Romance, Historical, Contemporary, Paranormal, Young Adult, Book reviews, industry news, and commentary from a reader's point of view

Why do ebooks cost so much?

Dear Jane:

Hi, I was wondering if y’all might know if any of the big publishers (Putnam in particular) have some sort of ebook deal with Amazon and B&N to exclude some of the smaller ebook retailers out there? I don’t remember you mentioning anything like this in your blog before.

The reason I ask is because I’ve been trying to buy Jayne Ann Krentz’s newest, In Too Deep; but can only find it at Amazon and B&N. None of the usual ebookstores have it. I’ve bought ebooks from JAK before, so I’m a little surprised – and irritated. I’d like to know who to blame before I start bitching. ;)



Dear Roxie:

In April of 2010, 5 of the major publishers (Penguin/Putnam being one of them) instituted what is now called Agency Pricing. Agency pricing has been instituted in US, UK, and Australia (even though some argue it is against the law in Austrialia) Under agency pricing, the publisher controls the price and the retailer is not allowed to discount.   Some of the smaller retailers had a hard time coming to agreements with the publishers and that is why some of the books from certain publishers don’t appear in the smaller retailer catalogs.   Additionally, under agency pricing, the retailer isn’t allowed to discount.   This led to Fictionwise, for example, discontinuing Micropay rebates and a number of titles disappearing from its virtual shelves.

The five major publishers are as follow:

  • Simon & Schuster (Pocket),
  • Penguin (Berkley/NAL/Ace),
  • HarperCollins (Avon),
  • Hachette (Warner, Orbit),
  • Macmillan (St. Martin's Press, Tor)

Under the traditional form of selling, the publisher sold the digital book to the retailer (or store) like Amazon or Barnes and Noble at a discount, often 50% off. The retailer/store would set the price for the readers. For example, if the retail price of a book was $7.99, Amazon would pay the publisher $3.98 for that book and then charge the reader some amount.   Some retailers like Amazon or Fictionwise or All Romance eBooks would sell these books at a discount, either a straight percentage off or some amount returned to the purchaser in rebate form.

Under “Agency Pricing”, the publisher gets 70% of the book’s retail price and the retailer receives 30%.   Under Agency Pricing, publishers are responsible for sales tax and thus have started to have to collect sales tax   for many states in which it has “substantial physical presence” or a tax nexus.   Many times, the regular presence of a single sales person can create a tax nexus and thus the increased number of states from which sales tax is collected for ebook sales.

If the book is discounted at a retailer or you can use a coupon on it, then it’s likely that publisher isn’t participating in “Agency Pricing.”   Most small press publishers do not participate in that type of pricing and neither does Harlequin, Random House, or Kensington.   Because those publishers don’t participate in agency pricing, they are more freely available at various retailers and not solely the big guns like Amazon or Barnes and Noble.

Interestingly Michael Hyatt, the publisher and CEO of Thomas Nelson publishing, recently stated on his blog that under Agency Pricing and with a reduced sales price of $9.99, the agency publishers are making the same amount of money as its hardcover revenue.   Therefore, the publishers who are participating in agency pricing and not discounting are bringing in even more revenue than before.

Assuming all costs being equal (despite the fact that elimination of print related costs does contribute some cost savings), an agency publisher selling a digital book at 7.99 is netting $1.60 more or 40% increase.

  • Wholesale pricing model, assuming 50% revenue of $7.99 book:   $3.995 revenue per book
  • Agency pricing model, assuming 70% revenue of $7.99 book:    $5.593 revenue per book

For mass market paperback sales, publishers employing the agency model are going to come out ahead. The publishers could price the digital book at $5.99 and still be achieving higher revenue.

I think this and Hyatt’s blog post shows us that price for digital books are unrelated to the costs of producing the digital book.

