Traditional Publisher Ebook Pricing Harming Authors' Careers

from the the-industry's-'get-broke-quick'-scheme dept

We've covered a number of stories dealing with ebooks and their disruption of normal publishing. There have been a lot of growing pains in the industry as the ebook market continues to expand, replacing physical sales (and their associated margins and intentional bottlenecks) and knocking down a healthy number of barriers to entry.

Allegations of ebook price fixing are still in the air, pending the Department of Justice's investigation. No matter the final decision, publishers will still be free to set ebook prices as high or low as they want to. But if they insist on pricing themselves out of the market, they'll be seeing an increasing number of their authors decide to write their own tickets, as others have done with great success.

Mark Coker, founder of Smashwords, breaks down exactly how traditional publishing houses are shooting their own authors in the foot with pricing "strategies" that run in direct opposition to how people purchase ebooks. With ebooks expected to compose nearly 30% of trade book sales (in total dollars) in 2012, authors may be doing serious damage to their careers by selling their ebooks through traditional publishers.

Coker quotes from his RT Booklovers convention presentation, showing that there are certain "sweet spots" in ebook pricing—ones that show marked sales increases and, sometimes counterintuitively, higher author earnings than others.
One surprise, however, was that we found $2.99 books, on average, netted the authors more earnings (profit per unit, multiplied by units sold) than books priced at $6.99 and above. When we look at the $2.99 price point compared to $9.99, $2.99 earns the author slightly more, yet gains the author about four times as many readers. $2.99 ebooks earned the authors six times as many readers than books priced over $10.
If an author can earn the same or greater income selling lower cost books, yet reach significantly more readers, then, drum roll please, it means the authors who are selling higher priced books through traditional publishers are at an extreme disadvantage to indie authors in terms of long term platform building. The lower-priced books are building author brand faster. Never mind that an indie author earns more per $2.99 unit sold ($1.80-$2.10) than a traditionally published author earns at $9.99 ($1.25-$1.75).
This isn't news to anyone following along here at Techdirt. For some reason, though, many traditional publishers still feel that higher prices equal higher profits and fail to see that lowering prices will increase their sales and profits over and above what they can expect at their normal price points.

Certain members of the traditional publishing crowd argue that lower prices are unsustainable given built-in costs and that pursuing these price points will somehow "devalue" the written word. First of all, selling your product for more than the public is willing to pay is what's actually "unsustainable." And any explanations involving fixed costs will fall on deaf ears because consumers don't make purchases based on what they think the product is worth to the company selling it. They purchase based on what they feel the product is worth to them.

Secondly, if people aren't buying at $9.99 but they are at $2.99, then the product isn't "devalued." If you're selling many more units at a lower price, then your price point is closer to "dead on" than "undervalued."
The picture painted augurs well for indie ebook authors, but indicates that authors who continue to publish with traditional publishers might actually be damaging their careers. Look no further than the bestseller lists at Apple, Amazon or Barnes & Noble to see that indie ebook authors are taking eyeballs from the authors of NY publishers. As I write this, seven of the top 30 bestsellers in the Apple iBookstore are distributed there by Smashwords.
In the short term, existing publishers would do well to follow Coker's advice and start maximizing sales by lowering prices. Most publishing houses have already had the term "price fixing" pointed at them, and thinking that you can somehow outlast the consumers in a price war is just going to shove you to non-existence that much faster. Exclusive deals with authors won't mean much when no one's buying, and those authors are going to swiftly tire of minimal sales and miniscule royalties, especially when they can plainly see better opportunities outside the gates.


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    Anonymous Coward, Aug 9th, 2012 @ 8:17am

    this is exactly the sort of thing that is ignored in the UK. the strategy there is and always has been that to make more money the price has to go up. the number of times that has been proven the exact opposite of what really happens. public transport pricing is a good example.

     

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      Niall (profile), Aug 10th, 2012 @ 6:19am

      Re:

      The exception to this was London Underground. Many years ago, faced with an inevitable massive rise in passenger travel over their network that was way more than they could cope with, they openly declared that they were deliberately raising prices a lot to force people to use other public transport options, despite the fact that in a lot of cases they were the only practical (or possible) one.

       

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    Pinstar, Aug 9th, 2012 @ 8:23am

    Early High price points are well and good for books that are already established. I can bet that when the next Game of Thrones book is published, people will buy it the moment it comes out even if it is $10+. I think their outcry of "undervaluing" books is them seeing low initial prices not milking early adopters. Of course, this leads to book sales being funneled to a few individually successful authors while shutting out thousands of others.

    With the barrier to entry lowered, anyone can be an author and make money from it. I think their real, unstated, fear is that there will be more and more high-quality authors who's works take off in popularity...that are NOT locked into a contract.

