The book industry is gonna get Napstered if it forces Amazon to raise e-book prices.

Media criticism.
July 15 2009 7:13 PM

Does the Book Industry Want To Get Napstered?

If the publishers force Amazon to raise prices on e-books, that's what will happen.

Kindles. Click image to expand.
The Amazon Kindle and Kindle DX

The book publishers are in the process of picking a fight with Amazon and other sellers over the pricing of e-books. If the publishers are lucky, they'll lose. Here's why.

Publishers generally sell e-books to Amazon and its competitors for the same price they sell paper books to retailers—about half the list price of the paper version. Amazon and the others insist on selling most e-books for about $9.99, which pleases the publishers when the e-book retail price is close to that of the paper edition: Currently, Amazon is selling the $14 list paperback of The Big Sleep for $10.98 and the electronic Kindle version for $9.99.

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The publishers dislike the rigidity of the e-book price, however, when the hardcover lists for $27.95 and Amazon sells it at a loss for $9.99. Why? For one thing, the publishers worry that the e-book vendors are robbing them of their ability to set prices by encouraging customers to think that every book should be priced at $9.99 and that further down the line this will take a bite out of their profit margins.

Authors and book agents also fret that low e-book prices will "cannibalize" hardcover sales, which will "undercut the sales and royalty potential of the printed hardcover," as one agent puts it. One publisher of a hotly anticipated book is delaying the e-book by six or more months because he fears cannibalization. But it's not clear whether Kindle sales cannibalize print books or add to them. In a May presentation, Amazon's Jeff Bezos dropped numbers that indicated some migration: "Today there are 275,000 books available for the device. On Amazon.com, 35 percent of sales of books that have a Kindle edition are sold in that format." That 35 percent figure is from May. In February, it was just 17 percent, but these percentages don't tell us a lot unless they come with total sales.

While publishers, authors, and agents are well within their rights to attempt to maximize profits by forcing e-book prices up, their efforts may backfire. Put off by higher prices, readers who have grown accustomed to $9.99 Kindle editions may choose to flout copyright law and turn to the lush "pirate" markets for books on the Internet. It's a simple matter of querying a search engine to find thousands of e-books—best-sellers included—that can be imported without charge into a Kindle, a Sony Reader, personal computer, or smart phone.

What has kept illegal e-books from taking off? First, all the electronic reading gadgets on the market are subpar, if you ask me, making the reading of books, newspapers, magazines, and even cereal boxes painful. The resolution is poor. The fonts are crap. The navigation is chunky. Not since the eight-track player has modern technology produced such a heap of garbage. If you're looking for the reason e-books constitute just 1 percent or 2 percent of all book sales, stop the search. Second, the hassle factor is too great. Only a student or a deadbeat with a lot of time on his hands is going to want to search the Web and scour the torrents for, say, a free, bootlegged copy of A.J. Liebling's The Telephone Booth Indian. It's as tedious as fishing! Third, not all bootlegged e-books are created equal. On finally finding that free book you so desire, you may find yourself wishing you had purchased the legal edition: Your bootleg may be filled with typographical errors, thanks to the slipshod application of optical character-recognition software. If a nicely produced Kindle version of The Telephone Booth Indian that doesn't have to be monkeyed around with can be easily nabbed for $9.99, which it can, why bother breaking the law to obtain an inferior edition for display on a rotten device? It's like using an acetylene torch to loot a kid's piggy bank.

Right now, the electronic-book market finds itself roughly in the same place the market for MP3s was in 1999, the year after the release of the first portable MP3 player. First adopters of e-books, who are filling their devices with content and proselytizing to their friends, have it better than the early MP3 users. The iTunes store, which was established in early 2003, was among the first online sites where music fans could easily buy music files, a la carte, from a huge selection. The other commercial sites, wrote the New York Times, were "complex, expensive and limiting" and "failing because they were created to serve the interests of the record companies, not their customers." Basically, before iTunes arrived, if you wanted portable tracks, you had to rip your own, borrow collections from friends, or grab "free" tunes from the "pirates" at Napster or other file-sharing sites.

It doesn't make me a defender of illegal file-sharing to say that the music industry goofed by waiting until 2003 to agree to sell individual tracks for the reasonable price of 99 cents. Its absence from the electronic-music market in those early years allowed illegal file-sharing to take root and spread, and it helped shape the perception, especially among younger consumers, that music "should" be free.

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