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One excuse the big publishers used for going to the agency model of pricing was that Amazon’s $9.99 price for certain bestsellers was undervaluing the books and would establish expectations in ebookers regarding maximum pricing. So, if that is true, how do these very same publishers justify putting certain ebooks on sale for $2.99 or less?

This question popped to mind when Little, Brown, a subsidiary of Hachette, put City of Veils by Zoe Ferraris on sale for $2.99. This is the second mystery book by Ferraris featuring the same Saudi Arabian investigative team. (Although this is not a review of the book, it is worth mentioning that it is a 5-star book that offers both a fascinating insight into Saudi culture and a great mystery.) City of Veils is neither the first nor the last ebook by one of the Agency 6 to be put on sale for $2.99 or less; such a sale seems to be a regular happening. (The first book in the series, Finding Nouf, is listed as discounted to $11.16 from the list price of $13.95, with neither price being a price I would pay for a fiction ebook.)

Which makes me wonder about the ‘value of ebooks’ and whether we are seeing the erosion of price to where, eventually, Agency 6 fiction ebooks will be regularly priced at $7.99 or less and frequently on sale for $2.99 or less.

There has to be something magical about this $2.99 price point. Why $2.99 and not $4.99? Or $3.99? Both prices would be substantial discounts off the list price and even off the standard 20% to 25% discount price. I suspect the answer lies in what experience is rapidly showing as the price point for maximizing volume of sales. I also suspect that publishers are finding that ebookers are unwilling to pay more than $2.99 for an introduction to a previously unknown author. Yet, I don’t see any evidence that after the introduction to a new author, ebookers are running to spend $11+ for other ebooks by the same author — I know I am not.

But regardless of the motivation, isn’t this $2.99 price point setting an expectation among ebookers as to what the correct price for an ebook should be? I find that it cements my belief that ebooks should be both DRM-free (which Tor, a Macmillan subsidiary, will be doing shortly) and list priced at no more than $5.99 and frequently discounted to $2.99 (or less). These Agency 6 discounts are also cementing my belief that I will only rarely pay more than $2.99 for any ebook.

The price point problem is exacerbated by other steps publishers are taking. I recently preordered Spycatcher with a bonus excerpt by Matthew Dunn, published by HarperCollins, one of the Agency 6, for 99¢. (The bonus excerpt is from Dunn’s forthcoming new novel Sentinel, which can be preordered for a whopping $12.99!) At the same time, Spycatcher without the bonus excerpt is available for $9.99. This type of discounting with bonus material included happens regularly. My question to publishers is this: Why would I ever consider buying Sentinel for $12.99 or Spycatcher for $9.99 — neither book nor the author being previously familiar to me — when I expect that at some future date I will be able to buy them for significantly less?  Doesn’t your offering one of the books for 99¢ create an expectation in me, the ebooker? And even if I can’t buy them in the future for $2.99 or less, why would I buy them at all — regardless of how good a read the introductory book is — at a price that has already demonstrated as far too high?

If there is any validity to the complaint of Amazon’s $9.99 price point setting consumer expectations at a price that is unsustainable by the publishing industry, how are publishers fighting that expectation by offering ebooks for $2.99 or less? Why is the publisher’s tactic sustainable but not Amazon’s?

Valuing of ebooks is difficult. Yes, there are costs that can be objectively measured but those per-unit costs diminish with volume sales. I grant that each ebook cannot be looked at in isolation as best-selling ebooks need to subsidize those that do not sell well so that overall there is an industry profit. Yet, where previously the argument was that no ebook should be sold below a price that sustained the industry, which price was somewhere north of $9.99, Agency 6 publishers belie that argument by demonstrating that at least some ebooks can be sold for significantly less without damaging the industry. That action reraises the issue of what is an ebook worth?

