Just when you thought books were a dying breed, along comes something to breathe new life into the publishing industry. Digital books are an ideal example of pricing perfection!

A war over words

Since the announcement of the new Apple iPad, publishers have pitting Amazon, maker of the Kindle digital book reader against Apple. Publishing companies such as Macmillan and Harper Collins have threatened Amazon with joining the Apple store, saying that Apple is offering them more pricing flexibility. (See blog post by Ed Sutherland for more on this story.)

The Amazon Kindle’s competitors include:

  • Soon to be released Apple iPad
  • Sony eReader, introduced before the Kindle
  • Audio books, available from sources such as Audible.com (recently bought by Amazon).  However they are a great deal more expensive than their digital cousins.
  • Paperback books, priced in line with digital books but require the reader to go online or to a bookstore to purchase them.

Adobe Digital Editions digital book reader application which allows you to download digital books to your computer.

The margin is where it’s at

Note the differences in margin that the various formats offer. For example, the teen sensation “New Moon” is available as follows according to the Amazon site:

  • Kindle Edition                 $6.25
  • Hardcover                      $13.59
  • Paperback (online)         $6.59
  • Audiobook, Unabridged  $34.02    

Amazon offers the Kindle digital edition and paperback with only a 34 cent price differential, despite the additional shipping and handling costs incurred for online paperback book sales. The cost of the same book at Barnes and Noble stores is $7.99, just $1.74 over the digital price to cover the sales staff and brick & mortar.

So given that a digital book is simply a small file uploaded by the publisher to the vendor’s web site and downloaded by customers, what do you think the profit margin will be for the publisher and the vendor? Comparatively speaking, digital vs. paperback, whether purchased in the store or online are quite significant. Cutting out the cost of postage is huge for the vendor, and the cost of printing a boon for the publisher. For the customer downloadable digital books mean instant gratification, although some miss the act of turning the pages of “a real page turner”.

Another revenue opportunity is gained from the lack of transferability. You can always share your paperback with a friend, or sell it in a book sale or to a used bookstore. Not so much with the digital version. Yet another win for the vendor and publisher.

These tantalizing profits are a good reason why Amazon wants to keep publishers away from the Apple store as much as possible, and why Amazon caved to publisher demands for pricing flexibility.

In summary, digital books provide an excellent example of how innovative marketing can lead to improved customer service and drastically higher margins and volumes for your product.