Finding a Tipping Point for Digital Books

The book industry is beginning to observe the effects of digital books. The trend, led by the popularity of the Amazon Kindle digital book reader, presents a dilemma for the publishing industry. About 10% of all book unit sales in North America during the first quarter of this year were in digital format. Kindle revenues alone are projected to be about $400 million this year and over $900 million in 2010.

So, what is the dilemma facing the book industry? Price. The cost of entry for consumers is high as the Kindle begins at $359. Moreover, consumers' perceptions about the price of digital books is that they should be much lower than print versions. In their view, a significant portion of book costs must be in manufacturing and distribution. Publishers would be quick to point out that the editorial process and marketing budget contributes a great deal to a book's price. Any cost savings realized from not printing and shipping books are not so great that book prices would fall drastically.

Lower prices for digital book readers will likely aid in the adoption of digital books, just as falling prices for Apple iPods and other digital music players contributed to the growth of digital music distribution. Price played a key part in music distribution, too, as the 99 cent price point proved to be magical. Is there a magic price for digital books to be successful, yet profitable? Amazon has used the $9.99 price point with great success; that could become the standard "hot price" for digital books.

One major difference between digital music and digital books is the behavior change required to become an adopter. Digital music players were an evolutionary product introduction, flowing from portable radios, cassette players, and CD players. Digital books, in contrast, are a significant departure from the experience of holding a paper book in one's hand. The colors, smells, and touch of a book contribute to the enjoyment of reading a book. Will the trade off of being able to download books quickly and at a lower price be enough for book enthusiasts to give up print?

Link: E-Marketer Daily - "Will Digital Books Turn Paper Books to Kindle-ing?"

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