Don’t get too used to paying next to nothing (well…) for your Kindle books, friends. A clever analysis by a Berstein duo suggests that Amazon currently only makes a 61-cent profit for each $9.99 Kindle book it sells. Meanwhile, a $24.95 hardcover book nets Amazon a cool $4.25 in profit. So it stands to reason that, if Amazon wants to replace that lost profit, it’ll have to raise the price of Kindle downloads.
Thankfully, though, not by much. If Amazon were to raise the price of Kindle downloads to $12.50, profits would jump quite a bit: from 6 percent to 20 percent per book.
Of course, on the other hand, since it costs Amazon a heck of a lot less to send you a Kindle book via Whispernet than it does to UPS all those books to your door. So while Amazon may not make as much money for each Kindle book sold, it’s not costing them as much to send it out to you.
And I’ll consider buying a Kindle once gets closer to $200. Till then, I’ll continue to suffer with regular ol’ books.
So what about the books for $1.99 and the odd freebee?
I don’t think they’ll raise prices. I think that Amazon knows basic economics and that as the price of luxury goods fall, the profit increases.
I love the kindle books and the classics you can often find so cheap, its worth it even if it does get a little more pricey for the new ones, but they come down quickly in some catagories.
This Kindle stuff is much more than just the short term economics – they have obstacles like getting publishers to allow the content to be distributed over this network in a digital form and out of their control. They also have to get customers to use the Kindle device. They also have to make sure that Sprint continues to work with them for the wireless connections, among other things.
My point is that I think this is just the first step – getting publishers to agree to use the service. Once they do that, they can flex some muscles on the publishers and get them to lower pricing, giving Amazon their profit margins.
If I pay $24.95 for a hardcover, or 16.95 for a paperback, or between $12 and $6 for a used copy, I own the rights to read it for as long as I own the book (in perpetuity); it’s called physical possession DRM.
E-book downloaders are screwing the pooch and getting screwed by the big dogs.
9.99 sounds like a magic number. That is whey they are sticking to it.
That has to be one of the stupidest bits of analysis I’ve seen in quite some time. It’s the kind of thing that is done more for headlines and ego than for any actual use in forecasting or strategy.
The report completely ignores the fact that the price of selling, storing, and shipping physical books continues to go up, and while the costs per unit may decrease with scales of efficiency, the overall costs still go up. Costs for selling, storing and shipping electronic books, on the other hand, continue to go down both on a per-unit and overall level. So while the margin may be less on an electronic book than it is on a hardcover, they are able to sell many more copies of an electronic book without increasing costs at all.
The fact that they can sell more without increasing costs leads to a second, more important conclusion; selling at a lower price means more volume which can lead to more revenue. If a book sells 10 times as many copies in paperback as it does in hard cover, there can be a 10 fold increase in the profit. And that’s the long tail of it.
Are prices going to go up? Probably at some point. That seems obvious. But this hype about Amazon jacking the prices soon seems to be more about promoting “the Bernstein duo” and Peter Kafka than anything else.
Absolutely agree with you. Also note that the $9.99 is only a few select books. Paperbacks are generally about 10% cheaper than the physical version, so throwing in the real-costs argument, they’re making a lot on those.
The $9.99 is only the teaser taste to get people to read ebooks.
$12.50? I almost guarantee digital book sales will instantly go down on Amazon if they make that change (enough to negate any extra profit they could realize).
Aren’t they already sidelined by the fact that they don’t uise the epub standard even before they try putting on the price of books for the Kindle?
Here’s another question – in the world of digital publishing, who would you most like to hear from today?