The industry has put itself into a straitjacket of its own making. Originally publishers planned to window ebooks. Windowing of ebooks allegedly would let publishers subsequently publish the ebook version of a pbook at much reduced price, more in line with ebooker expectations. But after much protesting from ebookers, publishers ultimately went to simultaneous release. Unfortunately, with simultaneous release, publishers decided they could not price the ebook much lower than the pbook for fear of cannibalizing pbook sales, losing money, and devaluing the book.

Then to shore up the value of ebooks, agency pricing was instituted. It was touted as necessary for the health of the publishing industry — from author to publisher. Now, within the past year, these same publishers are regularly pricing some ebooks at $2.99 or less, shattering the justification for the higher agency pricing.

In the end, I think publishers will find that $2.99 is the magic price point for ebooks. The combination of the self-publishing phenomenon that ebooks have produced, the use of the $2.99-or-less price point by self-publishers, and the apparent willingness of at least some of the Big 6 publishers to discount ebooks — even if for just a limited time — to that price point, will create an expectation in ebookers that publishers will be unable to combat. We may be a few years away from seeing that magic price point, but I suspect it is coming on fast.

(Via An American Editor.)

14 COMMENTS

  1. I have a hard time believing that Big 6 books will settle at $2.99. $2.99 is an effective price for sales because it triggers that impulse “But it Now” response without a whole lot of thought as long as the book is one I find interesting.

    That impulse trigger combines 3 factors: it is a large price drop from regular price, making it an extremely good deal, the price is unlikely to drop lower if we wait, the price is likely to go back up quickly if we don’t act now.

    These factors go away with a stable standardized $2.99 price point. While I would certainly buy more books if they were all priced like this, I wouldn’t buy the same books and I wouldn’t buy impulsively if I knew that price point was stable. I wouldn’t buy all the books that sit in my to be read pile, because I could just wait until I am ready to read a specific book to buy it – which may be never and which may not be the book the publisher wants to hook me in with.

    The real question posed here is do these sales trigger more sales of the regular priced books in the series or by the author. For me, it does, as long as I really enjoyed the book put on sale and as long as the other books in the author’s catalog are not excessively priced (for me, that would be under the $10 price point – although I will pay more for those books that I absolutely must read).

  2. Well I don’t know what is meant by the ‘magic’ price point. Does that mean all eBooks will be sold at 2.99 ? if it does then I don’t see it because it makes no commercial sense to me.
    I have not seen anything happen in the last year to contradict quite a discussion here back then about the likely future prices of eBooks when I and others felt that the right price for eBooks was between about $3 and $7 more or less.
    However it always made sense that there would be titles by new writers and average writers that would fit the $2.50 – $3.50 range and titles by authors in demand that would merit a price of up to $10.
    Every reliable article about successful pricing and sales I have read since supports that broad range imho and I believe that those broad numbers will end up being a pretty accurate prediction of how things will settle.

  3. The whole discussion of eBook pricing is skewed by a very vocal minority who do not comprehend the foundations of the publishing industry’s economic model. First: One must realize, when trying to make sense of publishers’ attempts to price eBooks, that historically the majority of the profit comes from the sale of the hardcover release. There are plenty of people who have quite happily paid full price ($25-$35) for new books, and they are the ones who have turned publishing into an industry of note. Not you, oh vocal minority, oh ye who would (imagining that there may be a future sale) wait patiently for a lower price on the same book, wait to buy it until it reaches your “magic price point”. The most vocal of the “Cheap eBooks now! Cheap eBooks forever!” crowd seem to correspond to the same readers who would not only wait for the paperback, but the mass-market paperback, and often for the used paperback; for the biggest publishers, readers in these last two categories aren’t even their customers – mmpb is farmed out to companies which do just that (and know how to operate on the tiny margins), and used books, well, that’s another matter – something all large media companies are trying to wipe out in the shift to digital. Windowing has everything to do with selling full-value books to people willing to pay for quality ($30), then selling discounted books to people who value books less and are willing to wait ($15), then selling the scraps to the mmpb-producers ($7), who then sell the books to the people who value new books just a little more than the used-book buyers (who can be said to barely value books at all; $3). Thus: The fact that books are available at different price points at different times, that they go on sale, and that some customers are willing to wait until they’re paying what amounts to a nominal price (i.e.: paying in name only), is not a new (or eBooks-related) phenomenon. Likewise, the fact that publishers would like to continue to sell their books at something close to their full value to the readers willing to pay full price should not come as a shock or as an affront to those who have always stood as the least-valuable customers; when a publisher prices an eBook at $15, it isn’t about YOU – it’s about the people who have been gladly paying $15-$35 for books all along! They’re also buying $12-$15 eBooks quite happily, despite all the moaning from the other end of the price/value spectrum.

