Cheap eBook Authors Realize Even Cheaper Is Even Better

from the do-the-math dept

We've been covering how more indie authors are discovering that just releasing their works as incredibly cheap ebooks can be amazingly profitable. But just how cheap? Kevin Kelly highlights how JA Konrath, who is the leading experimenter in this arena, has just discovered that $2.99 might have been too high. As an experiment, he dropped the price on one book that was $2.99 down to $0.99... and saw sales leap from 40 per day to 620 per day. As Kelly notes (his original math was wrong, but now there's updated math and more, including Amazon's cut:
Do the math:

2.99 x 40 = 11.96

.99 x 620 = 613.8


Amazon pays out 35% for ebooks priced below $1.99, and 70% for ebooks that are $1.99 and up. So the math is:

2.99 x 40 = 119.60; x .70 = $83.72


.99 x 620 = 613.80; x .35 = $214.83

I don't think publishers are ready for how low book prices will go. It seems insane, dangerous, life threatening, but inevitable.
It's not even that publishers aren't ready for how low book prices will go... it's that they still don't even realize that the prices are going to go down at all. Instead, many of them are still looking to make the prices go up, not realizing the umbrella they're creating for disruptors.


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  1.  
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    Donnicton, Mar 10th, 2011 @ 8:43am

    I'm thinkin' ya need to change 11.96 to 119.6, there.

     

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    Anonymous Coward, Mar 10th, 2011 @ 8:50am

    Re:

    Yes, Please "Do the Math".

     

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  3.  
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    ChurchHatesTucker (profile), Mar 10th, 2011 @ 8:51am

    Re:

    Fixed in the original post, with an update on Amazon's cut:

    Amazon pays out 35% for ebooks priced below $1.99, and 70% for ebooks that are $1.99 and up.
    So the math is:

    2.99 x 40 = 119.60; x .70 = $83.72


    .99 x 620 = 613.80; x .35 = $214.83

     

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  4.  
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    DH's Love Child (profile), Mar 10th, 2011 @ 8:56am

    Re: Re:

    I would be interested to see what the numbers would look like if he had just dropped it from $2.99 to $1.99.

     

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    Phillip (profile), Mar 10th, 2011 @ 9:03am

    Re: Re: Re:

    I was about to say the same thing, since the author gets double the cut it seems like 1.99 but be a good price point as well with the current shares.

     

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    Dark Helmet (profile), Mar 10th, 2011 @ 9:06am

    Re: Re: Re:

    "I would be interested to see what the numbers would look like if he had just dropped it from $2.99 to $1.99."

    I'd also be interested in some details on all he had/chose to do to set himself up with this as an indy author. Editig services, or did he self edit (which sucks)? Did someone do the eBook layout for him, or did he do it himself (something I personally struggled with when I put Echelon out on Lulu)?

    I ask this not so much because I'm interested in the costs, but I'd like to try this out for Midwasteland and am having trouble finding a starting point!

     

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    Jesse (profile), Mar 10th, 2011 @ 9:08am

    Is that sustainable? Or does that simply reflect the novelty of such low prices?

    I'm all for experimentation.

     

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  8.  
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    Danny, Mar 10th, 2011 @ 9:09am

    Its not that they don't realize it...

    ...it's that they still don't even realize that the prices are going to go down at all.

    They realize it...and they are doing everything they can to stop it from happening. These publishers are as bad as the record and movie industries but they are on that same path to hell. They see times are changing and technology is driving prices down and instead of getting with the times they are fighting tooth and nail to maintain their relative choke hold. Don't be surprised if we start seeing stories of publishers trying to appeal to congress to create special protections for their business models.

     

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  9.  
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    Dark Helmet (profile), Mar 10th, 2011 @ 9:10am

    Re:

    "Is that sustainable? Or does that simply reflect the novelty of such low prices?"

    I think the theory is the domino effect. The more people you can initially draw in with the lower price point is important, not only in the immediate rise in revenue from that quantity, but in the re-exposure you get when that greater number of people read the book, like it, and pass the word along about how good it is and how inexpensive you can get it for.

    This, coupled w/a decent self-marketing program MIGHT work wonders. I'm interested in trying it myself....

     

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  10.  
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    The Baker, Mar 10th, 2011 @ 9:17am

    When I bought my Kindle a little over a year ago, I calculated that I would save money on my book purchases after a year. It hasn't worked out that way:
    1. I tend to buy more books because of the convenience.
    2. The price of many mainstream eBooks have gone up, in some cases the eBook is more expensive than the hard-copy.
    3. Many of the titles I want aren't available as a eBook.
    4. Some books just don't work as a ebook, photography and woodworking books are a example.

    I think the publishers and authors do need to reevaluate their business models.

    I'm glad I bought my Kindle, it is a very handy ... small, lightweight, easy to read and the battery lasts forever. I'll still be buying real books for anything I want to hold on to or refer to later. I'm still concerned that I don't really own the eBooks on my Kindle or PC.

     

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    ChurchHatesTucker (profile), Mar 10th, 2011 @ 9:18am

    Re: Re: Re:

    I'm curious as to Amazon's logic behind the payout difference at the $1.99 cutoff. Does that mean that most books at that level don't sell well?

     

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    John Doe, Mar 10th, 2011 @ 9:21am

    Re: Re: Re: Re:

    If I am not mistaken, $2.99 is the cutoff to get 70% cut from Amazon. Though dropping the price to $1.99 would not double the "cut", it might double the take home assuming the sales were the same.

     

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    Jason, Mar 10th, 2011 @ 9:26am

    Math reworked

    Say he sold 420 at the 1.99 rate a cut from the 620 but a fair and probably generous number.

