Over the last few weeks, blogger/self-publishing novelist Jeff Kirvin has been looking on his blog (formerly Writing On Your Palm, for which I used to write before moving over here) at the matter of 99 cent e-book pricing. On March 3rd, he posted an entry concerning his focus on the Kindle and Nook.
Kirvin was thinking of starting out at 99 cents for the first book in his series and selling the rest at $2.99. He noted that one Amazon-published author ran into trouble when she tried to raise the price of her book back up from a promotional price of 99 cents to $2.99—Amazon noticed it was still showing at 99 cents on competitors’ sites and dropped the price back down again.
A little later, he brought up a blog post by Nathan Bransford about what independent self-publishing authors and their low prices mean for the rest of the publishing industry. Bransford pointed out that publishers make less profit per unit on e-books and so have a vested interest in selling as many printed books as they can for as long as possible, while self-published authors don’t have that middle-man mark-up to contend with.
This, in turn, puts publishers up against a perception-of-value problem: People will pay $12.99 to go to a movie, but won’t pay the same amount for a just-as-ephemeral e-book. Why?
Well, it’s partly because $12.99 is competing against the upstart $2.99 Kindle bestsellers and some other lunatics named Charles Dickens and Herman Melville and Jane Austen, who are giving away their books for free!! (Which, ahem, may be because they’re long dead and in the public domain).
Bransford didn’t have any easy answers for the publishing industry: it’s up to publishers to convince consumers that their books are worth the extra money. Consumers will have the final say over what they’re willing to pay, and publishers may be in for a rude awakening when and if e-books displace printed books as the primary market driver.
But Kirvin felt Bransford missed the boat in that the economics of supply and demand apply differently to a product where the supply is effectively infinite at zero marginal cost. With books, the supply is limited and it’s a balancing act to decide how many to produce and at what price to sell them to make the maximum amount of profit. (And since it’s hard to predict ahead of time which books will be best-sellers, publishers often guess wrong.)
Ebooks, on the other hand, are a post-scarcity good. There are as many ebooks as you can sell, and as it turns out, there’s plenty of room at the bottom. There is no such thing as an ebook print run. Without a constraint on how many copies you can sell, you don’t have to make as much per copy. Price the book low enough, down to “impulse buy” level, and you’ll pick up hordes of readers who never would have considered buying the hardcover. This is why one-to-one cost comparisons between paper and ebooks don’t work. An ebook priced at 1⁄20 the price of a hardcover will sell way over 20 times as many copies. Maybe not right away, but while a hardcover has maybe three months on the shelves, ebooks sell forever.
Kirvin did get into a discussion a few days later with an author who disagreed with him. She felt that the market was effectively bounded by the number of people who could afford Kindles, Nooks, iPads, laptops, etc. Kirvin pointed out that e-book sellers such as Amazon are making their books available on as many platforms as possible, and e-reader prices are always falling, so the market is continually expanding. (I would be inclined to disagree—I don’t own a Kindle or Nook, and though I do have an iPad I actually do most of my e-reading on a web browser or my more-convenient iPod Touch.)
When I pointed out that it was better to sell 1,000 copies of an ebook at $1 than 100 copies at $5, she disagreed, stating that those thousand copies would cannibalize the market, resulting in lower overall revenue. To her eyes, the market is fixed and unchanging. There are only x number of people willing to buy her books, so she needs to make as much off of each of them as she can.
But again, Kirvin pointed out, the e-book market is continually expanding, so there will soon be more new readers after all. I suppose it depends on just how fast the market is expanding, and how many of those readers would be willing to try her at a slightly or much higher price.
But Kirvin is not completely committed to the idea of 99 cent pricing being an unqualified positive. More recently he made a couple of posts wondering about the overall sustainability of 99-cent pricing. In the first, he compared the practice to to clear-cutting timber. After all, anyone who buys your book at 99 cents is someone who won’t buy it at $2.99, and Amazon and B&N’s per-unit royalties fall off fast below the $2.99 price point.
