So, for an average book of $10 price in its paper version, I would expect to pay $500 in total for the Kindle and a stock of 50 books.

In my view, a book should be sold for no more than $5, and a Kindle for no more than $250, to make them attractive to me.

I read an average of one book per month.

This assumes a break even versus paper books in a period of over four years.

I think that I am generous towards the e-book industry ..

The digital music market is moving in the right direction. Napster recently announced a hybrid subscription offer that allows unrestricted streaming from a catalog of over 7 million songs for $5 per month. In addition subscribers may download five DRM-free MP3 downloads per month.

A major book publisher could make an analogous offer. For a small monthly fee subscribers would be allowed online reading access to an entire vast catalog. Also subscribers would be able to download several DRM-free ebooks to add to their permanent collection each month.

Microsoft offers another variant subscription model with its Zune pass for $14.95 a month. Subscribers can download an unlimited number of DRM-restricted songs from a multi-million song catalog. The DRM causes access to each of these songs to expire when a subscription is terminated. However, subscribers are also allowed to download ten DRM-free songs each month to add to their permanent collections. This type of service is better for portability to places where streaming is impossible. Napster offers another plan that is similar.

If ebook publishers insist on using DRM then they should allow access to their entire catalog. They should also offer DRM-free items that provide a greater guarantee of permanence. Individual authors should be able to join together with one another and with publisher’s offerings. Payments would be based on frequency of access. Publishers should examine digital music plans and the possibility of offering access to joint catalogs, or at least single large catalogs.

These music subscription services have millions of customers but they have arguably not been as successful as the ITunes store. The reasons are complex: DRM is still clumsy and undependable, online streaming can be unreliable, music piracy is already rampant. But ebooks are different. Online access with caching is easier to implement and it consumes much less bandwidth. Downloads can be accomplished very smoothly, e.g., with Amazon’s Whispernet.

Access to ebooks should not be strangled by misguided policies based on antiquated systems grounded in physical books.

Distributor – 5-10%.
Warehouser – 5-10%.
Retailers – 35-40%.

I’ve seen lots of commenters around the web slamming Amazon for taking a 60-70% cut of Kindle offerings.

Since Amazon is acting as the distributor, warehouser, and retailer perhaps their cut is not so far off the mark eh!

All these “analyses” of what an ebook costs or should cost are pretty meaningless. Ultimately the market will sort all this out and an ebook will sell for what it sells for.

Perhaps authors/publishers should look at what is going on in the iTunes App Store. There are quite a few success stories of folks who write a neat little app that sells for a buck or two and end up making a nice chunk of money.

If you look at a comparison with app pricing for other PDA’s/Smartphones at vendors such as Handango (from which I bought a lot of stuff over the years for my previous PDA’s) a quick look at gaming pricing shows most games in the 15-20 buck range.

Apple has clearly shown that LOTS of people will drop a buck or so on a game or other app. Not so many people are quick to drop 15-20 times that amount to take the chance that the game sucks, they don’t like it, whatever.

It seems that the majority of iTunes App Store publishers seem to take the “we’ll make it up in volume” approach to pricing.

I don’t have any idea what an ebook “should” cost. All I know is that it will be a rare ebook indeed that I will pay more than 50% less than the street price of a paper copy. However, if publishers persist in releasing ebooks with DRM, restrictions on text-to-speech, clipping limits, etc. they shouldn’t be surprised if the market ends up setting a price point well below $9.99.