OFT investigates eBook prices

About time

How can a 200KB file that can be resold a billion times for zero cost, be legitimately priced higher than a hardback copy of the same book that has to be produced, shipped and stored AND has a resale value and lending capabilty?

Price fixing is the least of their crimes. Just one among many.

To all you authors out there; please sell your books direct to your fans please! You'll get more money and we'll actually be able to buy your books.

Currently the only way I can get an eBook of 90% of my orignal collection is to scan the book myself - hardly a satisfactory option.

Why can't I walk into Waterstone and trade my books for eBooks? I've already paid and they can resell the original. Simples!

By cheysuli on 2 Feb 2011

We know publishers are setting the prices. It wasn't that long ago that Amazon wanted to sell ebooks at a lower price but some publishers threatened them with withdrawal of their books.

While the OFT is at it then perhaps they can tell us why we pay VAT on ebooks but not printed books?

By steven_h1 on 2 Feb 2011

VAT

Everything has VAT applied unless it's on an exemption list. The government haven't added eBooks to the exemption list so that's why they're not VAT exempt.

By nelviticus on 2 Feb 2011

VAT on the books that aren't eBooks

The only paper books that are subject to VAT are those such as puzzle books and some types of colouring books, none of which would make good eBooks!

By BornOnTheCusp on 2 Feb 2011

Selling Books A Billion Times?

Cheysuli

I very much doubt many books, apart from some popular religious texts, would sell anywhere near a billion copies electronically.

The fixed costs of making the book available in the first place has to be factored into the equation.

For the publishers this may include paying the writers an advance, so they can afford to complete the book, and marketing costs to boost it's sales. Also remember that there may be a degree of cross-subsidisation between the publisher's successful titles and the riskier, low volume ones. The publisher can also act as a "guardian angel" to ensure the retailers don't screw the author out of royalties.

For example, what author would have the resources to check whether Amazon was massaging the sales figures?

And why should booksellers be obliged to take your old dog-eared paper books and give you nice e-book versions for free? They'd just end up with millions of virtually unsellable books on their hands. I also don't see the film, TV and music industries doing the same with their products.

Finally, good idea about authors selling books direct to fans. But how do they get fans in the first place? And how do they afford to write the books in the first place?

"This golden age of communications means we all talk at the same time". You need to shout very loud to get noticed.

So such a strategy would benefit existing high volume authors. I believe Stephen King did some direct internet selling of stories in 2000. It may also benefit authors of niche products, such as technical manuals. But it's difficult to see how it would benefit the majority of authors in the middle ground.

By Penfolduk01 on 3 Feb 2011

VAT on Books

Nelviticus

You are quite right about the VAT situation. If the EU had it's way, we'd pay VAT on everything, including food. Although I believe it is currently up to the individual member state what rate of VAT they set for each class of product.

So any "new" products that come along are normally VATable, unless someone can successfully argue legally that it falls into one of the existing exemptions.

Printed books are zero-rated for VAT, as they are included in the existing exemption categories.

e-books aren't, as they are not printed books in the legal sense, but an electronic representation of a book.

Any intersection of common sense definitions of things and the legal definitions of things are largely coincidental. Especially when it comes to tax law. :-)

To be honest, although I mention the EU here, I suspect that successive governments, of whatever political persuasion would secretly like to vastly reduce the exemptions list. But for various reasons this would be politically unacceptable.

Especially as most VAT exemptions and zero-ratings were designed as political favours. Including the zero-rating of party manifestos and pamphlets.

By Penfolduk01 on 3 Feb 2011

Colouring Books

BornOnTheCusp

The logic behind colouring books being standard-rated is that the majority of the content isn't printed! It's user generated when you colour it in. I can't remember the percentage of pre-printed to blank space, but this also affects certain types of exercise books and exam papers.

Current VAT law and regs are a total mess. There is a certain simplicity in charging VAT on everything, as it would remove many of the absurdities.

Although even then, you'd still have some debates. Like whether Jaffa Cakes are cakes (currently classed as food, hence zero-rated) or chocolate-covered biscuits (currently classed as luxury items, and hence VAT at 20%).

By Penfolduk01 on 3 Feb 2011

Another failing business model...

Yet again, we get a spokesman trying to justify out-and-out greed. You can download "Classics" for these e-books for free (or a nominal fee). Why? Because there's no money in it for the publishers, as Copyright has expired. It's a hook to draw people in. Let's face it, these days type-setting is all done electronically, so it's a simple matter to convert files into the correct format for the readers.