I’m in this for the long haul. I want to make my living as a novelist, month after month. And I worry that the rate of sales people are seeing at 99 cents is chewing up their potential market — contrary to my own previous statements, the market isn’t truly infinite; I’m not going to start buying romance novels at any price, and know others feel the same way about the stuff I write — faster than the market for ebooks overall is growing. People aren’t planting new trees fast enough to keep up with the clear cutting, in other words.
In the second, he considered how hard it is to make a living on a 99 cent e-book, due to the aforementioned royalty drop-off below $2.99.
A sale at 99 cents makes me only 1/6, or 16.7%, of what I make at $2.99. Hocking, Locke and others like them can get away with that because their pool of potential customers is so much larger. But if I want to make a living at this, 99 cents can only be an occasional promotional price. $2.99 or even $3.99 has to be the default.
Thus, he will be selling just the first book in the 7-book series at 99 cents, as a loss leader to entice people into buying the rest of the series at $2.99.
As I’ve said before, I’m perfectly happy to buy most of my e-books at up to $5-6 each, and the occasional one at $9.99. (I”ll even pay $15 for Baen “E-ARCs” for authors I absolutely have to read right away.) But $2.99 pricing makes impulse-buying more likely, and 99 cents makes it highly likely. It’s too bad that 99 cents is probably not sustainable.
When I’m buying a movie ticket, I’m paying not only for the story, but for the acting, the cinematography, the film editing. When I pay $10 or so for an audiobook at Audible, I’m also paying for the narrator’s performance. What is the extra value added that I should pay $10 or more for a DRM-crippled ebook?
@becca: You’re suggesting that the author’s work (and any additional personnel doing the proofing, editing, etc) isn’t worth a damn. Personally, I find that highly insulting. But then, that seems to be the prevalent attitude directed at authors and publishers these days, so I am also not in the least surprised.
but all that proofing, editing, etc. goes into the story content of a film and an audiobook as well. I’m not discounting those efforts. But there is simply *more* involved in making a film or an audiobook than there is in making a book (either print or e-format) and so I don’t see them as equivalent.
I think $.99 for the first book in a series and $2.99 thereafter makes perfect sense. I’ve read several authors for free or $.99 and then gone on to buy their next books at $2.99 or $3.99. They have become my new favorites and I will get their new books as soon as they’re published. $.99 eliminates most of the risk of trying a new author.
I also appreciate indie authors who put their books on sale for a special occasion, a new book coming out or a holiday. It’s another great way for readers to find a new author.
As for movies, I rarely go to the movies, it’s expensive for us as a family. I’d rather buy the DVD instead so that we can watch it as many times as we want, whenever we want, with the bathroom and kitchen nearby. So a $15 – $20 DVD divided by 5 people is $3-$4 each for unlimited play instead of $10 a ticket for a one time movie. A much better value for us.
Hi Chris. Really interesting article, enjoyed reading it.
This is a really big topic right now – I also read another article earlier today that also suggests the .99 priced eBooks potentially undermine the Market.
In the end it comes down to quality, I personally think that readers are willing to pay a fair price for any book (indie or trad published), as long as it is of good quality. With all the .99’s out there I’m a little concerned that the higher priced works that have been well written and edited will get drowned out.
What will help quality indie authors and writers is by building their platforms and readerships – this will obviously help them justify pricing at a more reasonable level than .99.
Personally, I’m about to upload some of my work to our new eBook platform and I’ve worked really hard on them so think that between 2.99 and 3.99 is a reasonable price. (just to mention that we will pay 60% at any cover price point to the author).
I think we should be careful about over using the .99 price, and agree with the idea of using it on earlier work to help build the following for a more sustainable price for more recent releases.
All the best
Adam Charles
IWriteReadRate.com
becca – you are absolutely right. A movie experience is a vastly more ‘valuable’ an experience for me. But then again it is for some and isn’t for others. We are unfortunately plagued by authors playing the victim and squealing about their plight. The fact is that books have been grossly over priced for decades and the crippled eBooks from the big publishers are following that policy.
So, you’re sticking to the insult. Because if you’re willing to pay out enough money to allow a movie studio to recoup the millions they put into a feature film, maybe you’d be willing to pay an author enough for the hundreds of hours, the equivalent of thousands of dollars of a professional salary, that they spent in conceiving, writing, editing and proofing a book?
