I've noticed a disturbing trend lately. Despite having a Kindle (which I sometimes prefer to reading a physical book), I still find myself buying a ton of paper books. And it's not that I want to read books on paper - I love being able to carry around a single device that has my entire book collection stored on it. The problem is price - if you are buying books that aren't newly released, you can typically get the print version for significantly less than the e-book. Sometimes you have to buy a used book from an Amazon merchant to get a big discount, but you can often buy the book directly from Amazon. For example, I just ordered this book, and paid $6.80. By comparison, the Kindle version still runs $13.99.
E-book pricing may be the only thing that keeps brick-and-mortar booksellers in business. The other day, I was visiting The Strand, a bookseller in New York City. At the front of the store, they have a section labeled "Lower Priced than E-books," where they prominently compare their in-store prices with Amazon's Kindle prices. It makes no sense that a brick-and-mortar reseller should be able to undercut the Kindle on anything (except for maybe used books, which I will get to later). While I love browsing the bookstore, a bookstore has both less selection and higher fixed costs than someone like Amazon, and there is no way they can possibly compete on price (unless this is just a gimmick to get you in the door).
Have I yet mentioned that e-book pricing is ridiculous? And I don't even care that I don't actually own the Amazon e-book like I would a paper book (although a lot of people take issue with this). For me, the problem is that I shouldn't have to pay more for something that required less work to produce and ship to me. I'm doing you a favor by buying the e-book - it costs a lot less to sell an e-book than a paper book. You don't have to print the book, ship it to stores or the reseller, and then finally deliver it to my doorstep. I just click "buy," and you copy a few bits to my device.
E-books also get rid of that pesky resale market (you know, the one that lets me get my paper books for less that they would cost on the Kindle). You don't see Amazon merchants listing used e-books for sale, since Amazon doesn't allow you to resell your Kindle books (this would be possible to do in a secure way, but I'm sure that publishers will never allow it). E-books are forever tied to the system you purchased them on (except for one not-very-generous "lend"). There is pretty much no way for anyone to sell an e-book for less than retail price?
So what's the problem? I think it's the publishers. Amazon actually tried pretty hard to keep the price low on e-books, limiting the price of most books to $9.99. Then Apple negotiated different terms on its iBooks program, and Amazon had to kowtow to the publishers to keep its rights to sell the books. Prices quickly shot up to $12-15 on a lot of books. Now, most e-books come in at prices that are equal to or higher than the print versions. This sounds great for publishers, but hurts everyone in the longer-term. It takes longer for books to move over to digital, people buy fewer books, and overall the economy stagnates.
Amazon has attempted to encourage lower prices on the Kindle store by increasing the revenue split on lower-priced books (books between $2.99 and $9.99 are eligible for a 70% royalty rather than a 35% royalty). This works great for independent authors, and you see a lot of books on the Kindle Store for less than $10, because the author makes more money in most cases. The problem is that e-books compete with paper books in the publishers' minds - every time they sell an electronic book on the Kindle or Nook, they have lost a potential book sale at the full hardback or paperback price. Never mind that they might actually make more money by pricing the book lower (because they would make more per book AND sell more copies) - the publishers still see e-books as a threat.
So what's the solution here? I think that e-books need to move to a system where they decline in price over time. It's fine for the price to be equivalent to a paper book at first, and the price should stay in lock-step over time. As the price declines, Amazon should encourage publishers to drop the e-book price as well. A related scheme would involve dropping the E-book price by X% of MSRP every three or six months until it hits a preset lower bound. In the shorter term, Amazon may want to consider dropping prices to price-match used book prices. By the time that a book hits $0.01 on the Amazon marketplace, there is a lot more supply than demand. By lowering the e-book price to $4 (the minimum cost with shipping on the Amazon marketplace), publishers could probably sell a lot of copies of these previously dead books.
I guess there is another solution, and that's the death of the traditional publishing model. Since anyone can publish a book on Amazon and sell it in the same place, there is no need to go through a traditional publisher. More and more authors are taking this route, because they end up with much higher royalties (no fixed costs to recoup), even if they sell significantly fewer books. Sure, authors still need to figure out how to market their books, but Amazon already does this to a degree, and I'm sure that they will become more effective at this over time (maybe Amazon will offer marketing services for a small fixed fee or per-book royalty). Plus, from what I have heard, the publishers' marketing efforts are pretty poor on all but the most popular books. It might be preferable to just come up for a bit of money to do electronic marketing, and to just consider that a cost of business. I'm sure that many well-known authors will switch entirely to digital over the next few years - the question is how quickly and completely this transition will occur.
In conclusion, I think that I'll keep buying paper books for the time being. Sure I love my Kindle, but the paper book economy is markedly better for the consumer right now. Plus, I still need a doorstop every now and then, and the Kindle just doesn't do a very good job with that.