14 DAY TRIAL // Amazon keeps saying that a fair price for e-books is $9.99 (€7.46). While this seems to be a number picked by Amazon out of nowhere, in a blog post published recently, the company brings math to the table.
The company considers that one of its objectives is to lower e-book prices. Those that are being released at $14.99 (€11.2) or even $19.99 (€14.87) are unjustifiably expensive because there are no additional costs for things like printing, over-printing, forecast, return, lost sales, warehousing costs, transportation costs or even a secondary market. “E-books can be and should be less expensive,” writes the Amazon Books team.
Amazon points out that e-books are highly price-elastic, which means that as the price goes up, customers buy much less.
“We've quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99 (€11.2), it would sell 1.74 copies if priced at $9.99 (€7.46). So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99 (€11.2), then customers would buy 174,000 copies of that same e-book at $9.99 (€7.46). Total revenue at $14.99 (€11.2) would be $1,499,000 (€1.12 million). Total revenue at $9.99 (€7.46) is $1,738,000,” Amazon presents its math logic.
While the total revenue increases by 16 percent, the customers are paying 33 percent less. More importantly, while the author’s royalty check increases by 16 percent, his or her books are being read by an audience that is 74 percent larger.
From the $9.99 price, Amazon believes that 35 percent should go to the author, 35 percent to the publisher, and 30 percent to Amazon.
“Is 30% reasonable? Yes. In fact, the 30% share of total revenue is what Hachette forced us to take in 2010 when they illegally colluded with their competitors to raise e-book prices. We had no problem with the 30% -- we did have a big problem with the price increases,” Amazon writes, reminding everyone of the ongoing war against book publisher Hachette.
While the company admits that some books may be justifiably marketed for more than the price mentioned above, the number is small.
As a last dig to Hachette, the ecommerce giant points out that the fees corresponding to the 35 percent for the author and the 35 percent for the publishing company go directly to the latter, and from there on, Amazon is no longer responsible for how much money the authors receive.
In Hachette’s case, Amazon says that they believe too little is shared with the author, adding that “ultimately that is not our call.”