That’s probably more than you wanted to know but it gives you a little understanding of the pricing of books.   You can check out other Dear Author articles on pricing here:

Jane Litte is the founder of Dear Author, a lawyer, and a lover of pencil skirts. She self publishes NA and contemporaries (and publishes with Berkley and Montlake) and spends her downtime reading romances and writing about them. Her TBR pile is much larger than the one shown in the picture and not as pretty. You can reach Jane by email at jane @ dearauthor dot com


  1. Tweets that mention Why do ebooks cost so much? | Dear Author --
    Jan 16, 2011 @ 06:30:08

    […] This post was mentioned on Twitter by Cynthia D'Alba and others. Cynthia D'Alba said: RT @dearauthor: NewPost: Why do ebooks cost so much? (Very Interesting. Good explanation) […]

  2. Carolyn
    Jan 16, 2011 @ 08:25:49

    Thank you for going over this again, Jane. I couldn’t figure out why I was paying the tax in Alabama; I thought they’d maybe just added it across the board and were pocketing the difference.

    I won’t pay some of these ebook prices. Wanted the new J D Robb, but nuh uh, not at that price.

    That book is a hardback. Will they bring the price down when it comes out in paperback?

    I thought ebooks would be easier, if not cheaper, but I’m still having to plot and plan.

  3. library addict
    Jan 16, 2011 @ 08:47:14

    As much as I hate Agency pricing (and I do!), one “nice” thing about Jove e-books (the ones in paperback from Penguin/Putnam) are usually (not always) a $1 less than their paperbacks. Of course, with coupons you can get the paperback for cheaper, but for some reason I will pay $6.99 for an ebook and balk at paying $7.99. I guess $7 is my personal cut-off point, especially when so many of these books are backlist.

    I was hoping Agency pricing would be a big fail for them and come April it would go away. Wasn’t the Apple contract for 1 year or did I dream that?

    FWIW, Borders and the Sony store usually have most new releases in e. And Kobo gets some eventually.

  4. Lisa J
    Jan 16, 2011 @ 09:27:39

    @library addict: I’m with you in hoping Agency Pricing would fail. I seem to have the same cut off point of $7. I just can’t see paying more for the e-book than I do a paper copy from Target. Whe it first came out, the newest Kresley Cole IAD book was priced $5.99 at Target, but the price was $7.99 in e. I didn’t buy it and it looks like I won’t be buying any of the others either since I am all e these days.

    I hate giving up my favorite authors, but I have to stick to my budget. The extra $1 – $2 per book adds up quickly.

  5. Ann
    Jan 16, 2011 @ 10:21:18

    My knowledge of anti-trust regulations is zero to nil, but how is this pricing collaboration between the publishing houses not a monopoly? Didn’t the airlines try that a decade ago and get spanked? (Of course, they’ve found a way to spank the consumers back, but that is a gripe for another website.)

  6. DS
    Jan 16, 2011 @ 10:44:00

    There’s a second circuit anti-trust case about price fixing among the big however many are left record labels involving downloaded music that I am watching– Starr et al v. Sony BMG Music Entertainment et al,. It was kicked out by the Federal District Court, Plaintiffs appealed to the 2nd Circuit who reversed. Defendants appealed 2nd Cir. decision to SCOTUS who declined to hear.

    While it is not the same situation as ebooks, I think it could give some insight on how the agency pricing model would fare under court scrutiny.

  7. m
    Jan 16, 2011 @ 10:56:20

    This pricing issue is why so many authors are going independent. Same thing happened with artists in the music industry. Any type of success at this is slow to come by as the big names still get the Internet attention. If you Google mystery authors, there are 27,500,000 listings to try to find a relatively unknown author.

    Since there is no quality control in place some of the books can be disappointing, which is why I like sites like BackList e-Books, KindleNation, and some others where books have been screened somewhat. Backlist e-Books lists only books that were originally published in hardback or paper by a major publisher. The other sites have reader recommendations, which is another type of screening.