    Even if 90% of these new 'casual' authors produce crud, there will always be the 10% who make bestseller quality stuff. The more raw authors allowed into the business, the more and more best seller quality books will see the light of day... and without a cent going to the publishing houses.

     

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      John Fenderson (profile), Aug 9th, 2012 @ 9:00am

      Re:

      With the barrier to entry lowered, anyone can be an author and make money from it. I think their real, unstated, fear is that there will be more and more high-quality authors who's works take off in popularity...that are NOT locked into a contract.


      You've just said succinctly what I've been struggling to put into words for years now about music (and, increasingly, movies).

      The cry from the old guard about piracy is not really about piracy, it's about losing control of distribution and production channels. They themselves have even said so in public a few times.

      Piracy is not a threat to them. A low barrier to entry is.

       

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        Edward Teach, Aug 9th, 2012 @ 11:39am

        Low Barriers to entry

        So why would a corporate entity wish to micro-control distribution and production channels?

        Usually, those are two aspects of a market that large corporate entities get others to do (think: car dealerships, or Archer Daniels Midland and farmers). Usually, you want to external costs and risks, not micro-manage them at great expense.

        I don't get it.

         

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          John Fenderson (profile), Aug 9th, 2012 @ 11:57am

          Re: Low Barriers to entry

          They have always wanted to do that. All car dealerships used to be owned by the automakers (most still are). All movie theaters used to be owned by the studios. It was anti-trust actions that made that change.

          The reason is twofold, and simple: first, they get a bigger cut from every point in the chain, and more importantly, they can prevent the emergence of new competitors.

          If you control all the means of distribution, then you can stop anyone else from being able to distribute a competing product.

           

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          PaulT (profile), Aug 10th, 2012 @ 12:58am

          Re: Low Barriers to entry

          "So why would a corporate entity wish to micro-control distribution and production channels?"

          To lock out competition, and give consumers no other choice than to buy from them. In entertainment, this means everything from creation to publication to marketing.

          "Usually, you want to external costs and risks, not micro-manage them at great expense."

          The entertainment industry is markedly different from traditional manufacturing in a number of significant ways. All you have to look at is how cinemas, radio stations, etc. have been bought out and controlled by the major corporates in that industry to realise they're not operating in the same way.

           

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      ltlw0lf (profile), Aug 9th, 2012 @ 9:26am

      Re:

      Early High price points are well and good for books that are already established. I can bet that when the next Game of Thrones book is published, people will buy it the moment it comes out even if it is $10+. I think their outcry of "undervaluing" books is them seeing low initial prices not milking early adopters. Of course, this leads to book sales being funneled to a few individually successful authors while shutting out thousands of others.

      I agree that many people will buy the book when it comes out at $14.99, but it appears that the publisher of that series isn't too dense. You can buy the first four ebooks at $30, and each book is available for $8.99. I have them all, except the last one. However, I suspect if they dropped the price in half, they would get more than double the purchases they already have. I bought them at $30.00 because I saw the value, but I know that many people won't buy them because the paperbacks are $4.99 and they can't see the additional value of ebooks.

      I have so many books in my physical library that I cannot see buying any more (need to buy a larger house,) but I still love reading so ebooks are the way for me to keep reading without needing a bigger house. I'd buy more ebooks if they were cheaper.

       

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        Travis, Aug 9th, 2012 @ 10:57am

        That is NOT a deal

        30 bucks for 4 ebooks is a deal?! I hope you were being sarcastic.

         

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          ltlw0lf (profile), Aug 9th, 2012 @ 1:30pm

          Re: That is NOT a deal

          30 bucks for 4 ebooks is a deal?! I hope you were being sarcastic.

          It isn't. As I said, if the publisher dropped their price in half, it would be a deal. However, $30 for 4 ebooks is better than $14.99 for each of the four, for a series that is "hot" right now. I bought them because I wanted them, and the price was in a range I'd buy them at.

          BTW, bought all of April Hamilton's books last night, and am beginning to read them. Also picked up R. Reid's Year Zero. Looking forward to reading through them all!

           

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        Johnny Shade (profile), Aug 10th, 2012 @ 7:50pm

        Re: Re:

        Well, you just basically stated my thoughts, but more succinctly. I do understand the bigger house issue. Currently house hunting for a place that has a Great Room where I can bulid floor to ceiling bookshelves with one of those awesome oak ladder/brass rail setups. Baen Books, you're the devil ;)

         

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      art guerrilla (profile), Aug 9th, 2012 @ 10:34am

      Re:

      according to Sturgeon's Law, 90% of ANYTHING is crap...
      plus/minus a couple percent, that is correct; so 90% of ALL scribblings WILL BE crap...
      art guerrilla
      aka ann archy
      eof

       

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    Anonymous Coward, Aug 9th, 2012 @ 8:29am

    A great use of stats to come to a misleading conclusion.

