Reference Price Of Digital Books

Public libraries do not lend Kindle books. There is news from Sony that its digital books will be available for lending. Public libraries do provide access to digital formats that can be read on PCs and Macs. Just like a copy of physical book can be loaned to only one patron at a time so is each digital copy. Libraries must buy multiple copies if they want to reduce waiting time. While end customers pay $9.99 for most digital books, libraries pay  $29.99.

Here is a story in The Times

Some librarians object to the current pricing model because they often pay more for e-books than do consumers who buy them on Amazon or in Sony’s online store. Publishers generally charge the same price for e-books as they do for print editions, but online retailers subsidize the sale price of best sellers by marking them down to $9.99.

“ ‘The Lost Symbol’ is $9.99 on the Sony Reader book page, and I just paid $29.99 for that for the library,” said Robin Bradford, the collection development librarian at the Indianapolis-Marion County Public Library. Ms. Bradford said she would consider buying additional digital copies if the price were lower. But “to buy nonphysical copies at the same price,” she said, “I just won’t do it.”

Amazon’s aggressive pricing set the reference price for most customers – even for those segments that get more value from the book. Since libraries can lend a single copy to any number of people (although over time) the value to them is much more than the value to an individual customer. While it makes business sense for publishers to capture their share of this value, the libraries do not want to pay $29.99 because they need to pay this price for every book and their low reference price.

How can publishers price the books to capture their fair share of the value created?

Focus on the reference price – relate back to the current higher pricing for library bound editions  than hardcover books. It is difficult to do so when the format is the same, so publishers need to make an obvious, even if it is meaningless, difference in the digital format sold to the libraries.  This is still not enough to bring the reference price up to $29.99. Another change to pricing is suggsted by a librarian from Colorado,

instead of purchasing a set number of digital copies of a book, she would prefer to buy one copy and pay a nominal licensing fee each time a patron downloaded it.

Publishers do not like it because it makes possible almost infinite parallelism, reducing their market size. A variation of this scheme is to have a price between $9.99 and $29.99  and add on a subsequent annual subscription, for a price, that allows certain number of downloads.

I cannot help but think  that all these additional steps would not be needed now if only publishers had taken leadership in determining how the digital versions should have been priced by the channels or better yet developed their own distribution channel for digital books instead of leaving to current channels.