  8. Brian
    Jan 16, 2011 @ 11:30:29

    My biggest beef with Agency pricing is with Hachette. They consistently price some of their ebooks $1-$5 MORE than the paper copy.

    Here are some examples…

    Kiss the Girls – James Patterson
    paper $7.99 / ebook $9.99

    Along Came a Spider – James Patterson
    paper $7.99 / ebook $9.99

    Some of Patterson’s other titles are similarily priced.

    Twilight – Stephanie Meyer
    paper $7.99 / ebook $8.99

    New Moon – Stephanie Meyer
    paper $7.99 / ebook $8.99

    Breaking Dawn – Stephanie Meyer
    paper $8.99 / ebook $9.99

    True Believer – Nicholas Sparks
    paper $7.99 / ebook $9.99

    The Notebook – Nichlas Sparks
    paper $7.99 / ebook $9.99

    Some of Sparks’ other titles are similarily priced.

    The Brass Verdict – Michael Connelly
    paper $9.99 / ebook $12.99

    Some of Connelly’s other titles are similarily priced.

    They’re also famous for keeping an ebook price high for months after the paperback comes out instead of lowering it. These are also all non-discounted for both.

    All of the pubs have stuff out in Hardcover where the HC’s street price is lower than the ebook priced at $12.99-$19.99. At the same time high priced Agency titles often make it into the Kindle top 100 and top ten so apparently a lot of folks are just fine with the pricing.

  9. TKF
    Jan 16, 2011 @ 12:30:03

    Shouldn’t Random House (Ballentine, Bantam, Dell) also be on the list of biggies?

  10. brooksse
    Jan 16, 2011 @ 12:55:46

    @TKF – Random House is not included because they’re not doing agency pricing for their ebooks.

  11. Carly M.
    Jan 16, 2011 @ 13:26:44

    I would be fine with agency pricing for new releases (maybe), but what really gets me is decade old mass market books at the 7.99 price point. If they were being re-printed with nice new covers or something I could understand. But a lot of the time (I’m looking at you Avon), they’re the same 2003 e-book file without a working ToC and other formatting errors for which I just can’t justify spending 7.99. I recently checked out a bunch of classic Lisa Kleypas e-books out from my library and read them on my Android phone; I enjoyed them so much I went to buy two on my Kindle and they were 7.99 for 1993 and 1994 releases. Lost sales, both.

  12. SarannaDeWylde
    Jan 16, 2011 @ 14:07:33

    Thanks for this post. This is something I’ve been curious about as well.

    I couldn’t understand why sellers were charging more for ebooks than the print edition. There was one particular example where I wanted to try a new author and the ebook was $20.

  13. Adam
    Jan 16, 2011 @ 14:19:23

    Take a look at this topic of ebook costs over at Teleread. Very interesting analysis on ebook costs/profits:

  14. Sci-fi bookworm
    Jan 16, 2011 @ 14:28:52

    I think the publishers and resellers should not be trying to get increased revenues from e-books compared to paper prints. They are defeating one of the main advantages of digital media and actually promoting piracy. The current prices are ridiculous and will have to be lowered or people will continue (and increase) copying and downloading illegally instead of buying, which they would if the e-books cost a reasonable amount taking into consideration production costs.
    We could have recently witnessed a huge growth in reading across the world and in all genres, with the obvious cultural benefits to modern society, and greed is standing in the way.

  15. Isobel Carr
    Jan 16, 2011 @ 14:30:26


    My biggest beef with Agency pricing is with Hachette. They consistently price some of their ebooks $1-$5 MORE than the paper copy.

    Hmmm, all their MM originals are the same price in paper and e (just checked, and my debut is $7.99 in both forms, as are all the other MMOs I could find). What you’re talking about must have something to do with books that start out as HB/TD.