    Math works out as:

    $1.99 X 420; X 0.70 = $585.06

    Which comes to more than double the take for a 1/3 of the exposure if it worked out that way. I too think that even Itunes with their $1.29 per song is testing the .99 cents threshold and books being more valuable than a single song could easily sustain the $1.99 price point for unknown authors and up for known authors. A Dan Brown book would easily fetch $5.99 close to release and should be brought down as paperbacks come out etc. to the $2.99 price point for him.

    Just food for thought.

     

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  14.  
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    Anonymous Coward, Mar 10th, 2011 @ 9:28am

    Re: Re: Re: Re:

    Lulu lists your books at $11 & $12. What determined this price point?

     

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    PaulT (profile), Mar 10th, 2011 @ 9:34am

    Re:

    I guess it depends on what you mean by "sustainable". Will it continue selling at such volumes indefinitely? No, but then very few books will, regardless of price. The long tail is still very much in effect as a rule, and that means most sales will be upfront - a process slightly disrupted by such offers.

    The real questions are things like: how many people bought the book at 99c who would not have considered it at the higher price point? Was there a knock-on effect, raising sales of the author's other books and physical copies (if any are offered) and/or readership of his blog? Will this have a positive effect on future sales, even if he initially offers them at the higher price?

    It's impossible to know for sure, but it's at least very likely that his paying readership has just increased. That can't really be a bad thing long term, even if 99c is all that the new readers will ever be willing to pay.

     

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    Marcus Carab (profile), Mar 10th, 2011 @ 9:36am

    Re: Re: Re: Re:

    I was reading about this author somewhere else (will look up the link) and he mentions that he has a regular designer/formatter who does the covers and typesetting, and takes care of all the distribution to all the different ebook stores. He said he pays just under $1000/book for this service.

    On the editing side I'm not so sure.

     

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    Justin, Mar 10th, 2011 @ 9:36am

    Re: Re: Re: Re: Re:

    Dark Helmet

    At $11 I will buy the hardcopy. The book is then mine. I would much rather pay $2 to $3 for an e-book and see you get more money from my purchase. But $11 is not my price point for an e-book.

     

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  18.  
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    Dark Helmet (profile), Mar 10th, 2011 @ 9:40am

    Re: Re: Re: Re: Re: Re:

    Hmm, the ebook should actually be at $5, which is still way too damn high and I'm an idiot for pricing it there.

    For the physical copy, Lulu has a high miniumum ($9 if memory serves) and for the author to make anything off a book sale, at a minimum it has to be at roughly $11 or so.

    Are you really seeing the Echelon ebook priced at $11? that shouldn't be right....

     

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  19.  
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    Anonymous Coward, Mar 10th, 2011 @ 9:46am

    Re: Re: Re:

    Or if he had dropped to exactly $2 to get the 70% rate. Doubling of his take home income would certainly change the results. Would it be cheap enough to attract sales?

    In all of this, I have to wonder too: at 99 cents, are people buying it because they want it, or just buying it because they have a passing interest and the risk / reward part gets to the point where they feel they can't lose? I have to wonder too if it's a bit of a commentary on the book itself, that so few people valued it at $2.99.

    Now, it might also be something to do with the way that Amazon displays the ebooks or makes them available. If they sort by price, example, would being at 99 cents have moved him on to an earlier screen, and thus upped his sales? This has been shown to be a good technique in app stores, where people seem more likely to take the cheap app or the popular app that is listed early. Could it be the price isn't the real key here, but rather display position?

     

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  20.  
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    Justin, Mar 10th, 2011 @ 9:47am

    Re: Re: Re: Re: Re: Re: Re:

    Just looked again. Echelon $11.16 MS reader & pdf
    Empyre $11.96 MS reader & pdf

    I'm going to look for them at the Bookstore by UIC.

     

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  21.  
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    Dark Helmet (profile), Mar 10th, 2011 @ 9:53am

    Re: Re: Re: Re: Re: Re: Re: Re:

    That's really wierd. I was just on my Lulu account and it's listed as $5 for the eBook.

    Tell you what, if you want to email me at my email below and let me know your format of choice (PDF, EPUB, etc.), I'll just send it to you.

    Just promise that you'll consider buying the next one I put out!

    tim at digeratigroup.com

     

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  22.  
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    Dark Helmet (profile), Mar 10th, 2011 @ 9:55am

    Re: Re: Re: Re: Re: Re: Re: Re:

    Ah ha! You were looking at the wrong book named "Echelon". I linked to mine below, but my offer still stands.

    http://www.lulu.com/product/file-download/echelon/12088469?productTrackingContext=search_ results/search_shelf/center/2

     

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  23.  
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    Deirdre (profile), Mar 10th, 2011 @ 9:57am

    Re: Re: Re: Re:

    J. A. Konrath blogs here: http://jakonrath.blogspot.com/ He give excruciating detail about his experiences as an author including numbers both from his trad publishers and his current situation.

    There's also a guy named John Locke who was a niche insurance salesmen and now has 7 books on the Amazon Kindle top hundred bestselling books. There's a guest blog post by him that is fascinating.

     

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  24.  
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    Dark Helmet (profile), Mar 10th, 2011 @ 10:15am

    Re: Re: Re: Re: Re:

    Absolutely perfect. I'm going to check those out, thanks!

     

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  25.  
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    Stephen, Mar 10th, 2011 @ 10:19am

    from the editor's desk

    Two major business issues stand in the way of lower book prices: the author's advance and a lack of sales data for books at lower prices. Konrath doesn't have to worry about either, of course, by paying himself and developing the data as he goer.

    Regarding advances: let's say you want to acquire a project that you think will net 15,000 copies in hardcover, given how comparable books by authors with comparable platforms have sold. If you price that book at $25, it will throw off an advance of $46,875 at standard trade retail royalty rates (10% on the first 5000 copies, 12.5% on the next 5000, and 15% thereafter). Pricing the book at $26 throws of $48,750. Pricing the book at $27 throws off $50,625. Given that offers are usually made in round numbers, that the $25 price would get you an offer of $45,000 while pricing it at $27 would get you $50,000, which might be what the author wants or needs. So you pay the $50,000. Now you're locked into that $27 price tag.

