eBook Economics: The Missing Manual

This post from Tim O’Reilly is required reading for those who are professionally (or otherwise) interested in understanding the economics of eBooks. Unlike a lot of the current screaming across the table that’s taking place between eBook enthusiasts and those who yawn at them or point out their obvious short-comings, O’Reilly takes a reasoned, rational, insider’s look at both the opportunities and limitations of the business of digital books. Obviously (to many who read this blog, at least) O’Reilly has unique insight into the topic. He’s written on the topic of business-models of digital book distribution since 1995 and, according to his post, the re-seller of digitally-published books, Safari, is now O’Reilly’s third largest customer behind Amazon.com and Barnes & Noble. (I’d like to ask him a clarifying question regarding that fact by wondering aloud where Ingram Book Co. would fall on that list — I’m surprised they aren’t #3.)

Again, O’Rielly’s post is about as crystal clear as it gets, straight from the CEO of a publishing company that caters to tech-professionals and tech-enthusiasts, an audience of gizmo early-adopters — and from someone who can only benefit from a wide-scale adoption of eBooks. Despite such apparent self-interest, he recommends to publishers — and would-be publishers — to stay realistic.

Money quote:

“My advice to publishers and authors is this: figure out what it costs to produce what you sell, estimate what kind of volume you’ll be able to achieve using the best available data, and then set your prices at a level that will deliver a reasonable profit from your efforts. Sound familiar? That’s what you do in business today. Don’t expect any suspension of the law of gravity. Leave that to the subprime folks, who followed on the heels of the dotcommers in coming up with new math that ultimately didn’t make any sense.

Then again, there are some ways to make money because of eBooks rather by from eBooks, but that’s another topic for another day.