    You make a couple of basic errors. First off, you are comparing GROSS author revenue as an indie to net author revenue under the publisher model. That is to say that the Author may make more initial money selling cheaper e-books on a per unit basis, but from there they have to pay out any marketing and promotion they did - or to consider the time they spent to do it themselves, or for the people they hired to do it for them.

    Second, while you compare a unit to unit basis, you don't give any indication to the size of the potential market. An indie author who is a great writer but a sucky marketer would make much more on higher priced e-books with a publisher, because they would do what he sucks at - marketing the damn thing.

    Third, the emphasis on the ethereal "building the platform" is a bit misplaced. There is no proof of any one to one relationship between books sold and "platform" built. In reality, it could be argued that the very low price e-book makes the author almost irrelevant in the discussion, that people are often buying because it's too cheap not to, and MIGHT be okay. In those cases, it's almost a given that there would be little relationship between units sold and "platform" size.

    That runs into the final point, which is that at certain price points, even bad books may sell as people are willing to take a risk that the book MIGHT have the information or entertainment they are looking for. It's not an indication of a great marketplace, but rather of a basic crappy marketing concept called "being too cheap". The long term effect is potentially removing the potential for the higher price point, and then taking this entire graph and moving it in the 1 cent to 99 cent range, with similar results at 10 cents, as an example.

    The race to the bottom is easy to win - but is usually a loser when you get there.

     

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      anon, Aug 9th, 2012 @ 8:49am

      Re:

      Did you not read the article? Seriously, it has been shown that more and more indie writers are making a success, more and more people are realizing how easy it is to market there new books and really good books get great reviews while the lower quality books do not.

      If you personally think prices should be higher to distinguish quality you are very confused as to what people look for in a book. They are not looking to distinguish quality by prices they distinguish quality by the reviews.

      In the "olden" days people had to take the word of professional reviewers and people who were paid to review books, now anyone can write a simple review and people can quickly glance through a few to determine if they want to buy the book they are looking at.

      I know a lot of people have been reviewing Clive Cusslers latest books and saying how he seems to have lost his touch, his books just are not as good as they were previously, I am sure even if his books were priced lower he would still not sell as many as he has previously.

       

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        Anonymous Coward, Aug 9th, 2012 @ 9:05am

        Re: Re:

        "If you personally think prices should be higher to distinguish quality you are very confused as to what people look for in a book. They are not looking to distinguish quality by prices they distinguish quality by the reviews."

        Yes, I read the article. Can I ask if you actually read my full comment?

        My point wasn't that higher prices distinguish quality, that is never the point. It's that the easiest form of marketing is to cut the price. It's the most common marketing technique (best prices here!), but it's rarely very successful. For the most part, it's a margin killer, and worse is it can help to redefine the public's perception of the fair market price for the product.

        "In the "olden" days people had to take the word of professional reviewers"

        Yes, and in modern times, you can take review advice from individuals who may or may not be paid shills, or may be the author themselves pushing out fake tweets, misleading reviews, and such. So who knows? Moreover, as I mentioned before, when the price gets low enough, the review process goes away as well. It's almost not worth the effort to pass judgment on a ripoff 99 cent e-book, you just move along.

        " I am sure even if his books were priced lower he would still not sell as many as he has previously."

        At the lowest price point, he might sell a big volume anyway, as people say "it's not as good, but it's probably worth 99 cents just to see if you like it". There is a point in the price curve where you could potentially sell anything, even an empty file, and still get sales.

        Social media can only go so far in influencing people against the oldest marketing technique in the world: Cheapest price possible.

         

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          Anonymous Coward, Aug 9th, 2012 @ 9:13am

          Re: Re: Re:


          My point wasn't that higher prices distinguish quality, that is never the point. It's that the easiest form of marketing is to cut the price. It's the most common marketing technique (best prices here!), but it's rarely very successful. For the most part, it's a margin killer, and worse is it can help to redefine the public's perception of the fair market price for the product.


          Margins on an item aren't really relevant in terms of ebooks. You don't care what an individual item sells for as the cost to actually make 1 more is nil. You care about total revenue offsetting your time to write & edit it and make a little profit. Whether that comes from 1 sale, or 1 million really doesn't matter (in the short term...it may for building an audience and fans).

           

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            Anonymous Coward, Aug 9th, 2012 @ 10:35am

            Re: Re: Re: Re:

            "Margins on an item aren't really relevant in terms of ebooks. You don't care what an individual item sells for as the cost to actually make 1 more is nil. You care about total revenue offsetting your time to write & edit it and make a little profit."

            Well, that's not really true. You are pushing the theory of marginal cost, but even Mike knows that you cannot do a true marginal cost discussion on something that has pretty much all of it's costs up front. Mike will hammer the point, but it's pretty basic. Professors that teach the supply / demand curve will tell you that it doesn't work properly in this sort of case.