Most writers (obviously this doesn’t include the blockbuster authors) don’t make a fraction of the cost in time and money it takes them to write a book. But this doesn’t seem to concern the public, who assumes writers essentially want to work for free, and whatever they get in payment is gravy. IOW, it’s okay if a movie studio makes a profit from their movies, but who cares if a bunch of flaky writers make a profit?
This is why 99 cent pricing isn’t sustainable for any but the most popular authors; everyone else would lose their shirts, because they wouldn’t come close to earning what they put into the book. And I fail to see why this doesn’t seem to be important to anyone other than authors… what did all authors do to make all consumers want them to fail so miserably at their trade, even while they will willingly pay $20 to see SAW XIV?
Ah, but I have said too much.
Unfortunately Chris’ article is very rambling and unfocussed. The blogs covered by the article are equally all over the place and it’s way too much effort to have to read each in total.
The reason is that there is no such thing as the perfect price point. We have read in teleread of several previous experiences by the new breed of self published authors that a number of pricing strategies have been successful From starting high and moving low, to the opposite.
It all depends on the reputation of the author and the value readers place on that title, or the risk they deem they are taking in trying out a totally unknown writer. Looking at individual author experiences is not even close to definitive.
“Bransford pointed out that publishers make less profit per unit on e-books ”
We have heard this nonsense before and it’s hard to believe they are still trying to peddle it.
The supply/demand argument is baseless and pointless. Paper books were never a limited item, except with old first editions or signed copies.
“anyone who buys your book at 99 cents is someone who won’t buy it at $2.99”
A bald statement without supporting evidence, that I find wholly unconvincing.
“People will pay $12.99 to go to a movie, but won’t pay the same amount for a just-as-ephemeral e-book. ”
Really ? who exactly are buying the 12.99 ebooks on amazon then ? And since when is ephemeral any kind of determining factor ? I find this statement bizarre.
” It’s too bad that 99 cents is probably not sustainable.”
What on earth does that mean ? ‘sustainable’ ?
“. . he will be selling just the first book in the 7-book series at 99 cents, as a loss leader ”
Huh ? How exactly is 99c causing the author to make a loss ?
Smart authors need to focus on their overall takings on a title as a guide to their pricing policy. Only a mug gets his precious ego entangled with the price he charges for his eBook.
Smart authors will understand where they are in the quality stakes and the reputation stakes. New authors know they need to get read, and build a reputation. Established authors know they are already valued. All of these factors go into the decision on pricing. There is no evidence whatsoever that there isn’t room in the market for all of these strategies and all of these prices to coexist.
There is no evidence or logic that the ‘existence’ of eBooks for 99c has any influence whatsoever on the 5.99 market … unless the public discovers that despite the claims of the pricier authors to be superior in quality, the truth belies the claims. This whole argument seems to come from the tired old way of thinking where all books were priced more or less the same in some kind of bizarre ‘defensive pricing’ strategy.
Timely article as I just tried this experiment myself. Biting nails now. Went from 9.99 per title ( and a nice monthly income from it ) to 1.99 – 4.99 on various titles. I now have to sell 4 x as many books to have what I WAS making. Am giving it a couple of months, but it’s scary. Thanks for your article. I feel a little better. I think.
It doesn’t need supporting evidence. If they’ve bought your book at 99 cents, they won’t buy it again at $2.99, because they’ve already got it. That’s a simple fact.
The 99 cent pricing is not sustainable because it is simply too high when youre competition is Amanda Hocking or Konrath. Or when some of the great classics of the past can be had for free.
Bluntly put there are many works of contemporary fiction where zero is far too high a price for me to waste my valuable time on. Nor is it the case that we do not have enough fiction already, if no more is produced from this time onwards there is still enough for several lifetimes worth of reading.
Why is it that Amazon will give you a 70% royalty between a price of $2.99 and $9.99, but not below that? If they’d do that for prices below $2.99, the economics would be much more favorable for authors, and we could afford to set our prices that low. Perhaps they just have to take a higher royalty at those lower prices in order to cover costs, but I don’t know why. I’ve sold the same articles for $.99 and $2.99 at different times. The content is the same. Only the price is different. And I sell more copies at $.99, so if Amazon raised the royalty percentage there, they’d make the same money overall.