    Of course, most trade publishers don't look at the numbers this closely and might just offer $75,000 or $100,000, imagining that somewhere along the way the extra $25-50,000 worth of underpants they bought will somehow turn into profit. Thus, paperbacks by John Grisham, he of the seven- or eight-figure advance, cost $10.

    Let me add one thing to the side of the topic: another reason for higher prices now is the discounts given by the chains. If you charged $22 for a book five years ago and it sold fine, but now the chains are offering a 20% discount, why not price it at $27? The final price is still roughly $22. It's not that prices have gone up; it's that now there's discounting.

    Anyway, here's the key to the second issue, which is a much bigger one, I think: "how comparable books by authors with comparable platforms have sold." When a rep goes into a bookstore and pitches a book, the buyer immediately looks up the sales of the author's previous books and any comp books on the computer. Then he orders accordingly. For instance, if the author's last book sold 2000 copies at B&N, B&N likely won't be projecting anymore than that unless major media coverage is likely. These comp books were assuredly sold at a similar price to the one being pitched.

    So the problem with lowering prices in order to stimulate more sales is that there is no database of sales of books at those lower prices to use as a model. There are examples here and there, like Konrath, but nothing wide-ranging. So publishers can't build a p&l around a book with a lower price and consequent higher sales.

    In addition, hardcovers that have been published at lower prices than comp titles are actually seen as being somewhat devalued by it, which then hurts sales. I would also think that, with so many books given as gifts, a lower price hurts the gift value too (books are the rare product that come pre-tagged for all to see). So there is a cultural bias against lower prices too.

    Some might say ebooks change the rules. That may be true. What ebooks don't change, though, is the publishing infrastructure that has prices fixed in catalogs, then fed out the etailers, and those etailers better have the same price or there will be hell to pay. It's easy to play with the price of one book, when it's your book and you're selling it. It's tougher when you don't sell your own product directly for the most part, and a price drop could be read by an agent and author (and some corporate master) as a way to hurt their bottom lines.

     

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  26.  
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    Rick, Mar 10th, 2011 @ 10:28am

    Free is even better

    I've been reading on my iPad using the Kindle app for about a year now and before that using my iPod touch. At first I would only ever get free books. I've not been a big reader in the past so I'm never sure what to get and didn't want to waste money. One thing I've found is that with some authors who have a series of books will start off with the first one as free. This is what finally made me pay for my first ebook when I wanted to read the rest of the series. In this case the other books were also very affordable at no more than $5.00 each.

    Interestingly, the indie author of this series has now been picked up by a publisher. So for him I think the free book paid off in terms of sales for others in the series and getting him a publisher. Here is the first book in the series for anyone interested. The Crown Conspiracy (The Riyria Revelations)

     

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  27.  
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    Rui Cruz, Mar 10th, 2011 @ 10:30am

    Who needs publishers any way?

    Who needs publishers any way? they are doommed... From the producer to the consumer with no stop between. They are history...

     

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  28.  
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    Phil Bowyer, Mar 10th, 2011 @ 10:32am

    Let me also point out that the cut off is $2.99 not $1.99. This post also doesn't tell the whole story.

    Joe was a successful author, signed to a publisher long before this "experiment". He has since gone Indie, but he has several books out, which is key. The more books you have available, the more they cross sell each other and help increase sales.

    It's also important to note that it's not JUST the price that is responsible for the jump in sales. Yes it helps, but marketing and a bunch of other factors are in play here, like reviews, tags on page, and writing - can't forget the quality of the actual story.

    Someone asked if the model is sustainable. Too hard to tell, but if I had to guess, I would say yes. My book is for sale on both Amazon and B&N and sales have grown steadily over the past few months since I released it. I know several authors are having the same experience. Some, like Amanda Hocking, are knocking it out of the ball park. We are defintely experiencing a shift away from the trad publishing model. There will still be winners and losers, but I think there will be more winners, and we won't have the gatekeepers that exist with the agents and publishers.

    I love Techdirt for bringing attention to this stuff, but I just wish they'd move past the highlights and give the real story as it's much more interesting.

     

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  29.  
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    David (profile), Mar 10th, 2011 @ 10:35am

    Re: Got a kindle

    I would never have bought a Kindle, but I got one as a gift. so, for me the practicality of buying books on it is increased. the only books I am hesitant about are, like you said, more technically based books. I am a culinary student, in addition to being a full time programmer, and can't see buying my school books on kindle...

     

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  30.  
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    Anonymous Coward, Mar 10th, 2011 @ 10:50am

    "I think the theory is the domino effect. The more people you can initially draw in with the lower price point is important, not only in the immediate rise in revenue from that quantity, but in the re-exposure you get when that greater number of people read the book, like it, and pass the word along about how good it is and how inexpensive you can get it for.

    This, coupled w/a decent self-marketing program MIGHT work wonders. I'm interested in trying it myself...."

    I think the broader point, though, is not whether this is sustainable for individual authors, but whether reducing ebook prices actually stimulates the market, or just steers people's choices of book.

    It's totally unsurprising to me that one can massively expand sales of an ebook by setting the price far below the market average. The question really is what happens if/when the tide is turned in that direction, and everyone starts significantly lowering their prices.