            What is also not discussed is that, in order to make the increased sales (as indicated on the chart), how much more effort much be put into marketing? How much harder do they have to work to find those customers? Remember, while in theory the market is the billions on earth, the reality is that most books have a much smaller potential market. If you exhaust the market quickly by selling really cheaply, you have almost certainly left money on the table.

            Let's just say it's nowhere near as simple as the original poster would like you to think.

             

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          Anonymous Coward, Aug 9th, 2012 @ 10:01am

          Re: Re: Re:

          My point wasn't that higher prices distinguish quality, that is never the point. It's that the easiest form of marketing is to cut the price. It's the most common marketing technique (best prices here!), but it's rarely very successful. For the most part, it's a margin killer, and worse is it can help to redefine the public's perception of the fair market price for the product.

          First, you have obviously missed the part where authors make more money by selling at a lower price point. Sure, your margin is lower if you sell at one-third the price; but at four times the volume, who cares?
          Second, I think the significantly increased sales volume at lower price points already says a lot about the public's perception of the fair market price of an ebook. Failing to meet that expectation is at best ignorance and at worst self-sabotage.

           

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          Old Man in The sea, Aug 9th, 2012 @ 6:05pm

          Total costs vs (Number Sold by Price Point) = profit/loss

          I am not an economist or an accountant. My background is engineering and computer science.

          Some simple ideas i was taught many years ago -

          For any product, there will be costs associated with the manufacture and sale of said product. The very first one has the most cost associated with it, each unit thereafter has an associated cost (generally much smaller). In the terms of ebooks, the cost of the initial copy includes all the time and effort associated with the authoring of it. For each additional copy the effective cost is very small fractions of a cent (let us give a figure of say .000001 cent to cover storage etc).

          We will then have the costs associated with the marketing of said items.

          Now if we look at a market of a couple of thousand sales, we can then calculate the amortised unit cost to break even. On top of this we then add what we want as a profit for our endeavour. This allows us to calculate the sales price. To this we then add any appropriate taxes (one of the two unavoidable things of life, the other being death).

          This gives us the price we need to sell at to make the profit.

          We then have to look at the perceived value of the product in the market place. What will people be happy to pay for this product?

          There are three options here:-

          1). Too expensive for the market, people won't buy it. At this point you have to make a decision as to whether to drop the price or not. Or even go ahead to make and sell said product. You may even need to look at whether to change tack and look at somehow increasing number of items sold to be able to reduce unit cost.

          2). Price matches expectation

          3). Too cheap for market, again may have the situation that people may not buy because of perceived lack of quality. Option here is to increase price to appropriate price and make more profit.

          In the real world, I have seen all three processes.

          There are many variations of the theme and your reputation also has an effect on what you can charge.

          In the end it is all about perceived value for money. Do I want to supply my customers with a product they want to buy from me and not someone else? Do i want to build a relationship with my customers so that they keep coming back to me?

          As is the main point of this site, connect with people and give them a reason to buy from you so that both you and them are happy with the transaction.

          regards to all and to all a good weekend

           

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      Tim Griffiths (profile), Aug 9th, 2012 @ 9:02am

      Re:

      " but a sucky marketer would make much more on higher priced e-books with a publisher, because they would do what he sucks at - marketing the damn thing."

      http://www.techdirt.com/blog/casestudies/articles/20120717/22485119738/if-this-is-what-bi g-publishers-call-promotion-no-wonder-theyre-trouble.shtml

      Yay for assumptions!

      For the rest of your post I'm don't understand statistics well enough to comment on most of it but I will talk about platform because you are really and very clearly trying to reach for something to back up your point an fail to deliver anything.

      "Third, the emphasis on the ethereal "building the platform" is a bit misplaced. There is no proof of any one to one relationship between books sold and "platform" built. In reality, it could be argued that the very low price e-book makes the author almost irrelevant in the discussion, that people are often buying because it's too cheap not to, and MIGHT be okay. In those cases, it's almost a given that there would be little relationship between units sold and "platform" size."

      Not a single thing here makes sense, firstly no where does any one say more books sold = a bigger platform. What they say is that with more books sold you have advanced in building a platform. If you don't understand that dissection then no wonder the whole point is lost on you.

      Secondly you say "it might be argued" and then do nothing to argue it. You state people are more likely to pick the book up because at that price they can risk the book being bad, that's fine but that's an advantage to an unknown author so I fail to understand what you are driving at. If I bend my mind out of shape I can make a guess that you think the decision to buy a book is more important than what some one thinks of a book after reading it but it hurts to do so.

      I could see you arguing that because some one brought a book 'cus it was a cheap punt that they may not engage with it.. which is making vast assumptions, or that they may not give it priority reading... but none of this actually changes the basic fact that the book is in the hands of a person that it wouldn't have been if it was more expensive.

