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Expert Explains Why E-Books Are So Expensive

j0396222.gifWhat’s a fair price for a digital book? Following GalleyCat’s ongoing discussion of that million-dollar question, one e-book insider wrote in with a few theories about why these new books cost so much.

Here’s our expert’s breakdown of the average book’s cost to distribute and sell online: “The large publishing houses’ cut is generally 45-55% of the book’s list price (this is split with the author whose cut is 15% of list price). Distributors are generally taking 10% or more of list price. Amazingly, the less expensive the book, the distributor cut can grow pretty dramatically because almost all distributors include a minimum charge. DRM providers are generally taking 3-5% (and in the case of less expensive books even more) of list price. The credit card processors, even with micropayments, take 3-6% of the sales price.”

Taking those numbers into account, our expert concluded that these overhead costs will keep driving e-book prices higher and hurting e-book retailers:

“When 65% of list price is already spoken for by the publisher, the distributor, and the DRM provider, there is not a whole lot of room left. I’ve heard that the average discount on eBooks is 15%. The only person who feels the pain of that 15% is the retailer. So when you add in (lets use a round number) 5% for credit card processing, you are talking about a best case 15% margin on eBooks. Add in the costs of support personnel and a general staff, you’ve got to sell a lot of books to even break even as an eBook retailer.”

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