Any thoughts on this?
@becca:
How long does it take you to watch that $12.99 movie? How long does it take you to read a 3-400 page book (in whatever format you choose)? Why insist on paying less for the item that keeps you entertained longer and that can be re-read again and again? Which is a better value per dollar?
ehh so length is now a measure of value ? and 500 page books are worth double a 250 word book ? I guess a ticket to a 90 minute football match being 35 euros makes a 500 page book worth … 220 euros ? Seriously ?
Chris: “It doesn’t need supporting evidence. If they’ve bought your book at 99 cents, they won’t buy it again at $2.99, because they’ve already got it. That’s a simple fact.”
I agree. And if you had said that I wouldn’t have taken issue 🙂
Common Sense’s math is closer to my experience than $12.99 movies. On the rare occasions we do go to a movie theater, we pay $6-$8 per ticket. Generally, however, we’ll pay $20 for a DVD and watch it multiple times. Since we’re a family of 4, that works out to $5 per person, divided by how ever many times we re-watch the movie.
The real value for me is in audio books – we go through a huge number of them, because we’re in the car a lot. at approximately $10 per book for sometimes 20 hours of listening, it’s a steal… and yet Audible seems to be making good money, since they haven’t raised their rates in the several years I’ve been a subscriber.
I don’t require $0.99 books, or even $2.99 – although that price is an impulse buy for me. I’ll gladly pay $5 or $6 for a full-length book that I’ll probably only read once. I don’t see why this is considered an insult. Yes, a good author spends hundreds of hours creating that book – but the author isn’t going to make that all back just on me.
The best value per dollar for me is paperback (usually with a coupon) – I can read it, lend it, re-sell it or give it away. It doesn’t have DRM, and I can read it where ever I want to when ever I want to. A book that is crippled with DRM, that I can’t read on both my Sony and my Kindle, that I can’t dispose of any way I wish when I’m done with it just doesn’t have the same value.
Comparing ebooks to movies is a false equivalency. Comparing ebooks to audiobooks is closer, but is still a false equivalency – more goes into the making of a video or an audio book than goes into the making of a paper book or an ebook.
I see no reason why I should pay as much or more for a limited ebook than I do for an unlimited paper book. So far, nobody has been able to give me *any* good reason why I should pay as much for an ebook as for a paper book. Saying that low prices devalue the book (in whatever format) strikes me as romanticism from the days (long past) when publishing was a gentleman’s profession.
A movie is different to me because it is something I see with friends, and what I am paying for is the social experience—the cushy theatre seats, the movie theatre ambiance, etc.
And as I have said before, it’s not that a price in and of itself is the issue. The issue is what you get for that price relative to what else is available within that category. And that’s the Konraths, the Hockings etc. at lower than $12.99, the classics for free and the mass market paperbacks for half the $12.99 ebook. Why should I pay $12.99 for a crippled ebook when I can pay half that for a non-crippled ebook by someone else, or a paper book by the same author which I can trade, sell etc? It just makes no sense to me as a consumer. It doesn’t mean I hate authors, want them to fail, think they don’t deserve money etc. But if they are getting $6 for the paper, why should I think they deserve double that for an ebook with which I can do less?
becca: As it stands now, books and audiobooks are considered different markets for most publishers (we’ll see if that changes as Text-To-Speech improves). If audiobooks were the primary revenue generator for publishers/authors (meaning people stopped buying the print/e books), audiobooks would cost a LOT more money than they do now. Actually, what would really happen is that you’d likely never get an audiobook at all because the development would cost too much. But hey, at least we’ll have Text-To-Speech!
It’s like the Indian or Southeast Asian editions of textbooks: the reason they are so much cheaper is that the publisher has already made ‘enough’ revenue domestically for the book to be profitable. Selling it at a lower price abroad allows them to reach that market and sell the book at a ‘reasonable’ price for that market. However, the textbook wouldn’t be profitable if the selling price for everyone was set to the foreign textbook price. Some college students have the same difficulty as you do and think that the value of a product is ONLY indicated by the lowest possible price point that it can be purchased anywhere in any format. That’s just not how the world works, no matter how much people want it to be nor how much they whine about it.
