I can only wish this is the last time I'll have to say this.
Something I find myself repeating all the time in conversations about ebooks:
The PPB (paper, print, bind) cost of a book is generally about 7% of the cover price.
(There are costs other than PPB that go into a first-printing unit cost [1] of a book: typesetting, copyediting, design fees, etc. They're another 3% of the cover price. They're things that you pay for only once no matter how many books you print. PPB is an additive cost, that you pay again every time you print another copy.)
[The ideal is for the first printing of a book to have a unit cost about 10% of the cover price. It is a number that publishers aim at. It's a little harder to achieve on very short runs (under 2000 copies) or very long books, but it is the general rule of thumb, and applies on hardcovers and mass market ppks alike. Please note this includes plant costs as well as PPB.]
Shipping is another 2-3% of cover price.
So following the "I shouldn't have to pay for physical components I'm not buying" metric, an ebook would be correctly priced at a 10% discount off the hardcover list price. (7% PPB + 3% shipping)
Moving on to the new and informative part of the post...
But what about returns?
Oddly, this is the part that ebook-price-whiners never mention, which makes it really clear to me just how little they know about the industry.
Returns are losses that the publisher takes on printed books that aren't an issue with ebooks. When I speak of returns, I don't mean Joe Reader brings a book back to the store for a refund. I mean the practice where Awesome Bookstore orders 50 copies of a new novel, sells 35 copies, and then sends the 15 unsold copies back to the publisher for a refund.
Sometimes the publisher can turn those 15 copies around to another store that wants them, and sell them anyway; sometimes they languish in the warehouse until they must be pulped or remaindered. (Note: mmkt paperbacks are not returned. The bookseller reports them as destroyed and the publisher credits the bookseller. This is because mmkt paperbacks are cheaper to print than to ship around the country and warehouse.)
The question becomes how to figure the savings on returns you get with ebooks rather than print books. Figuring a typical return rate of 30% and a publisher's share of cover price at 50%, it would seem reasonable that ebook purchasers are saving the publisher around 15% of the cover price by buying a non-consignment version of the book.
Which says to me that if the publisher is to give all [2] the savings of the ebook format to the reader, then the "correct" price for an ebook is about 75% the price of the print edition.
Of the COVER PRICE, folks.
I note that A Dance with Dragons (to pick a random example) has a hardcover list price of $35. This means that Bantam will collect collect roughly [3] $17.50 per unit sold.
[Please note: I don't work for Bantam, and I don't know their realio-trulio numbers. I'm basing my calculations below on what I dealt with at a different Big Six publisher for 14 years.]
The print edition is selling on Amazon at $20.75, which means that Amazon is selling the book at a profit to them of only $3.25.
The publisher has set the price for the ebook edition at $15. [4] Following my metric of it being reasonable to give back 25% of the cover price to the reader for the e-edition, the "correct" price of the ebook should really be $26.25. There's a whole lotta discounting of the ebook going on, all courtesy of the publisher!
[Large] Publishers set their ebook sales prices, so they can't be discounted by the retailer like the print edition. The current setup has the publisher getting 70% of the list price and the retailer getting 30%.
So on that $15 ebook, Amazon (and B&N and whoever else) is getting $4.50-- Note this is MORE than they're making on the print edition! (And they don't need warehouses for them!)
The publisher is getting $10.50--significantly LESS than they collect for the print edition.
But they saved money not printing the book. How much less? Let's do the math!
$17.50/copy is the normal chunk they collect.
But they're avoiding perhaps 15% returns [5], so let's say they would normally collect $14.88 per unit printed of this book.
Now subtract the $3.50 for PPB and shipping that ebooks don't have, and we get a final ebook profit for the publisher of $11.38 if the publisher were passing all the savings on to the reader.
But wait, the publisher is only getting $10.50!
That's right, folks, they're giving more discount to the reader than the publisher's actual savings generated by an e-sale rather than paper. The profit on the printed hardcover is underwriting your ebook price.
[1] Unit cost means "what did we spend to produce each copy of this book?" in terms that make it a tax write off when the book is pulped. It doesn't include overhead (office space, employee salaries, computers, etc.).
[2] I'm not certain the ebook reader deserves all the savings. The publisher had to invest in new staff and training to create this format for the reader's benefit and convenience. I don't think it's unreasonable for the publisher to keep a little of the savings and offer better wages to their employees.
[3] It's really +/- a couple of percent, but 50% is the industry standard for these sort of back-of-the-envelope calculations.
[4] $14.99. I like rounding.
[5] Less than "typical" returns, but this is a big bestseller with lots of pre-orders. If they're not getting 90% sell-through on this book then they need to fire their forecasters, but I'll go 85% to allow some wiggle room.