      Any sale of a book creates the potential to build your fan base no matter what the price. It's just that when you sell at a lower price you will sell far more copies to people who are not already part of your platform and that give you a bigger potential in adding people to that platform. The fewer people who buy a book and the higher the likely hood that a given person is already part of your platform that is the result of a higher price puts you at a disadvantage in terms of growing your platform than some one selling at a lower price.

      Nothing that you've said makes it seem you understand what is being presented let alone have a valid counter point to make about it.

       

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      The eejit (profile), Aug 9th, 2012 @ 9:02am

      Re:

      You seem to have a fundamental disconnect between conuming a product and the valuation of the same.

       

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      John Fenderson (profile), Aug 9th, 2012 @ 9:15am

      Re:

      First off, you are comparing GROSS author revenue as an indie to net author revenue under the publisher model.


      A valid point, although I think that the difference is not great enough to be extremely significant. The overhead incurred by an indie is much, much lower than a traditional publisher.

      to consider the time they spent to do it themselves, or for the people they hired to do it for them.


      This, also, is not so different. Traditional publishing houses are increasingly offloading most of the time & effort of promotion onto the authors themselves anyway.

      you don't give any indication to the size of the potential market


      Perhaps because the size of a potential market is not something that can be pinned down as a universal. It depends on the author and the book. And, this kind of thinking is a big part of what makes most mainstream movies, music, and books nowadays schlock.

      It may very well be that an author is willing to forgo squeezing every possible penny out of market in exchange for other nonmonetary things that they value more. Going indie allows authors to make these kinds of subjective, personal decisions.

      An indie author who is a great writer but a sucky marketer would make much more on higher priced e-books with a publisher, because they would do what he sucks at - marketing the damn thing.


      If the value a traditional publisher brings is only in the marketing, and if that marketing can increase your profits, then even an indie author can accomplish the same thing by hiring someone to do the marketing. For some authors, this would make sense, for others it wouldn't, but in neither case is it necessary to go through a traditional publisher to do so, and in neither case is price-fixing necessary.

      The long term effect is potentially removing the potential for the higher price point


      Well, first, I think this is wrong. Even in markets that are flooded with incredibly cheap commodity items, there exist premium versions that command high prices. I can't think of a single market where this isn't true. There's no reason to think books would be any different.

      But even if it's right, so what? If an author can make the same, or more, money in the aggregate, why does it matter at all what the price is per unit?

      As an author, if I can sell my book for 10 cents, make the same income as with other price points, and have a few orders of magnitude more people reading my book, I would say that's an excellent deal. I write to be read. If it was about nothing but the money, then there are far, far more lucrative fields to go into.

       

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        Anonymous Coward, Aug 9th, 2012 @ 10:42am

        Re: Re:

        "A valid point, although I think that the difference is not great enough to be extremely significant. The overhead incurred by an indie is much, much lower than a traditional publisher."

        I would say that this may not be the case if they are trying to achieve the same level of sales - or in this case, having to drive 5 times as many sales to make the same gross sales numbers.

        "Perhaps because the size of a potential market is not something that can be pinned down as a universal. It depends on the author and the book. And, this kind of thinking is a big part of what makes most mainstream movies, music, and books nowadays schlock."

        Exactly. However, most authors are working in what could be considered smaller markets, and as such, a lower price point risk exhausting demand more quickly, and leaving money on the table.

        "Well, first, I think this is wrong. Even in markets that are flooded with incredibly cheap commodity items, there exist premium versions that command high prices. I can't think of a single market where this isn't true. There's no reason to think books would be any different."

        My thought process is only that if every e-book is 99 cents, then a premium might be $1.99. Right now, a premium book is $10. I don't think from my experience in pricing that there is enough of a premium to support a 10 times price. In fact, what you are seeing in the chart is sort of that trend - the volume is at the low end, the easiest marketing point. Can there really be a long term market for a 10 times premium cost? Probably not, which in turn may shrink the entire market. People only have so much time available to read books, it isn't like they will buy 5 times as many because they are cheap.

        Sideline: it's also not clear if the ebook market will include "collectors", which do exist in the physical world. Those collectors, especially in hard cover books, make up a significant part of the premium book market. Will people buy books that they might read one day (as is often done with printed work) or will they hold off to buy only as they are ready to consume, because of the whole instant on, fully connected world we live in?

         

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          Anonymous Coward, Aug 9th, 2012 @ 11:13am

          Re: Re: Re:

          My thought process is only that if every e-book is 99 cents, then a premium might be $1.99.


          I too questioned the comment about destroying the higher price point. Your follow up example doesn't clear things up for me.

          The premium price point isn't set as some multiplier of the commodity.