So, please go ahead and keep buying audiobooks (I love them too and think they offer great value!). But please do not think it’s reasonable to compare the print book price to the price of the audiobook considering their different roles to the publisher and author when it comes to revenues and profits.
I listen to a lot of free podcasts. I read a lot of free blogs and news groups. Nobody talks about how those devalue my science audiobooks or my newspapers.
I keep mentioning (and others do too) the example of Baen books. They’re able to produce a high quality product in a niche market, DRM-free with rare conversion errors. By the logic given by so many people here, they should be charging twice as much for their product as they do, because their market is limited – and yet they consistently charge $5 and $6 for their ebooks, and don’t seem to be in danger of going under.
If the model works for Baen, I don’t see why it can’t work for bigger publishers.
Nobody has even addressed this issue.
Many people aren’t willing to pay $12.99 for a movie, however. A lot of people simply wait for the DVD to come out and buy that, or rent it from Netflix.
I think the reason why (some) people are willing to pay $12.99 for a movie is because a movie is a communal and social experience (like a date, or seeing it with friends), and to get the full movie experience you need to see it in a theater. Reading a book is normally a solitary experience, and isn’t limited to a single location owned by someone else, which makes it more akin to watching a TV show or Netflixing something.
Joanna: I agree that $12.99 is not a price that I’d be willing to pay for an unknown fiction author, but that does not mean that $12.99 isn’t the profit maximizing price at this point in time for some or most eBooks. Assuming it isn’t, or that .99 or 4.99 or 9.99 is the profit maximizing price, is just flat out ignorant. The best publishers will be experimenting with this (more on that below), but they have an obligation to their authors to maximize their revenues, and someone who buys a book at 9.99 instead of the 12.99 that they’d be willing to pay is a ‘loss’ of 3 dollars to the publisher. Now, it’s POSSIBLE that enough people buy more copies at 9.99 than 12.99 to make up that revenue, but in NO WAY is that guaranteed, or even necessarily likely, depending on the author.
Regarding publisher price experiments, people seem to be very patient with Amazon and Google as they build their data systems that help them create predictive algorithms. What’s with the impatience towards publishers? At most they’ve been collecting this data for a year, right? What do you guys do for a living? Why would anyone think that’s enough information to make long term pricing decisions?
In other words, Anon, publishers will charge whatever they think the market will bear – they’re not charging less overseas out of the goodness of their hearts, but because the market wouldn’t support American prices.
What I’m saying is that my small, personal share of the market at least won’t support ebooks over $10, and prefers them around $5 or $6 at most. If publishers want to sell to me or to people like me, then they need to lower their prices. Otherwise, yes, we’ll either go with indy authors or simply not buy those books at all.
becca – you are completely right. What some people don’t get is the same thing that has been said hereabouts over and over again. It’s the value to the customer, not the producer. The abandoning of the market by the Agency Publishers has enabled them to artificially FIX the prices at exorbitant prices and earn substantially higher profits than they ever did with paperbacks. They have no interest in making ‘enough’ profit. They want to make the maximum they can screw out of the customers.
Now I have to say that I have no problem with that, in principle. What I have a problem with is them destroying competition and FIXING the price.
Anyway we can all argue forever here. The changes are coming fast. Indies are proving that authors and indie publishers can make good money at a fair price, and over time the readers are starting to learn that. The Big Publishers are sitting on a time bomb that is ticking away and they know it. They are taking a cynical and short term view of maximising their profit now because that is the way Corporate Management works. There is nothing in it for them to look forward five years. Their bonus’ and perks are based on this years performance.