    So, if Book A that you're interested in costs $5, and Book B that you're equally interested in costs $0.99, you'll probably buy B. If the price of A is also just $0.99, will that mean you choose between them on some other criteria, or that you buy both? If the former, it's likely that the volume of books you've been consuming has been determined by the amount you want/are able to read; if we have lots of book consumers like this, then a trend to lower prices would simply reduce margins in the long-run, with no positive effect on demand. If, OTOH, you do the latter, and buy both books, then it probably means that your appetite for reading was previously being constrained by your ability to afford the reading-matter you wanted; when we have consumers like this, we can see that reducing the cost of books/ebooks, while obviously lowering the margin per copy, could also cause the book market to expand.

    On the basis of no research, I would guess that a typical book-reader in North America, Western Europe, or Japan (to name a few rich countries/regions) can already afford to buy as many books as they can read. Certainly, as someone living in the UK, and with average or possibly below-average disposable income, my bookshelf contains many as-yet unread volumes. I think the elephant in the room - which may actually turn out to be the saving grace of publishers - are the emerging markets, where books are still an unaffordable luxury, and knowledge-hungry people simply go without the literature they desire. Here, if publishers were creative and open-minded enough to dramatically lower their prices, I think they could shift massive volume.

     

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  31.  
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    Marcus Carab (profile), Mar 10th, 2011 @ 10:53am

    Re: Re: Re: Re: Re: Re:

    Ah, Locke is who i was thinking about in my comment above - not this guy.

     

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  32.  
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    Dark Helmet (profile), Mar 10th, 2011 @ 11:02am

    Re:

    Well, perhaps we can look to the music industry for answers on this one. On the whole, the production of music is way up as prices have gone down (including $0 piracy), as is music consumption. Perhaps the effect we'll see will be a return to reading once the prices are all so competitively lowered that there's little economic or mental barrier to getting the books?

    The additional benefit of not having to have loads of shelf space for paperbacks won't hurt either....

     

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  33.  
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    Phil Bowyer, Mar 10th, 2011 @ 11:18am

    Re: Re:

    I think we're already there. Fortunately the publishing industry (self pubbed) is ahead of the music industry. Some authors have realized that they can sell at a lower price, keep all of the royalty, and as a result make more money giving the fan what they want and how they want it.

    The music industry waited too long for that, which is why it's having the problems it is. They have other challenges too, but the slowness to respond to changing trends and giving the peeps what they wanted really killed them.

     

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  34.  
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    Phil Bowyer, Mar 10th, 2011 @ 11:23am

    Re: from the editor's desk

    I agree 100%, which is why the publisher model is doomed. Authors can go direct to fan and make more in the long run. Publishers simply can't win these days.

    Authors can make money selling at $0.99, publishers can't. Authors can engage and build relationships with fans, publishers can't.

    Publishers just don't have the value they used to. Sure they provide services like editing, but those services can be acquired elsewhere for much cheaper, also allowing the author to keep their rights.

     

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  35.  
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    Mike Masnick (profile), Mar 10th, 2011 @ 11:34am

    Re: Re:

    Fixed...

     

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  36.  
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    PRMan, Mar 10th, 2011 @ 12:17pm

    Re: Re: from the editor's desk

    Which is exactly why publishers need to cave a little on e-book prices. E-Book sales are new. They're not in you catalogs. You said it yourself. They don't figure into the advance, so they are pure gravy. And yet some companies greedily try to charge MORE than the hardback. And most charge more than the paperback!

    So why not charge half the paperback price? $1.99? .99? At some point, it cannibalizes the books, but by pricing it at, say, half, you should make up the difference on volume, which costs you nothing with eBooks.

    If you don't lower the eBook prices, other authors will and they will replace the publishers.

     

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  37.  
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    David Liu (profile), Mar 10th, 2011 @ 12:24pm

    Re: Re: Re: Re:

    There are probably fixed costs that need to be taken into account with using the service, so at the 99 cent level, the proportion of sale price to costs warrants the higher tax.

    Of course, I'm just talking out of my ass here, and Amazon could really just be a bunch of dicks who want the extra money at that lower price.

     

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  38.  
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    Lawrence D'Oliveiro, Mar 10th, 2011 @ 12:54pm

    Re: I love Techdirt for bringing attention to this stuff, but I just wish they'd move past the highlights and give the real story as it's much more interesting.

    Why not offer an article? Mike seems willing to accept the occasional guest post from folks who know what they’re talking about.

     

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    Dark Helmet (profile), Mar 10th, 2011 @ 1:04pm

    Re: Re: I love Techdirt for bringing attention to this stuff, but I just wish they'd move past the highlights and give the real story as it's much more interesting.

    "Mike seems willing to accept the occasional guest post from folks who know what they’re talking about."

    And some of us who don't... ;)

     

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  40.  
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    Nathan Warawa, Mar 10th, 2011 @ 1:07pm

    Marketing number theory

    As much as we scoff at the "$.99" thing, it works. But considering it's near-universal application, our brains usually adjust for it, such that 9.99 registers as "10 bucks". We tend to shop logarithmically, such as we give little to no consideration to things at the $0.10 marker (look how often now you see nickels and dimes in those "Give a Penny, Take a Penny" trays), a quick snap judgement at $1.00 (ie Like=Buy), a brief value consideration at $10 ("Does this have a use for me?"), and so on and so forth for each order of magnitude. So, to maximize your profits, you want to price as close to the next mental step of the customer while putting some number play to use to ensure that they consider the price less than that next step. This book situation is a perfect example: $0.99 is less than a buck, so the mind doesn't go to risk assesment or visualising a possible buyers remorse situation... if there is a light interest in the product, and there's an easy way to acquire it, you hit that buy button. At $2.99, or even $1.99, or even $1.29 (*cough* iTunes *cough*), the mind sees that as "more than a dollar", and thus, more consideration than a flippant purchase. Now, back to the number 9. Considering it's abundant use, I suggest 8 be the new 9. If an 8 precedes a 9, it prevents the mind from rounding when making snap judgements. When you see "$0.89" or "$8.99", your mind no longer subconsciously rounds to the full next step. You see "significantly under a buck" and "significantly under ten bucks", respectively, so for $.89 songs, you may not even listen for the whole sample, and for that $8.99... whatever... hey, at least you'll get SOME use out of it, and if it sucks, well, it was "cheap" (look around your house and find just how many "under $10" items you have laying around).

