get away with charging five times as much as its competitor for an identical product.

Big old overheads

While publishers of everything from pop music to newspapers like to claim their costs are in funding the creative work, the pricing on something like Parade's End puts an end to that myth. Remove a living writer (with a desperate need for an editor) whose writing will claim as little as five per cent of the cover price, and it's clear consumers are really paying for a costly distribution system that many of us no longer need.

Random House Digital's eBook pricing is based on the costs of producing and distributing paper books, which requires a huge investment. You need expensive presses, paper, and a distribution network including warehouses, trucks, and retailers who pay for storefronts. Add to that staff who hand-sell the books, one copy at a time.

How does this compare with the time it takes one person to layout out a digital file of a free book and deliver it to an electronic bookstore?

Remove the high costs of delivering paper books and Amazon.com's early maximum pricing of $9.99 for eBooks starts to look reasonable. With new books, you're only paying the writer, the editor, and the book designer, plus some administrators -- all of whom stand to make more profit in digital books. That price also supports the 30 per cent that the digital retailer claims for a spot in its store. Although many publishers, like Harlequin, also sell books directly on their own sites, lowering cover prices to around $5.

Apparently a New York court agrees with me that publishers aren't playing fair with consumers when it comes to eBooks. They just signed off on a settlement in a price-fixing suit brought by the Department of Justice against Apple and some major book publishers. The DOJ accused them of colluding to force eBook prices closer to those of their paper siblings.

The court agreed they ran afoul of the Sherman (antitrust) Act, and the judge declined to hear arguments about the impact eBooks would have on the profitability of publishers. The decision notes that "The purpose of the Sherman Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market."

Why fear the eBook?

Well, amen to that. But of all the publishing businesses I would have expected the book trade to manage digital disruption best. Booksellers have always known that the content and the distribution system are two separate things that are valued differently. A paperback book costs roughly half its hardback twin for the same content. In secondhand books, a Readers Digest reprint of The Great Gatsby has no value, while a hardback in good condition may earn more than its cover price -- mystifying, since the content is identical and the reading experience similar.

And when it comes to rare and antiquarian books, the artifact itself is the prize. Prices for a first edition, a rare misprint, or a signed copy -- even just a pristine dust jacket -- remind us that the copy is almost irrelevant in book pricing. In the case of F. Scott Fitzgerald's 1925 novel The Great Gatsby, the copyright-free eBook is widely available free; a first edition of the hardcopy book in good condition will bring $7,000 to $10,000 at auction; and that rare dust jacket earned a seller $180,000 in 2009.

In theory, eBooks ought to reinvigorate the literature business much the way radio gave the music business a boost. Although not until musicians got over the idea that broadcasting their concerts was somehow stealing from them. Book publishers have a wonderful opportunity to shake off the shackles of high distribution costs and concentrate on delivering a wider, more interesting range of books. While nothing beats a blockbuster in any format, they could also profit from repackaging classics at a reasonable price (as Vigo does) and producing a wealth of long-tail books from their own back catalogues.

What are they doing, instead? Annoying customers with inflated, unjustifiable prices all the while whinging that eBooks will kill literature. (Nah, judging by history the digital revolution will only kill inept publishers.)

Not that Random House is alone in making me wonder what the big players in the book biz are thinking. Harlequin gave them some help in the image-tarnishing department this summer when its writers sued over the company's handling of eBook sales.

In July romance writers launched a class action suit against the Canadian-based multinational for allegedly defrauding them of eBook payments. According to the claim, the publisher licensed the rights to its own subsidiary in Switzerland at a reduced rate. Since writers are paid a percentage of the sales price, that cut their royalties by about half. Meanwhile the company resold the books at the usual prices and pocketed the larger profit.

Genius! Well, except for angering writers who could just as profitably publish themselves and irritate the devout fanbase that would follow them.

Given that indie romance authors are the ones making headlines for their million-dollar eBook sales, I'd be surprised if the disgruntled writers of imprints like Harlequin Presents and Harlequin Spice aren't colluding right this minute to launch their own romance line: Harlequin Pissed Us Off.

Now, tell me again how eBook pricing reflects the real costs associated with the talent producing them?

The Great War all over again

The irony is that I probably wouldn't have noticed any of these signs of the old order imploding if I hadn't been hunting for a book that explores the old order imploding. Parade's End opens in London in 1912 and spans the First World War, which shook-up the economy and the power structure while ushering in all sorts of newfangled things like cars, radio, and movie palaces.

I'm assuming our collective fascination with 1912 to 29 -- consider the -mania and The Great Gatsby revival -- is more than just an enthusiasm for fabulous dresses. The social, economic, and technological disruption that marked that era feels familiar in 2012, although we seem to have forgotten much of what they learned.

The oracles of the day predicted film would destroy theatre and it did replace cheap-and-cheesy vaudeville with a better commercial entertainment product. But it had no impact on theatre, which thrived throughout the 20th century. These days film is used to extend the reach of good productions -- London's National Theatre does limited runs in local film houses. Other sibyls foresaw that radio and records would destroy the market for musicians. Of course we know it had exactly the opposite impact. Broadcasting created new audiences, and records whet the demand for concerts.

And so it is with eBooks. About one-third of the books sold are now electronic, and I've yet to meet anyone with an eReader who hasn't said they read more now that books are easier to get and cheaper. Ironically, they spend more money.

All of which makes me think that the MBAs running publishing companies might want to take a break from plotting and scheming to con the marketplace and try reading some of the books on their roster. They're full of useful insights.

© Shannon Rupp. For permission to reprint this article please contact the author: shannon(at)shannonrupp.com.