  16. Kristine
    Jan 16, 2011 @ 14:30:29

    The angency pricing is nothing more than price gouging here. The fact that e-books cost more than a hard copy of the same book is nuts. I mean the books have to cost less to produce than the hard copies. The fact that book prices in general have shot though roof in the last few years with some paperbacks costing upwards $9.99 in certain cases means that I started to look at e-books as a way to save a little bit of money but now it costs even more in e-book form for the same book. Now my biggest fear is with the fall of Borders that the publishers are going to inplaniment agency pricing in the retail sphere and then no book can be sold under a certain prices that might be pegged to Wal-Mart, I am not targeting them they are the largest retailer so pubilshers so for it to work they will cut a deal with them so they can be the cheapest, prices and no one can go lower. That means that in few months you will be paying though the nose no matter what format you read. I hope that I am wrong but if it is working in reguards to e-books, and no one has sued yet, then what would stop them and I feeling that they will do this so they can make even more money than before and I shudder what the end results will be in the end.

  17. orannia
    Jan 16, 2011 @ 14:47:41

    Thank you Jane!

    Under Agency Pricing, publishers are responsible for sales tax and thus have started to have to collect sales tax for many states in which it has “substantial physical presence” or a tax nexus.

    Question – are the Agency publishers therefore indicating that the point of sale is where they are? (Or are you referring only to hard copy sales rather than digitial?) The publishers’ stance on geographical restrictions is that the point of sale is the purchaser’s computer…. Sounds to me like they are trying to have their cake and eat it too. Well, that or I’ve completely misread things :)

    As for charging more for an eBook than a MMP or HB… *heads desk* Why do they not realize that the digital format is here to stay?

  18. brooksse
    Jan 16, 2011 @ 16:01:09

    @orannia: The point of sale is the purchaser’s computer, but apparently each of the publishers have a business presence in most U.S. states. Sales staff or something.

  19. brooksse
    Jan 16, 2011 @ 16:26:32

    Funny thing about the sales tax… Sony and BooksOnBoard now charge me sales tax on every purchase, agency and non-agency alike. Yet neither charged me sales tax prior to agency pricing taking effect. In fact, prior to agency pricing, BooksOnBoard would charge Texas residents sales tax on physical goods that had to be shipped, but they did not charge us sales tax on digital goods.

  20. Brian
    Jan 16, 2011 @ 18:54:49


    According to TX tax code it looks like BoB is doing what they’re supposed to…

    “Sec. 151.010. TAXABLE ITEM. “Taxable item” means tangible personal property and taxable services. Except as otherwise provided by this chapter, the sale or use of a taxable item in electronic form instead of on physical media does not alter the item’s tax status.”

    Perhaps they were supposed to be collecting sales tax from folks in TX before and were remiss?

  21. Brian
    Jan 16, 2011 @ 19:04:07


    Why do they not realize that the digital format is here to stay?

    I think at this point they do realize it’s likely here to stay. What they’re trying to do is exercise more control over things and perhaps even slow them down a bit.

    @Isobel Carr

    Hmmm, all their MM originals are the same price in paper and e (just checked, and my debut is $7.99 in both forms, as are all the other MMOs I could find). What you're talking about must have something to do with books that start out as HB/TD.

    That’s quite possible, but it’s still a problem IMO. I know all their books aren’t that way, but IMO none of them should be.

  22. brooksse
    Jan 16, 2011 @ 20:46:33

    @Brian: Yes, I figure they were supposed to be charging TX residents sales tax for ebooks all along. Apple has always charged me sales tax for music purchased via iTunes, so it make sense that ebooks would be taxable too. But with ebooks, I just never really thought about it until after agency pricing took effect.

  23. Isobel Carr
    Jan 16, 2011 @ 21:26:57

    @Brian: Totally agree. I skipped a book by a favorite author who’s with Delacorte because the eBook was still priced like the HB release MONTHS after the MM had come out.