    I'll end with a warning: pricing is just one aspect of marketing and doing business in general. If no one knows your product exists, or can't acquire it, it doesn't matter how you play with the pricing.

     

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  41.  
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    Phil Bowyer, Mar 10th, 2011 @ 1:25pm

    Re: Re: Re: from the editor's desk

    The problem is they can't lower prices. Too many mouths need to be fed out of that price, so it's just not feasible. eBook prices are $10 out of need, not necessarily greed. Although when eBook start getting more expensive than there paper counterparts, then greed is an issue.

     

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  42.  
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    Erin B., Mar 10th, 2011 @ 1:36pm

    Re: Who needs publishers any way?

    Okay, but for the meantime, how many self-published books did you read last year as opposed to traditionally-published books? I read 82 books last year and none were self-published. I'm not the most prolific reader, but that number is nothing to sneeze at and it wasn't a result of picking one bookshelf at the library and reading straight across that shelf. A fair number of the books were small press or public domain, but I'd estimate no more than %20-30 of those.

    Obviously, self-publishing is a viable option and has the potential to become increasingly so, but before we hit critical mass, something else is needed.

     

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  43.  
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    Erin B., Mar 10th, 2011 @ 1:38pm

    Re:

    Seriously, you might want to think about offering an article to Mike. Seems you have an interesting viewpoint; Techdirt's audience would very likely be keen to hear more about it.

     

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  44.  
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    PaulT (profile), Mar 10th, 2011 @ 1:48pm

    Re: Re: Re: Re: from the editor's desk

    Did you miss the part in this experiment where the revenues were higher than they were at the higher price? If "mouths to feed" is the issue, total revenue and not individual unit price should be the criteria.

    "eBook prices are $10 out of need, not necessarily greed. "

    I'd love to see a citation for this, given that eBooks require none of the printing & distributions costs that make up the bulk of the cost of a physical book. If they're even just the same price as a physical book, something's not right.

     

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  45.  
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    Phil Bowyer, Mar 10th, 2011 @ 1:49pm

    Re:

    Well, I suppose I could. Thanks for the idea and encouragement.

     

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  46.  
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    Stephen, Mar 10th, 2011 @ 1:50pm

    Re: Re: Re: from the editor's desk

    At the moment ebooks aren't considered part of projected sales, for the most part, at least not where I work; sometimes paperbacks are, especially at the bestseller level. That will change, though, as we get more data about what kinds of ebooks sell best. Right now we have maybe 12-18 months of decent data. A sale is a sale, and I'll count whatever I can to get more money for my authors.

    The reason an ebook can cost more than a hardback is because the latter is discounted by the retailer. That's why paperbacks are often more expensive than remaindered hardcovers.

    And cannibalization is not as big an issue as you might think. A recent BISG study showed that only about a quarter, I think, of readers were going ebook-only. That said, it still hurts the advance line. And if you can't project the revunue that lets you offer what an author can get from someone else, who may not care as much about advance writeoffs and profitability because they have the warchest to spend more, then you can't do a lot of great books. The incentive is to keep prices high.

    That said, show publishers that consistently and statistically--not anecdotally, theoretically or morally--that lower prices sell more books for greater revenue and royalties, and publishers will instantly go for the greater revenue and royalties.

     

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  47.  
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    PaulT (profile), Mar 10th, 2011 @ 1:56pm

    Re:

    "Certainly, as someone living in the UK, and with average or possibly below-average disposable income, my bookshelf contains many as-yet unread volumes."

    As a matter of interest, how did you obtain these books? Did you buy them new, at list price, or did you pick them up second hand or half price at Asda? If you're anything like me, you probably picked a lot of those volumes up via one of those sources, which don't exist with digital goods.

    Part of the problem with eBooks is that they have no second market value, and the bulk buying deals that supermarkets use to reduce prices cannot exist with an infinitely reproducible good. That makes them less valuable than the physical goods, hence further demand for the lower prices that much of the industry is trying not to offer.

     

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  48.  
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    Stephen, Mar 10th, 2011 @ 2:00pm

    Re: Re: from the editor's desk

    Your post inspired another thought in me separate from your responses to my initial post.

    You write: "Authors can make money selling at $0.99, publishers cant." You say this because publishers have obvious overhead expenses, plus publishers can only do so many books in a year so each book has to carry a minimum share of the load. If it's not going to carry its share, then it's not worth doing.

    But we're not looking at what it costs to self-publish, let alone write a book. We can't just look at one side of the author's ledger, how much money he made. We also have to look into what he did to make that money. Sure, like bands and any start up business, they'll suffer anything to promote their art, but what are the costs of that? Does the compensation make up for the hours they put in? We have to look at self-publishing as a business, not the rewards of artistry, especially when the complaints against publishers would require them to not act like businesses looking to make a profit.

     

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  49.  
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    Stephen, Mar 10th, 2011 @ 2:13pm

    Re: Re: Re: Re: Re: from the editor's desk

    I've written about the actual costs of an ebook several times before. Short answer: it's not nothing, and there's more to the cost of a book than just the printing and paper.

     

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  50.  
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    Phil Bowyer, Mar 10th, 2011 @ 2:20pm

    Re: Re: Re: Re: Re: from the editor's desk

    Paul, there are costs involved with eBooks. Depending on your book size, Amazon charges the author a delivery fee. I don't remember what that is off the top of my head, but it's a tiered system. I'm sure the big pubs have special relationships w/ AMZN that can get around that, but it does exist.

