Now, I buy far more books than is good for my family finances, and that includes a lot of impulse buys. Amazon, through the combination of one-click and signing up for Prime, makes matters even worse. But my hand hesitated over the keyboard this weekend and then zero-clicked on Robert Skidelsky's The Return of the Master. I didn't read it in hardback and normally buying the new paperback would be a no brainer for me. But the publisher (Penguin) is asking for a penny under £10 for a 256 page paperback. Some academic publishers have long made a habit of extortionate pricing because their market is university libraries, but one of the more notorious, Edward Elgar, seems to have had a change of heart – I've recently noticed some of their texts being published as trade paperback formats priced from £12 to £16. But is the price of wider market paperbacks and trade paperbacks going up?
True, online discounting means you don't need to pay full price. Amazon UK is currently asking for £5.99 for the Skidelsky book, and at that price perhaps I should have clicked. But then £5.99 is my mental pricing point for a slim paperback book anyway, maybe £1 or £2 more for bigger books. I wonder if cover prices are going up in order to ensure that discounted prices offered by retailers like Amazon increase too?
It isn't easy to find a book price index – Nielsen Bookscan charges for its data, and anyway creating an index is complicated by both the extensive discounting and the inability to take account of factors like quality and size of books, not to mention all those '3 for 2' special offers. However, the Publishers Association does print annual revenue and volume figures. These show that unit revenues for book sales in the UK rose 4.4% from £3.83 in 2008 to £4.00 in 2009, and for sales overseas by 18% from £3.39 to £4.01 (although part of that will be an exchange rate effect). The increase in the UK was double 2009's CPI inflation.
Of course, how much a book 'should' cost isn't obvious. In an ideally competitive industry, it would be costs plus normal profit margins. The rapid growth of e-book sales complicates the analysis further. However, costs have certainly been coming down on the production front thanks to technology, although they may well have gone up on the marketing front.
My suspicions about the (lack of) strong competition in publishing were aroused when I was a member of the Competition Commission inquiry group looking at the merger of two high street book store chains, Waterstone's and Ottakar's. One of the publishers who came to urge us to block the merger mused in the hearing that they had started selling books too cheaply, and readers were no longer properly appreciating the value of the product. The UK has a couple of thousand publishers but industry revenues are overwhelmingly dominated by the top four. On the face of it, there is a classic oligopolistic structure of a small number of companies dominating sales with a large competitive fringe.
The industry magazine, The Bookseller, says in the same article that big publishers have been having a tough time. However, its figures are for turnover, although it also reports a decline in their market share. The key test is profit margins, which takes us back to the price question. If competition is so tough, how come book prices have risen in real terms?