Counterintuitive hypothesis: The most significant thing that Amazon and now Barnes & Noble have done for e-books hasn’t been the creation and updating of their dedicated reading machines. It’s the creation of a genuine marketplace for e-books, where consumers can pick up titles easily, publishers can offer them and make at least a little money, and [in Amazon’s case] even little guys can get their stuff out there. You might have needed the reading machines to push the marketplace, but the marketplace will continue to be relevant even if everyone decides tomorrow that they don’t actually want a Kindle anymore. You can already read e-books on computers, smartphones, and pretty soon video game consoles. Amazon sold the razors, sure, but they can sell you the blades even if you don’t buy a razor at all. That’s big.

But creating a marketplace isn’t just about syncing to a device and matching readers’ eyeballs to content. You also have to establish, respond to, and eventually stabilize readers’ and publishers’ expectations about sales, especially about price. 

This is harder than it sounds. How much should an e-book cost? How much should publishers have to share with the retailer? Just what are you buying? For hardcovers and paperbacks, these expectations have built up over a long time. This tweaked a bit when online sellers and big-box retailers started offering moderate-to-steep discounts over cover. None of this makes establishing norms for digital sales any easier.

For music, Apple pulled this beautifully in the early days of iTunes. At the time, CDs sold between 10 and 18 dollars for a typical album. This was actually really frustrating, because percentage-wise, it’s a huge variation. It was also an uptick from cassettes, which had rarely cost over $10. 

Apple just perched on the low end: every track is 99 cents, every album is $9.99. They were competing with the free (P2P or friend copies) and the physical (real discs with better sound quality that you could play in your car), and they found a way out. Round numbers (good retail numbers for any product), close to what we were used to paying (but still offering competitive advantage). And they held it there, even when big media companies huffed and puffed because they wanted to charge more for high-demand (or high-cost) products. Apple’s establishment of trust with the music-buying public won out. And held out. Singles still cost a single. Which makes the digital music marketplace oddly pure.

At Booksquare, Kassia Krozser argues that the same price-stabilization is beginning to happen with e-books:

At Digital Book World, I’m going to do a brief presentation called “The Case for the $75 eBook”, because there is a marketplace for high-priced ebooks. In fact, I think there’s a robust marketplace for higher priced digital books, and I believe I can make a strong case for these price points.

That being said (ha!), I don’t believe the publishing industry can make a valid, solid, logical case for pricing most narrative fiction (and some non-fiction) ebooks above $9.99. Not only is this price point being cemented in the minds of readers by retailers, but, let’s be blunt, publishers have done a lousy job of making the value argument. The near-cynical approach of publishers to producing and selling ebooks has backfired. The process, the pricing, the product has been weighed by consumers and they are not amused. They like the $9.99 and below price point. It makes sense to them.

So, yep, I’m predicting publishers will have no choice but to swallow this one and figure out how to make their business work with ebooks priced below $10. It’s better to initiate this change rather than scramble when the retailers start demanding better terms. You can do it, publishing industry, you can do it!

It’s true! Maybe it’s just because we’re already primed by iTunes albums, or because $10 is the low-end price of a good trade paperback, or that $9.99 is one of those psychologically great retail numbers (Just dollars and cents! Not tens of dollars!), but it’s got real power. 

For instance, I priced Stanislas Dehaene’s Reading in the Brain at both Barnes and Noble and Amazon. The book lists in hardcover at $27.95. At Amazon, it sells for $18.45 in hardcover and $14.76 for the Kindle. At Barnes and Noble, it’s $20.12 (huh?), or — yes — $9.99 for the e-book. 

Now this was easier because I like the B&N app for the Mac and I preordered the Nook. But if B&N sells its e-book for $18, I either buy the hardcover from Amazon or pass altogether. At $9.99, I bought it right away. I did the same thing for China Mieville’s The City and the City: Kindle $13.73, B&N $9.99. On the other hand, I sprung for The Complete Short Stories of Ernest Hemingway for almost $18 and still feel like I got hosed. 

Now, digital books also offer the possibility that books, like CDs, can be split and sold separately. Maybe I just want to buy a copy of “The Undefeated” and “In Another Country” — a taste of Hemingway, not the whole short-form corpus. Big publishers haven’t really done this yet. But among independents and self-publishers, the other price point that seems to be emerging — the symmetry with iTunes is astonishing — is the 99 cent short story. And again — this feels just about right, especially appealing to folks reading these things on their iPhones, who don’t want to leaf through a whole novel or anthology, right around the same price as a cheap iPhone app or a single song. 

But Krozser’s hypothetical $75 e-book suggests that there are still plenty of other price points and formats to be hammered out. Maybe $25-$40 is the perfect price for an e-textbook. Maybe a short, indie nonfiction pamphlet — 2011’s version of New Liberal Arts — could sell well for $3.99. Maybe digital copies of new books will be free for readers who buy the hardcover (factored into the sale price). It’s still wide open. But with competition between sellers and tug-of-war between customers and publishers, we’re bound to figure it out.