I wouldn’t mind the publishers charging their current prices for ebooks, if only they’d allow coupons and vendor discounts. Since I can use coupons and vendor discounts on paper books, I don’t understand why I can’t do the same for ebooks.
becca, the issue is that since you still can get discounts on paper books, this can make their price cheaper than the ebook version 🙂 That’s where my problem is—I don’t want to pay more for a crippled ebook version than I would for a trade-able, sell-able paper version. Now, when the paper version is a fancy hardback and I can get the ebook for less, I am good with a $12 ebook. But when the paper version is $6 and the ebook double that, then I have an issue and as a consumer I vote with my wallet and don’t buy that book. It’s my choice. I can choose plenty of other things. The publisher then has to make that call of whether they prefer to modify their price to sell to people like me or not and that is their choice too, of course 🙂 It’s like any other consumer good. My parents drink wine and sometimes they will pay more for the fancy label, and other times they will pay less for a different type of wine. Making the choice to buy a cheaper one does not mean that they hate the wine growers and want them to starve 🙂 It means they have a budget, and the bulk of their purchasing is at price point X, and occasionally they go to price point Y for a special reason. Some vendors will sell different products at both ends of the spectrum to try and get the most business from customers like them. Others will decide that they are enough of a name brand—the Stephen King or John Grisham of the wine world, as it were—and only charge the premium prices.
I think it also depends partly on what type of writing you do. I have two books on managing a freelance writing career and on taxes for freelance writers. I wouldn’t follow the .99 model for them because of the value of the information to the reader is much higher than that. However, I will be be working on a YA series later this year and I’m quite enamored with the idea of pricing the first at .99 and then 2.99 for the rest. Only time will tell if the Hocking/Konrath model will be sustainable.
http://writingandsellingnonfictionbooks.blogspot.com/
This is a great topic. Bottom line for me: Free samples to rope me in, very low prices (for me right now, under $8, and under $5 even more appealing) and free e-readers so I don’t feel like a nut when I say the word Kindle.
Joanna, I totally agree with you.
.99 makes good marketing sense (free is even better-there is no risk there for the reader) Once a reader reads an author they love then it dosen’t really matter what price you set the subsequent books for because a reader who loves you will pay just about anything. Just make that free or .99 cent book the best thing you have ever written and readers will flock to your work. For years Lynn Viehl has offered free content on her blog. Years ago everyone poo-pooed her (she did no other marketing once she found out what a waste of time it is for a mid-list author, her blog is entitled Paperback Writer) but she gradually increased the number of her readers and reaped the benefits and has continued to do so, writing many series under several different names including an excellent sci-fi series that was 10 books long (Star Doc). I genre hopped right along with her because I loved her writing style. If your writing is good you will collect readers by keeping that first book priced low so people will take the leap and purchase an author they know nothing about.
Not true, at least not for me. I love Nora Roberts, but I think her ebook prices are too high, so I do without.
I love Lois McMaster Bujold, but the only reason I bought Cryoburn in hardback is to get the CD with the other Miles books on it.
Does anybody doubt that there are many thousands of highly skilled writer who are living in a crappy apartment somewhere completely unrecognized by the major publishers?
Under the old system these people were locked out of the book distribution system unless a major publisher decided to take them under wing. But now they can self publish and find an audience.
Does anybody doubt that there are tens of thousands of unknown writers who are more skillful and more thoughtful than the writers pushed by the big publishers to the top of the best-seller lists?
Imagine this scenario – unknown writer who is barely surviving spends a year writing his heart out. Then he self-publishes and sells 50,000 copies at 99 cents, taking half for himself. Of course not every self-publishing author is going to make 25 grand on his first book. But now they at least have a chance.
It’s a global digital world so multiply this scenario by 100,000 or more potential authors who can now self-publish. The world is swimming in digital media. Look at the absolutely amazing things some people create for youtube, for example. People WILL create. And now they don’t need large corporations in order to seek an audience.
Ebooks are all about more freedom. More freedom to read and more freedom to write. And any author or publisher who thinks they “deserve” some special pricing structure or special protections or special anything based on the past can hold on to that idea and ride it all the way into oblivion.
The biggest problem with indy authors is for their audience to find them. Most of the book review sites that I frequent and trust won’t review an indy author who hasn’t been professionally edited (which can cost more than your typical indy author wants to or is able to pay). I’d love to look more at indy authors, if I could find the ones that wrote what I want to read (most seem to be into horror or YA or paranormal YA, which I don’t read).
Well said, Binko. Totally agree with you. It’s an exciting time to be a writer and reader, with lots of potential for wider and richer experiences for both.
All the best
Adam
iWriteReadRate.com