  24. Christopher Dutchyn
    Jan 16, 2011 @ 22:02:52

    Recall that prices are not determined by costs (except bounded from below). Instead, prices are fixed by expectation of what the consumer will pay. If you’re willing to pay $5 for something with a cost-of-goods equal to $1, then the seller will set the price at $5.

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  27. Froggy
    Jan 17, 2011 @ 11:18:39

    wow, interesting reading. I know I personally won’t pay more for an ebook than for the actual book.

  28. TKF
    Jan 17, 2011 @ 11:24:17

    @Christopher Dutchyn: I work in international trade, and it’s frequently depressing to know what the imported cost of an item is and then see it in the store for ten or twenty times that. And yes, that kind of markup is not uncommon, esp on the low end. High end markup is surprisingly much lower.

  29. KarenT
    Jan 17, 2011 @ 13:18:32

    When I read the Michael Hyatt blog post, I was annoyed. He is comparing one time costs associated with converting books to the multiple formats to the hard cost per unit of a paper copy. Once x copies of the ebook are sold, the conversion cost is paid for. But that paper and distribution cost is there for every paper copy forever. It also does not consider losses for remainders which don’t happen with ebooks.

    As far as all the different formats, etc. Publishers need to get together and create standard. If all publishers publish in the same standard, either the ebook readers will have to step up or create conversions from the standard to their own format. This is a long term solution, but it would reduce costs for everyone in the long term.

    I have a kindle that I like but don’t use all that much due to over priced ebooks and paperback swap.

  30. TKF
    Jan 17, 2011 @ 15:10:02

    @KarenT: Publishers do not control the format options. Device creators do, and publishers offering a way to crack and convert is illegal, so their hands are tied.

    IMO, the complaint should be leveled at Adobe and Amazon, who will not allow both types of books to be read on a single reader. It’s the software and hardware owners that need to get their shit together, but they never will, because they WANT their stuff to be propitiatory.

  31. SAo
    Jan 18, 2011 @ 02:01:54

    While the publishers are pushing for higher prices and, most of al, to set e-book buyers’ expectations of a “reasonable” price for a book, at the same time, authors who own their backlists or who decide to go solo will be pushing in the other direction with the two dollar book.

    If enough readers figure out how to find readable 2$ books, that will put a lot of pressure on the high agency prices. If the 2$ books end up an ocean of crap any editor would have tossed in the circular file after the opening paragraph, the agency folks will get their way.

    The thing to remember is that while readers have always had loans, libraries, and used bookstores to lower the cost of books, the publishers have always seen the hardback buyer as the holy grail, their premium desired customer. Interestingly enough, I think the bulk of the hardback book buyers buy one or two books a year as presents.

    We as readers can discuss efficient ways to wade through the un-agented books. Perhaps reader review clubs were every subscriber has to review 4 a year.

    Equally, refusing to buy e-readers tied to a single format might encourage the e-book reader makers to converge on a format.

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  34. Lenice
    Jan 22, 2011 @ 20:57:27

    Thanks for this info Jane. I’m still unclear as to why ebooks previously available to me in Australia no longer were after the change over to agency pricing? It’s very frustrating that authors new release ebooks also aren’t becoming available to me, but paperbacks are. Are u able to help me understand why this is, and/ or if it’s likely to change at any point? Apologies if you’ve explained thus issues before. Thanks.

  35. Jane
    Jan 22, 2011 @ 21:04:45

    @Lenice I wrote about geographical restrictions here. I think that what happened is before publishers weren’t so strict about geo restrictions and after Agency, they were.

  36. Lenice
    Jan 22, 2011 @ 22:59:52

    Thanks for the link Jane. The thread was a great read – in content & size! I may have missed further details in the thread (a bit sleepy on a sunny Sunday arvo here in the land of oz), but did you end up setting up that site for lost ebook sales?? I’d be very interested in a link.