    There's also formatting costs (which if you believe the publishers, it's actually more than printing - yeah I know, I don't buy it either), but it still is a cost.

    There's also rights. Typically, eBook rights are separate from printed book rights. It's all negotiated at the same time, but it's a different part of the deal. The author usually gets 25% for ebooks.

    There's other things too, like paying someone (a team most likely) to manage the digital distribution. Some places like KOBO are very strict on how they receive data (they're a lot like Apple). Someone has to deal with getting the titles listed and lets not forget the accounting aspect and a wealth of other things that go into making it all work. All of these people need a paycheck, hence the "mouths to feed".

    So, while it's cheaper to produce an eBook, it's not fair to say there's no cost associated with it.

     

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  51.  
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    Anonymous Coward, Mar 10th, 2011 @ 2:21pm

    The math:

    Above $1 = less recurring expenditure.
    Bellow $1 = increased recurring expenditure.

    Above $10 = only the top 20% of the population expend more than once in a month.

    Country barriers apply if you have an old distribution system they will try to make you sign an exclusive deal which is bad, you want to reach everyone in the world with prices bellow $1 and have them all pay you again and again and again, not once every 6 months.

     

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  52.  
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    Anonymous Coward, Mar 10th, 2011 @ 2:26pm

    Re: Re: Re: from the editor's desk

    The top selling books on the Kindle are almost all, except for 2 no-indy, indies.

    There is your millionaire indie already that is selling $500.000 per month and the others fallow selling between 50.000~100.000 per month, I say that pretty much covers all costs of living for an author who don't want to use a publisher anymore, they can do it all by themselves, lower the price and make a living.

     

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  53.  
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    PaulT (profile), Mar 10th, 2011 @ 2:28pm

    Re: Re: Re: Re: Re: Re: from the editor's desk

    "Short answer: it's not nothing, and there's more to the cost of a book than just the printing and paper."

    I understand that, but I'm not talking about those costs. The simple fact is that you have the initial costs of creating the book, then the marginal costs of creating copies. With a physical book, the latter costs are significant and have to be recouped directly. Paper is expensive, as is printing, and there's a significant cost involved with things like logistics and inventory management.

    But with eBooks, none of those exist. Once you get past the initial costs, the marginal costs are low, and don't scale the way that physical print runs do. So, why are eBooks so expensive? I'd love to hear an explanation as to why a product that is worth less than a physical book (no resale value, can't lend it to friends, etc.) is justifiably the same price a physical book with all its added expense to produce the copy I'm holding.

    Bear in mind that the price, along with DRM, are the major reasons why I buy second hand physical books instead of newly minted eBooks.

    "I've written about the actual costs of an ebook several times before."

    Do you have a link? I haven't read it, and I would like some more information. I'm always open to some additional facts from insiders.

     

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  54.  
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    Phil Bowyer, Mar 10th, 2011 @ 2:36pm

    Re: Re: Re: from the editor's desk

    Stephen, you're right there are costs to self pubbing. But the cost of writing the book is the same regardless of whether it's trad pubbed or self pubbed. Actually, self pubbed authors can start earning money the day it's ready, rather than waiting the usual year or so before it's published-- and that's assuming they already have an agent that has accepted it. It could be years from "the end" to published the trad way - what's the author supposed to live on? What is the cost of all those lost sales by not getting it listed?

    I do agree with you that there are costs involved in self pubbed that often get overlooked. Book covers, editing, knowledge and time to do everything necessary. These costs can be controlled though, because I can hire someone to edit my book for a flat cost. I don't have to give them 25% for each book sold. Same goes for every service a pub provides - you are paying them a lot more than you would just contracting out. It's like paying the gardener a percentage of your house for cutting the grass. Doesn't make sense today.

    I don't think anyone said that it's not hard work. It's damn hard work. I do agree that it needs to be looked at as a business, which not many artists do sadly. I'm trying to change that mentality through my "Start Up Model", but the art always takes center stage.

    I get that you're part of the system that I've been condemning, but it's not personal. I don't think you're a bad guy, I just think that we live in a different world now where publishers don't have the value they used to.

     

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  55.  
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    Deirdre (profile), Mar 10th, 2011 @ 3:29pm

    Re: from the editor's desk

    One of the largest independent erotic romance publishers-- Ellora's Cave, who puts out both digital and paperback editions-- recently announced that they were going to reduce their prices-- Here's a quote from Jane Litte's Dear Author blog:
    Ellora’s Cave’s pricing at retailers like Amazon and Barnes & Noble has been outrageously high. This is because EC’s existing contracts pays royalties based on the cover and if EC lowers the retail list price then (according to how the contracts are structured) EC would lose money on the sales at third party retailers. The stated goal is to lower prices but “adjust royalties so that EC makes no less than it does now and the author makes more that currently due to increased sales.” The internal email goes on to state that ten authors have been recruited to test a lower price point with a reduced royalty rate of 30% cover price. At the lower price, EC will need to have “at least two-and-a-half times more sales from the vendor sites to compensate for the lower per-sale income.”
    The whole post is here: http://dearauthor.com/wordpress/2011/03/09/wednesday-midday-links-upcoming-rt-convention-avon-impuls e-ec-lowers-prices/ Erotic romance is a big seller in digital. However, as Jane noted, EC's prices were considered outrageously high at between $2.49 for a short short story (Called *ahem* Naughty Nooners) to $15.95 for novels over 100k words. The fact that they are even willing to test this with a few authors is significant of the need for lower prices in order to move downloads. An author chimes in on the posts stating that her book with EC at $11.98 on Amazon had sold dismally compared to her other "more reasonably" priced work. I think, not all, but a significant number of ebook buyers are very cost conscious, especially when they are buying genre for leisure reading. I bought five independent Kindle books this year. Two were some of the best writing I read this year, two were entertaining and fluffy, one was extremely painful. Very, very, very painful. Hint: if the sample sucks don't be optimistic and think it will get better.