          Water to drink can be found for free be opening one's mouth in the rain. How does that affect the price of Blingh20 at $40 a bottle? It doesn't.

          The premium is set by what makes it premium (real or contrived as in blink/status symbols).

          The Tata Nano hasn't lowered the price of Bentley's. They don't even play in the same market.

          I think the problem is that what passes as "premium" ebooks aren't really premium experiences at all. They're just another ebook.

           

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          John Fenderson (profile), Aug 9th, 2012 @ 11:43am

          Re: Re: Re:

          However, most authors are working in what could be considered smaller markets, and as such, a lower price point risk exhausting demand more quickly, and leaving money on the table.


          But that's not how it works. If I'm writing a book that will only appeal to 100 people worldwide, but will strongly appeal to them, then I would charge a pretty high price for it (out of necessity, to cover the cost of writing the book). That most other books might cost 99 cents isn't at all relevant.

          This isn't new -- that's how it works in the publishing industry right now. I've purchased many books that cost upwards of $200. They were priced that high because the total market for them was in the high hundreds, but if you were in one of the hundred, the book was indispensable to you. The existence of $2 paperback novels don't affect that one bit.

          Also, the "leaving money on the table" comment is symptomatic of a deeper underlying problem. If you as an author is making a reasonable living that way (and in the traditional publishing world, the vast majority of authors are not), does it really matter that you haven't squeezed every conceivable dime from your book?

           

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            Andrew D. Todd, Aug 9th, 2012 @ 1:02pm

            Expensive Tech Books, and Where They Lead (to John Fenderson, #29)

            I strongly suspect that the books you paid $200 for were either Engineering/Computer Science textbooks, or tech manuals of one kind or another. I think the most expensive set of books I ever bought myself, adjusted for inflation, were a set of books for SIMSCRIPT on the mainframe, back in the early 1980's. IBM manuals for the mainframe were priced reasonably, roughly comparable, relative to thickness, to paperbacks. However, IBM made its money on the computers. CACI, the SIMSCRIPT people charged a high price for everything, not just the software, but the books as well. This was probably counter-productive, because it is obviously advantageous to the developers of a programming language to have lots of people out there who can write code in that language. Curious point, CACI, originally a spin-off from the RAND Corporation, became government contractors by small increments, and from there, they became mercenaries, and they were eventually caught torturing prisoners in Iraq.

            http://en.wikipedia.org/wiki/CACI

            I leave you to draw the moral from this.

             

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      Josh in CharlotteNC (profile), Aug 9th, 2012 @ 9:20am

      Re:

      First off, you are comparing GROSS author revenue as an indie to net author revenue under the publisher model. That is to say that the Author may make more initial money selling cheaper e-books on a per unit basis, but from there they have to pay out any marketing and promotion they did

      Pretty hard to compare marketing and other costs when the publishers keep that info hidden. Why don't you provide some studies that show it if you're so confident the publisher model would win out?

      An indie author who is a great writer but a sucky marketer would make much more on higher priced e-books with a publisher, because they would do what he sucks at - marketing the damn thing.

      [citation needed]

      Third, the emphasis on the ethereal "building the platform" is a bit misplaced. There is no proof of any one to one relationship between books sold and "platform" built.

      Seriously? First, "platform" was never used in the article. What you should be referring to is "brand" or "name recognition" and there is mountains of evidence in support of it. How many people will run out and buy the next Stephen King novel just because he wrote it? Thousands - maybe millions. I've got a dozen favorite authors I'll buy books by, just because I've enjoyed the books they've previously written.

      In reality, it could be argued that the very low price e-book makes the author almost irrelevant in the discussion, that people are often buying because it's too cheap not to, and MIGHT be okay.

      Yeah, they'll do it once - which is the whole point - and with near zero marginal cost, there is every benefit to get that first sale and build the relationship. And if it's good, then the next time they see a book by the author, they'll buy that as well. But if the first book sucks? No way I'm even dropping 99 cents on the next one.

       

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      Anonymous Coward, Aug 9th, 2012 @ 9:32am

      Re:

      "being too cheap" sounds more like a term to protect the large publishers and their marketing from competition.

      If a book is sold at a "too cheap" price you are moving the market towards a more minimalistic approach where you have to rely on mouth to mouth (for the indies it means guerilla marketing, for the larger brick-publishers it means support from governments in terms of tax-credits/tax-breaks, higher library royalty etc.).

      What if a book is sold for 6$ most of the time, dropping down to 3$ sometimes to attracht new readers? What if a second book from a hit-auther is sold at 10$ just after release and gradually decreased in price to 6$, followed by wholesales with 3$? I would say that the primary problem for big publishers are their lack of price-differenciation and a far too high "standard-price".

