Raf Manji pointed out on the Facebook page for my book, The Economics of Enough, that the price for the Kindle version on Amazon UK is higher than the price of the hardback. As he added, “Go figure!” I haven't explored thoroughly enough to know if this anomaly is very common, but it is clear that retailers have not thought through e-book pricing.
This is especially strange for Amazon, which has built its business on setting low prices for books (which are price elastic), and then figuring out what price discrimination tactics work. Speed is one: a lesson promulgated first in Shapiro and Varian's Information Rules is that one thing you can certainly charge for online is getting something at once, or before everyone else. (Information Rules is one of my all-time business economics favourites.)
Price discrimination linked to time is a tactic that has long worked well in books – the hardback is a good example. People who want a book quickly will pay more. The price differential of a hardback exceeds the cost differential of hard covers.
However, the Kindle edition of a book seems never to be the first – indeed, it will be a week or so before mine is available.
The other issue is that e-books don't include any re-use or re-sale rights in the price. I can't borrow a book my husband downloads, whereas we have always shared physical copies. And I can't sell a download back on Amazon marketplace. I think this limitation lies behind the strong consumer instinct that e-book prices will have to be significantly lower than physical prices. Retailers have focused on the price of the devices, but overlook the effect of the price of the e-books.
I suspect part of the answer to the puzzle lies in rights clearances. This is still a thicket of nonsense for e-books, especially for a book like Enough which has pictures in it (yes!). It will have to be sorted out if retailers and publishers really want to drive these sales. Apart from anything else, they have to overcome the die-hard romanticism of hard-core book lovers and buyers.
The pricing on e-books appears strange as you have outlined. The pricing is set as if e-books are substitutes for physical books but they are better considered compliments. I would gladly supplement my copy of Economics of Enough with a low cost e-format to read on my Kindle while travelling (and lighten my bag) but would return to the physical when at home.
If e-book publishers get people into the practice of reading on electronic formats using this technique, they might be able to then sustain an increase the price of e-books and some may even buy e-books in preference to some physical books.
I think you're right, Ian, there's obviously a lot of market testing to be done – but the lesson of electronic formats for music was that prices had to be lower online and CD prices had to come down too. This was only partly due to piracy and the competition from zero prices. In the end, new technologies serve consumers, not producers.