In just the same way as mp3 files are over-priced, so are e-books. As was stated before, storage costs are minimal, post-editing costs are zero (no paper, etc), server costs likewise, when expressed as a percentage of the costs of running a site such as Amazon, for example. Again, as was stated above, Amazon actually wanted to drop prices, but were warned off. That, by definition, is price-fixing.

Did anyone see the HMV/Waterstones rep on BBC News a couple of weeks ago, wringing his hands and moaning that Amazon, etc, were "violating his industry"? WAKE UP!! If your turnover is down, then putting prices UP is the wrong move. Just after Christmas, I was in London with my kids and we all piled into HMV. "Ooh, can I have this one, please, Dad?" Prices were utterly shocking, even for the "sale items". So, firing up the Amazon App on my iPhone, I bought all the kids' requested items online, right there in the store, delivered to their home addresses the next day (thanks to Amazon Prime) and for half the price that HMV wanted to stiff me for.

And, FWIW, the argument over Jaffa Cakes/Biscuits was settled in court years ago. And, if VAT was applied to everything, then there'd be no argument about cake/biscuit, would there?

Penfold, your logic is flawed, as is your business model. Now, run along and tell your boss that you've had a really great idea - sell e-books at their real cost and you'll make more money.

By mikejdcastle on 3 Feb 2011

Why does everyone think there is zero or no cost on storing an ebook for sale. If you want to sell just one ebook you need a computer which isn't zero cost, you need somewhere to put the computer which isn't zero cost, you need electricity which isn't zero cost, you need an internet connection which isn't zero cost, you need to have a means of processing credit cards which isn't zero cost, you need someone to design, build and maintain everything which isn't zero cost. I could go on but you get the idea. Now there is economies of scale and selling two books isn't much difference cost wise to selling one but at some point you need more servers, disks, internet etc.

However, that doesn't mean I think books are the right cost but I do think that they should follow normal market economics.

By glennon3 on 3 Feb 2011

glennon:

Most publishers will already own and run all of those facilities. They have websites, they use electricity, they process card payments already, so, perhaps not zero cost but no additional cost.

As for proofing, layout and what not - takes almost no time at all.

In fact, printing massive runs of books such as the Harry Potter series costs less than 50p a book (I stacked most of those as a student!). The reason prices are high is to either squash the market for ebooks and protect real book sales, thus maintaining the myth and ensuring high profits for publishers (authors get a tiny fraction of sales) or to simply make rapacious profits.

Either way, the market will decide. If the prices are too high the books won't sell.

By bubbles16 on 4 Feb 2011

As 'glennon' says, publishers already have all the facilities. A book is just a text file laid out to a template by the author in any WP app such as Word - 5MB for the text and colour graphic covers means most people could store over a 1000 titles on just a fraction of any home computer hard disk.

Modern printing is done "on-demand" with little need for storage and the print run can mix book sizes and covers to any number depending on the order, as well as pack and label them for posting out straight to clients/customers.

Authors are lucky to get more than 11% of the total price in royalties for hard-print, so the minuscule cost of e-books means the publishers will rake in the difference. Add to this the fact that royalties for third-party licensing and other media (film, CD/DVD and ebooks) tend to be far lower than the original hardcopy, and you can see how great the potential rip-off is.

I have produced academic works that require far more proof-reading (mainly bibliographic and scientific references) than paperback lit. Authors have spell-checkers and grammar checkers, so style is the only real thing that editors have to bother about nowadays. E-books are only PDFs that Word can produce from a DOC in a minute and then you convert to ePub etc format in some other cheap software. Obviously publishers will use a slightly more sophisticated process, but to say it is expensive or takes more than ten minutes using automation is twaddle.

The EU is on to this because big cartels in some countries are not only fixing prices and ripping off authors, but most of their works are translations of English authors and the translators are the real victims of this malpractice (1% is max royalties).

The market will decide, but only if the price-fixing cartels are rooted out. The very small publishers also need to be protected from both the huge Amazon-type monopolies as well as these large national publisher cartels.

Spare a thought for the authors and the translators: currently they barely earn a living wage, especially when you consider a book can take a year to write and four months for a professional translator to render into the other language.

The irony is, of course, that most of these works are already available on the internet pirated download sites, and the publishers are trying to make the innocent reader pay for their failure to regulate their own business, just as happened with CDs.

By marland on 18 Mar 2011