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  38. Leon Jester
    Jan 29, 2011 @ 13:29:42

    Baen Books has been doing very well with their WebScription business. []

    Other publishers are running into problems with their (frequently overseas) directors who are afraid that pricing electronic copies below hardcover will reduce hardcover sales — as a result, some people are purchasing neither.

    For example Tor initially priced the electronic edition of David Weber’s “Off Armageddon Reef” at $18US — whilst Amazon was offering the hardcover for ~$16.50US.

    I, for one, refuse to pay hardcover prices for electronic files that, with current technology, cost little to produce and maintain. Tor’s German masters made a brilliant marketing decision there. Sorry, Dave.

  39. jellisii
    Feb 01, 2011 @ 04:03:11

    The cost in an book is NOT in the format. It’s everything before it hits the press/website.

    If you do some research, you’ll find that the press/shipping/transport (the only things UNIQUE to a printed book) is only a very small fraction of the cost (IIRC, it’s about $2-3 per first run hardback book, due to quantity) of the book. On both printed and ebook formats, you still have to do typesetting, editing, marketing, review, author payment (they work under a contract, again, IIRC), etc.

    Saying that an ebook should be a fraction of the cost of a regular book is completely fair. That fraction is MUCH higher than most people THINK it should be, however.

  40. Leon Jester
    Feb 01, 2011 @ 11:56:48


    If this is to my address, then:

    I’m fairly familiar with the expenses of offering an e-book in varied formats. With any volume at all, it’s low enough to be considered negligible.

    As to shipping costs, they’re going to vary, dependent on weight. High end is a single copy, low end is a case, lowest is multiple cases by LTL.

    Composition costs can be split between the printed matter and the electronic, they’re the same file with minor changes depending on format; the same for editing, proofing.

    Marketing costs depend on the publisher and the publisher’s accounting system. A review is a review.

    Author’s re-imbursement will vary with publisher and that author’s contract. More enlightened publishers pay a higher royalty on electronic sales as the costs to the publisher are significantly lower (presuming the publisher can manage it’s way out of a wet paper sack).

    Costs should still be well below that of a softcover mass market book.

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  43. Publishers have sales people?
    Aug 16, 2011 @ 07:47:56

    “Under Agency Pricing, publishers are responsible for sales tax and thus have started to have to collect sales tax   for many states in which it has “substantial physical presence” or a tax nexus.   Many times, the regular presence of a single sales person can create a tax nexus and…”

    Publishers have ‘sales people’??? Funny. First they said higher ebook prices were due to the ongoing costs of fighting piracy. Then they said the ebooks needed to be copyedited, formatted, coded, and so on and that had to be outsourced. Then they said “The authors had to eat” (even though they barely can on the tiny royalties they are paid by publishers). Then they broke down and said jobs were at stake and health insurance and leases had to be paid, and that’s why they were charging so much for ebooks.

    Not the consumer’s problem IMO.

  44. Publishers have sales people?
    Aug 16, 2011 @ 08:29:28


    Wait a minute. So you’re saying publishers PAY for these reviews? Maybe I’m not understanding but you figured “review” into what I understand to be the high ebook costs? So you’re charging ebook readers for the book’s review, too? As for formatting-say for example to Sony ereader (which is pdf), all you have to do is click a button and the book is converted to PDF! I self-publish & used free Kingsoft Writer (akin to Word) and it has a built-in PDF converter for example. I click a button and bam, I’ve got my conversion!

    Publishers do yourself a favor & stop BILKING readers AND librarians on these ebooks. It would be a shame to see you go down in flames over this but you seem to think that not only writers are stupid (to accept 14.9% of ebook sales while you engulf 70%), but you think customers are stupid, too, and will blindly pay $20 for a digital book. You just stubbornly won’t listen. Harlequin is the only publisher embracing this with common sense and moving forward. Notice how the other big publishers are even being SUED already by consumers in a class action suit. And no, it’s not Amazon that’s suing them, it’s people (even though they’d like to flatter themselves into believing that Amazon did it. It was consumers.

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