     

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  56.  
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    BigKeithO (profile), Mar 10th, 2011 @ 3:50pm

    Re: Re:

    I know that when I see a $0.99 ebook in the Kindle store I don't think twice about buying it. Anything above $4.99 I usually think long and hard about, the wife is the same way.

    $0.99 is a no brainer, I'd be surprised if more people didn't feel the same way.

     

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  57.  
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    BigKeithO (profile), Mar 10th, 2011 @ 3:53pm

    Re:

    I had this concern with a Kindle as well, not actually owning the book was a huge turn off.

    So I did a little research, downloaded "Kindle for PC" and a handy little script called "Skindle", suddenly the DRM on the books doesn't concern me. Any book I've purchased is stored safely on my PC, DRM free.

     

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  58.  
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    Stephen, Mar 11th, 2011 @ 2:21pm

    Re: Re: Re: Re: Re: Re: Re: from the editor's desk

    First of all, I'm with you: I make books, and I generally only buy used ones because of the price. So, as a consumer, I would love to see the cost come down.

    Also, you'd be surprised (as a consumer) and terrified (as an author) how many books never sell even half their print run, let alone get reprinted. So I would suggest that the price of an ebook come down after its paid out a certain numbers of copies (to carry its weight of the production costs of the book), but the fact is most books would never sell enough to justify this.

    I'm afraid you'd have to search the site for my thoughts on the costs of book productions. I've gone into it several times over the years.

     

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  59.  
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    Stephen, Mar 11th, 2011 @ 2:33pm

    Re: Re: Re: Re: from the editor's desk

    Yes, the cost of the labor and time in researching and writing a book is the same however it's published, but the difference between self-publishing and having another publish your book is the outlay of upfront costs from editing the book to selling it into stores. See Cory Doctorow's essay in the recent PW on his own self-publishing experiment and the money he made.

    And one of publishers' biggest costs is the advance. What's often not talked about is, publisher's usually overpay. Most books don't earn out half their advance. So an author could make more money by going with a publisher because it's more than likely the book will fail.

    People can bad mouth publishers' all the time for being greedy, but the fact is, publishers take on all the risk of a project--and get a fraction of the reward--not paying back unearned advances and accepting returns of unsold copies. They're the ones who lose when a book fails, not the author or the store.

    In an ideal world, I'd kill the return policy and see author's return some percentage of their unearned advance, that is, have stores and authors take on some of the risk inherent in the system. But that will never ever happen. Oh, the squawking from stores and the Author's Guild if some publisher even suggested it!

     

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  60.  
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    nasch (profile), Mar 12th, 2011 @ 9:07am

    Re: Re: Re: Re: Re: Re: from the editor's desk

    Depending on your book size, Amazon charges the author a delivery fee.

    Is this a flat fee per copy? If it's not per copy or it's a percentage, then it matters little to the price.

    There's also formatting costs

    This is a fixed cost, which doesn't factor into price.

    There's also rights... The author usually gets 25% for ebooks.

    A percentage cost, so as the price goes down so does the cost. So this doesn't matter.

    There's other things too, like paying someone (a team most likely) to manage the digital distribution. Some places like KOBO are very strict on how they receive data (they're a lot like Apple). Someone has to deal with getting the titles listed and lets not forget the accounting aspect and a wealth of other things that go into making it all work. All of these people need a paycheck, hence the "mouths to feed".

    This is all fixed cost, so doesn't affect price. And as PaulT said, mouths are best fed by maximizing profit, not per unit price.

    So, while it's cheaper to produce an eBook, it's not fair to say there's no cost associated with it.

    Of course there's cost, but you haven't mentioned any costs that would actually affect the price. Are there any costs that are incurred for each copy sold, and are not a percentage of sale price?

     

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  61.  
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    Anonymous Coward, Mar 14th, 2011 @ 6:56am

    Re: Re: Re: Re: Re: from the editor's desk

    "What's often not talked about is, publisher's usually overpay. Most books don't earn out half their advance. So an author could make more money by going with a publisher because it's more than likely the book will fail. "

    Interesting point.
    "...publisher's usually overpay..." So publishers have no idea what the actual value of a book is? I will grant that one.

    "So an author could make more money by going with a publisher because it's more than likely the book will fail"
    But if you remove the physical distribution costs and the publisher overheads... and then are able to price the book much, much lower - will it still fail? This one I think would surprise you.

     

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  62.  
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    Anonymous Coward, Mar 14th, 2011 @ 7:05am

    Re:

    Absolute bullshit.

    At almost $30 US dollars for a *PAPERBACK* I can not afford to read. My collection bought in the good old days of Asimov et al is falling apart from being re-read to death.

    The font gets larger - the books get thinner and the price jumps 2000% in just a few years.

    Ebooks at $1-2 dollars and watch me buy known authores entire back collections - watch me buy names I have never heard of that look even vaguely interesting.

    Until then watch me Infringe IP with 7GB torrents of ebooks and only the odd "donate" click on an authors site (usually only those that are smart enough to make some attempt to offer their work at a humane price.

    /rant - sorry has to get it off my chest. Dropping prices increases the market.

     

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  63.  
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    Kaitlyn, Jul 27th, 2011 @ 12:07am

    Is the printed book...

    Is the printed book dead already? Or still dying? I think neither. The love of printed words on paper still exists and will survive in some form or another. Anyone remember the huge 'zine craze? It's still going on in that city where the 90s never died (Portlandia, looking at you).

    Imagine - if newspapers and tech blogs focused on the accomplishments of the printing industry instead of the next new gadget it will be read on. Or better yet, focus on independent printers and the indie bookstores that still exist and do some amazing work like the ones in NYC and the Northwest.

