E-books? Think again

(From the Wall Street Journal)

Are E-Books Worth the Money?
by Brett Arends
Thursday, August 26, 2010

If you walk out of the cinema this week with a burning desire to read Elizabeth Gilbert's "Eat, Pray, Love," you can download it onto your Amazon Kindle electronic book reader — if you have one—for $12.99.

Then again you could just walk into your local Borders bookstore with a coupon and get the paperback for $10.

Barnes & Noble will charge you $12.99 to read the book on its e-book reader, the Nook. But it's only $9.36 (shipping may cost you extra) if you order the paperback at bn.com.

As a society, we have gadget-itis. No new machine that goes ping goes unsung. People stand in line for hours to purchase an iPhone barely distinguishable from the one already in their pockets. Amazon's newest Kindles sold out within days of going on sale. (Those who bought quickly will receive theirs this week.)

E-book readers are booming. Amazon (AMZN - News) says in the past few months sales of e-books have zoomed past sales of the paper ones. While e-books are still in an early stage—the Association of American Publishers says that so far this year they account for 8% of consumer books, compared to just 3% in 2009—the growth rate is dramatic. (This is one of the problems besetting Barnes & Noble, which has just announced a quarterly loss following a decline in sales of traditional books.)

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Beyond all the hype, are e-book readers a good deal? Are they worth the money? If so, how can you get the maximum return on your investment?

Here are six money tips for pennywise book lovers.

1. Casual readers probably shouldn't bother.

The median American book-buyer purchases just seven books a year, according to an AP-Ipsos poll in 2007.

An e-book reader right now typically costs about $150 (more on this below). Even if you save a couple of bucks per book by downloading them onto your e-book reader, the payback isn't going to be much for the casual reader. If you saved $5 a book, you'd have to buy 30 just to earn back your initial investment. If you only saved $2 a book, you'd have to buy 75.

I don't want to sound negative. I happen to think e-book readers are great. But that's because I read books avidly. (I've been known to take 10 books on a beach holiday.) If you are in my camp, e-book readers let you carry a library in your pocket or bag. But if you're a casual reader, they probably don't make much economic sense yet. (On the other hand, once you buy an e-book reader you will probably buy and read more books.)

2. The books aren't as cheap as they should be.

E-books are far, far cheaper to produce, distribute and sell than paper ones. There is no paper, no printing, no trucking and no retail space.

So they should cost a lot less to buy, but the deal often isn't anywhere near as good as it should be. Amazon has tried to drive prices for best sellers down to $9.99, but the publishing industry has fought back. A lot of best sellers go for $12.99 instead. That may be cheaper than the hardbacks, but the gap should be wider.

As in the case of Elizabeth Gilbert's runaway success, you may sometimes find the traditional version cheaper. Looking for Stieg Larsson's "The Girl Who Played With Fire"? It's $7.99 on the Kindle. I bought it in Borders, with a coupon, for $5.68.

Books are cheaper in electronic format, but not all.

3. Savvy readers read the classics anyway.

Why? Because they're free. From Aesop to "Zarathustra." From "Hamlet" to "Huckleberry Finn." They won't cost you a penny. These books are outside of copyright. Just go to Gutenberg.org and download them. Thousands of them. And they're better than most of the stuff published more recently anyway.

4. Be aware of the potential costs of buying a Kindle.

Amazon sells the best-selling e-book reader. It's a great product, very easy to use—much easier, I've found, than the competition. But Amazon has given the device a cellular connection and a keyboard so you can access its online bookstore any time, any place, to buy a book. Good for them. Not so good for you. The results are predictable: You may end up making lots of impulse purchases. Don't be surprised if you spend hundreds of dollars on books in your first year. (Amazon now sells a Kindle that only has a Wi-Fi connection instead of cellular. This may save you money, as the connection will only work in a Wi-Fi hot spot. By the time you've found one, you may have decided you don't want the book.)

5. Be aware of the costs of the rivals.

The main ones are time and hassle. The many rivals to the Kindle generally use a software platform from Adobe, and it can be a pain. Even worse: Adobe provides only very basic help if things go wrong. In extremis, you may find yourself emailing India. I asked Adobe why this was. A spokesman explained that because Adobe Digital Editions was given away for free, the company only provides "a baseline level of support, which is web-based," he says. This includes "an active user forum"—in other words asking other customers how to solve your problems. Good luck with that.

If you can overcome that problem, rivals do offer benefits that may save you money. First, they let you shop around for e-books at different online bookstores, and many run promotions. Second, they will let you borrow some e-books online from your local library. Third, many of them come without any wireless connection whatsoever. That means fewer impulse purchases.

6. And if you're thinking of buying a book reader—wait!

At least, hold off for a month or two or maybe even a few weeks. Prices simply have to come down. They may do so fast.

Amazon's first Kindles went on sale three years ago for $399. Its latest versions, out this week, start at just $139. That's cheaper than rivals. They're going to have to respond.

There's an upgrade cycle going on as well. E Ink Corp., the company that makes most of the screens, has developed a newer version with somewhat sharper contrast. (Handy if you're reading fine print, but not so important for most books).

In a rational market, we should see big price cuts this fall, especially as the last of the old models go on sale. Of course, that's in a rational market. Let me know if you ever find one.

Write to Brett Arends at brett.arends@wsj.com