      Too cheap as you put it is fearmongering to try and keep margins high enough for the old school markets to survive alongside, but in reality that perception is completely wrong since the costs for the same book in paper and in PDF are not the same and trying to sell that notion is the biggest delusion here.

       

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        Anonymous Coward, Aug 9th, 2012 @ 10:46am

        Re: Re:

        ""being too cheap" sounds more like a term to protect the large publishers and their marketing from competition."

        No, as I said elsewhere, my thought is that being too cheap means that you sell as many pieces as the market needs, at a price point below what they are willing to spend, generally leaving money on the table.

        If there are only 1000 potential buys for your e-book, willing to pay $5 each... and then you sell for 99 cent, you end up leaving $4 on the table on every sale, and knock $4000 off your final income for the project.

        Remember, not all books have large markets, many of them have actually pretty small niche markets. The risk of exhausting the supply of buyers with a cheap price is pretty high.

        There is no fearmongering in "too cheap", just an observation of perhaps shrinking the income in the market by pricing below what people are generally willing to spend.

         

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          Anonymous Coward, Aug 9th, 2012 @ 11:19am

          Re: Re: Re:

          If there are only 1000 potential buys for your e-book, willing to pay $5 each... and then you sell for 99 cent, you end up leaving $4 on the table on every sale, and knock $4000 off your final income for the project.


          You're kind of trampling on the laws of supply and demand here.

          There are only 1000 potential buys AT A PRICE POINT.

          When you change the price, you change the potential buys.

           

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          PaulT (profile), Aug 10th, 2012 @ 1:55am

          Re: Re: Re:

          "If there are only 1000 potential buys for your e-book, willing to pay $5 each... and then you sell for 99 cent, you end up leaving $4 on the table on every sale, and knock $4000 off your final income for the project."

          Only if you *really* suck at marketing (or your product sucks) and you don't manage to get the audience that would never pay $5 for an eBook but will happily throw 99c on the table. Your argument only makes sense if you assume that the market size is the same in both cases - it isn't.

          "Remember, not all books have large markets, many of them have actually pretty small niche markets."

          A $20 eBook is a niche market as well. Most people won't pay that for an eBook, no matter what it is. $2? Bigger audience, no matter the title. You just have to work out another way to differentiate yourself from the competition other than obsessing over pricing.

           

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          Anonymous Coward, Aug 10th, 2012 @ 6:14am

          Re: Re: Re:

          I would argue that the content of the numbers in the study should show that there are more to it than "too cheap" and "lost potential". If you want to argue about potential loss you have to compete with low margin sellers by holding a higher "quality" or better deals.

          The basic premise is: In a new market, prices should be set by the lowest quality suppliers. Afterwards the higher quality suppliers can start to make their presence felt through adding better or better controlled content.

          A good publisher in the old market always has some promotional material they can bundle with the book. Illustrations anyone? Those are what is harder for low margin sellers to include and therefore something worth bundling into the product package. The inclusion is almost free and if it can help sell more books, so run with it!
          Another good idea is dataslamming: As a publisher you know exactly how many pages are in the book, how many pages with B/W-illustrations and how many pages with colour-illustrations are in the book (If you don't you have greater problems than pricing!)
          how about including data like number of pages in the book, number of illustrated pages (total and coloured), wordstandard informations like in any other book (typeset, size) and available extra information from word processor: Number of words/letters. Then people feel that it is less of a black box they are buying into!
          Geeks like I can roll around in pricing per illustration, pricing per word/side, illustration to written page ratio (at least estimated) and several other valueation criteria to make my own decission regarding its value for me.

          There is so much potential for raising the bar on value of E-books without much effort for paperback-sellers. You could make it very appearent where your quality is simply better than John Does autobiography. Use it or loose it!

           

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      Anonymous Coward, Aug 9th, 2012 @ 11:02am

      Re:

      I disagree, I refuse to buy books for $14.99 or even $10.99 for kindle. I'll read free versions unless I can get them in the sub $5 range.

       

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      Anonymous Coward, Aug 10th, 2012 @ 8:35am

      Re:

      the big publisher's marketing sucks though

       

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    Russ (profile), Aug 9th, 2012 @ 8:34am

    Print Publishing

    I wonder what the optimal mix of prices would be for the traditional mix of Hard cover, paperback/trade and ebook would be? I don't remember any mention of an analysis similar to this for that mix.

    Nothing I have read indicates that publishers are interested in optimizing book prices. The approach seems to be 'what the market will bear' and must protect the whale authors.

    OTOH, if I was only an ebook author, I would be crazy to add the overhead of a traditional publisher and pay for expertise they eveidently don't have.

     

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    Anonymous Coward, Aug 9th, 2012 @ 8:38am

    You see much of the same behavior in price point, sales volume, and overall income in many of the indie game titles on Steam.