     

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  64.  
    identicon
    Anonymous1, Oct 5th, 2011 @ 1:07am

    Re: Its not that they don't realize it...

    @Danny, regardless of what publishers may or may not be charging, trying to earn a living is not "evil", as you put it. I'm an author and I won't work for 99 cents. End of story. In fact, I won't even turn my computer on for 99 cents, let alone spend hours of MY time working on material so I can earn 35 in royalties on it from Amazon (which is how much authors get when selling at the 99 cent price point point). No.

    And you brought up the music industry and said music companies are "evil". Don't you understand that people have to eat? How can a band (of 4 or 5 people) sustain themselves on 99 cents? Huh? They buy their own equipment & guitars they need, studio, and so on. How are they supposed to sustain with that? Oh, but you still expect quality music with sound engineers.

    And before you start threatening and blustering that we artists had better wake up and do as we are told if we ever want to sell, I say YOU better wake up. Your precious Kindle device is worthless without books and content to put on it. Got that? Your iTunes is meaningless without musicians providing that content. The minute they stop providing content, it's over, and you'll get the ameteur garage bands you deserve to get at that price point.

    Same with Kindle. You're not going to attract talent at the 99 cent price point. There may be one or two authors, but I can assure you they'll grow tired of slaving away for you for a 35 take-home royalty, coupled with the critical, cheap and demanding attitude so many bargain hunting Kindle readers seem to have.

    And the same goes for game developers developing games for the Android Market for 99 cents. Amazon, Apple, and Android are using artists to make content to enhance their devices & make them seem more desirable. We provide entertainment but we are not your slaves by any means, even though you clearly feel we are. We do NOT have to provide content for you. Since we're not earning much on this stuff anyway but 99 cent, all we have to do is walk away. Most of us need day jobs because we can't sustain ourselves on creating content to begin with, so we can walk away & it won't hurt us financially. The 99 cents just makes it easier.

    It's something you need to really consider. And like I said, musicians, writers, and game developers will stay on, but they will be ameteurs producing garbage & dross. You won't get any GTA, Fatal Frame, Silent Hill, Half-Life 2 or Resident Evil on 99 cents. No, those artists expect to be paid for the hours of entertainment they're providing you with, and the work they've done.

     

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  65.  
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    Anonymous1, Oct 5th, 2011 @ 1:21am

    Re: Its not that they don't realize it...

    @Danny, Oh and one more thing. I just noticed you brought up the movie industry, TOO?

    Let me guess, you expect movies tickets to cost 99 cents as well, huh? ALL art should be 99 cents, right? Whether it's an Android game, a Broadway musical, a painting, an ebook, a song, a mural, a sculpture, a feature film...all art should cost you the same. Am I right? Well, SURE, I don't see a problem with feature films that cost 99 cents. But don't expect anything more than Youtube. Don't ever expect The Departed or Avatar, just Youtube.

     

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  66.  
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    PaulT (profile), Oct 5th, 2011 @ 4:48am

    Re: Re: Its not that they don't realize it...

    A late comment, but: 99 cents? I don't see where anyone's asking to work for that...

    Oh, it's actually 99c * (the number of copies you sell - publisher costs). You're not being asked to work for 99c, any more than Lady Gaga was asked to work for 99c when Amazon sold her album for that.

    Sorry if you think this is unfeasible. Maybe you're in a niche market (in which case find ways to monetise this), or maybe you need to find better/less expensive publishers, or even self publish. But, you don't get to dictate the market because you think you're "worth" more.

    If I'm a Kindle user, I won't pay more than $5 for a non-resellable digital file that I'll probably only read once. Less than that if you're an unfamiliar author to me. I don't care much you whine, I won't pay more than $5 for a Kindle file. Lower the price? Maybe I will. Your choice as to what you do, but don't whine about piracy or being expected to "only get 99c" when your sales volumes are low.

    "We do NOT have to provide content for you. "

    Similarly, WE do not have to buy what you created, at a pre-specified price, to justify your feelings. I'll buy something else, thanks.

    "You won't get any GTA, Fatal Frame, Silent Hill, Half-Life 2 or Resident Evil on 99 cents."

    You can if you wait long enough. Not everybody has to buy new, or at full price, which is something an author should be fully aware of.

    Besides, what if I don't want those games, and I only want Angry Birds? Sold at 99c, for great profit to all those involved. It's a shame that you think some viable areas are beneath you, but that's probably why most artists aren't good businessmen.

     

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  67.  
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    nasch (profile), Oct 5th, 2011 @ 6:04am

    Re: Re: Its not that they don't realize it...

    The short version is: we don't need you. If you can't make a living at market prices, step aside and make room for someone who can. If nobody fills your place, or if it's only "garbage" then you can come back and say I told you so. I wouldn't hold my breath.

     

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  68.  
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    nasch (profile), Oct 5th, 2011 @ 6:08am

    Re: Re: Its not that they don't realize it...

    1. You're arguing with a strawman. He didn't say "prices for everything will be 99 cents" he said prices are going down.

    2. You're assuming the only way to make a living at art is by selling copies. This is false.

     

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  69.  
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    Snaggle-toothed, Oct 7th, 2011 @ 3:07am

    Re: Re: Re: Its not that they don't realize it...

    I'd wager you need entertainment creators more than they need you, Danny.

     

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  70.  
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    nasch (profile), Oct 7th, 2011 @ 2:59pm

    Re: Re: Re: Re: Its not that they don't realize it...

    I'd wager you need entertainment creators more than they need you, Danny.

    Commercial entertainment creators need people like me. Without us, they go out of business. People like me, however, don't need commercial entertainment at all. We like it. We want it. We even pay for it. But we don't need it. If there weren't any, we would make do with amateur entertainment, and probably even find much of it that's pretty good - even better than what we're used to now.

     

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