    There have been quite a few articles on how lower price points, or temporary sales, can earn game makers 10x or more the income compared to higher prices. I've actually bought cheap sale games that I've still not played...sad but true.

    Much of the same thing happens here. A $2.99 price point is a "hell, why not?" price while $9.99 takes some mental anguish to spend.

    If given the choice, I'd also much rather make $100,000 from 100,000 people than the same amount from fewer. That larger new audience is potential future fans (i.e., future profit).

     

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      Anonymous Coward, Aug 9th, 2012 @ 11:16am

      Re:

      Much of the same thing happens here. A $2.99 price point is a "hell, why not?" price while $9.99 takes some mental anguish to spend.


      This is a concept people have a hard time rationalizing.

      It would be tough for me to explain, even though I do it all the time. I buy mp3 albums through amazon. There's plenty of things I'll check out for $2.99, but $9.99 for a band I know and like....pass.

       

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    mermaldad (profile), Aug 9th, 2012 @ 8:42am

    overhead

    Of course the traditional publishers have more overhead. They have to protect against devaluation. That PC on the desk? They pay $2000 for it, because they wouldn't want to devalue the PC by paying less. Long distance phone calls? They pay 12 cents a minute for the same reason. What's that you say? They don't do that? Then why do they think consumers would want to do it?

     

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    Bas Grasmayer (profile), Aug 9th, 2012 @ 9:07am

    Always felt that a $3 price point (or just below) makes a lot of sense for ebooks... Turns out I was right.

    I think an important aspect is that $2.99 as a price makes sense for something which is intangible (whereas anything upwards of $6 becomes abstract). Therefore, the price point significantly and drastically lowers the stress / energy consumption of the potential buyer's purchase decision.

    I think the right price point for digital music (especially when sold as albums) is below $1 per track, but the environment in which people buy it makes a huge difference here (vs ebooks).

    Films... probably $2.50 for a 720p digital copy. Maybe $1.99 for a 48hr window to stream it.

    The goal is not to have the most money per transfer; the goal is to get the biggest returns overall... If you can reach 5x more people by dropping your price by 50%, that's a big difference (and I don't believe I'm speaking in hyperboles now).

    If you want to make more money PER SALE - remember that the sale itself is not the end of your relationship with the consumer... Let it be the beginning.

     

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    Mark (profile), Aug 9th, 2012 @ 12:51pm

    Space invaders

    Something that seems to have been overlooked by the traditional publishers is that physical books take up a lot of space if you have plenty of them. And, while individually they are portable enough, in bulk they are not. So there's a practical upper limit on the number of physical books that most people can reasonably own.

    By contrast, e-books take up no physical space at all beyond the size of a single display unit, and only a fairly small amount of electronic space. I can fit more books on my Nexus 7 than I can on the shelves of my study, and, unlike my physical books, I can take them all with me wherever I go.

    What that means is that e-books can be much more of a speculative purchase than physical books. Without considerations of storage and transport space, the only issue is the cost. At traditional prices, I have to be pretty sure that I'll enjoy it before I'll part with my cash. But bring the price down, and I'm far more likely to buy a book just on the off-chance that I'll like it.

    This is a market that traditional publishers haven't really tapped in the past, because the realities of physical book transport and storage mitigate against large-scale speculative purchase and so reducing prices doesn't increase sales enough to offset lower unit revenue. But the evidence is that for e-books, it does. The successful publishers of the future will be the ones which adapt to the new reality.

     

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    383bigblock (profile), Aug 9th, 2012 @ 1:28pm

    This is why I won't buy another e-reader

    OK..I was one of the first group to purchase a Kindle for my wife (back when it was $350) since she is an avid reader. The whisper net feature was great and the list of titles she could download for $2.00 was fantastic. I have over 1,500 paper backs at the house on shelves and I thought I saw the last bill from Barnes & Nobles and others being replaced with Kindle purchases. NOT ANYMORE. Here we are 3 or 4 years later and the price of e-books for the Kindle are now more than the paperback prices. I guess me and a whole lot of other people pissed away our money and ultimately got screwed. You can't tell me it costs more to produce an e-book than a printed paperback book.

    It's quite obvious the system is F'd up.

     

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    Anonymous Coward, Aug 9th, 2012 @ 1:37pm

    Like with movie studios, game companies, ect they are too focused on "leaving money on the table" to realize that if you stopped worrying about it there's more money to be made by not gouging consumers. For any Authors,Game Makers, Movie makers, ect listening stop focusing on "leaving money on the table" and instead try to expand your overall value particularly userbase. The lower cost you can make it to the consumer often times you get quite a few more consumers.

     

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    Mike, Aug 14th, 2012 @ 8:29pm

    agree

    I have 16 ebooks on Amazon and a few on Smashwords. I can tell you that the lower the price the more the sales, something that Wal-Mart has known for decades.

     

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