    Is $2.99 the magic price for eBooks? Well, for a certain class of reader, the ones for whom mmpb and used were the first times they’d consider buying a book (magically quite near the same $3 price point), maybe. But not for everyone. Not for publishers on the first day of a book’s hardcover release. You $3 book buyers are not the market at that time; you’ll be the market later. Feel free to wait, as you always have. The publishers are not in business to serve you; they’re primarily in business to serve those willing to pay 10x more for the same story, and are willing to let you eat those customers’ scraps.

  4. Teel, your post is comedy gold. I especially love the way you ooze out copious amount of disdain for those of us who laugh at the idea of paying hardcover prices for a basic ebook.

    My first instinct was that you are simply trolling. But your post is too elaborate to be just a troll. So I imagine it’s meant to be another long-winded diatribe explaining why traditional publishers who built on empire based on control and distribution of physical books should still be able to charge sky high prices in the digital era.

    Your premise seems to be that cheap paper books are meant for cheap low-class readers (like me!) who have to wait months to read the cheap version of a book, long after the high-class readers have paid top dollar for the premium version. And how exactly would this apply to digital books? Will the premium buyers get fancier digits? Will their binary file last longer? Will the cheap ebooks self-destruct after a couple of readings? Funny stuff! Really!

  5. $2.99 is only sustainable as a permanent price point for authors if accompanied by large-volume sales. Although the publisher can cut production costs to some extent by producing ebooks, the cost in time and effort to the author is the same for ebook and pbook. The industry standard top royalty of 10% on pbook and 25% on ebook means we can take a cut from $10 to $4 but not further unless sales increase. For all the grandstanding by publishers, they don’t have a product without writers.

  6. Department store JC Penney decided to get rid of all the sales and the hype that goes with it and offer all its clothing, etc., at a much lower price. This has proven to be a total disaster for them.

    People like sales.

    The Big 6 books on sale at $2.99 have been out for a long time and are loss leaders to bring attention to other books by the same author. This type of sale has proven successful for many authors over the years.

    If these books were just published and the price was long-term, this low price might suggest the trends mentioned by Rich, but they aren’t so don’t expect the Big 6 to lower their prices to under $3.

  7. Teel McClanahan III wrote: ” … a very vocal minority who do not comprehend the foundations of the publishing industry’s economic model.”
    I am afraid we understand it all to well, and the unfortunate nature of your post is that you believe this model can in any way survive the transition to digital over the coming 20 years. It cannot, is not and will not.
    The olde world is disappearing and no matter how you protest, it will continue to disappear. The hard cover market will disappear. The majority of the windowing strategy will disappear. Only a tiny fraction of titles will be distributed in physical form as opposed to POD. Informed readers will be, and are already, abandoning the outrageous prices in favour of Kindles and Kobos and they are already discovering that there is better reading to be found that the trash that is often peddled in the hard cover list and the best seller list, moving instead to the independents where quality is to be found at realistic prices and DRM and other barriers are slipping into the waves of history alongside the legacy publishers.
    The olde world of landmark office headquarters, lavish office suites, management expense accounts and bloated publishing companies is evaporating before our very eyes. These companies are scrambling as we speak to restructure and shed middle management and many other obsolete roles.This was the business model that forms the foundation of the “publishing industry’s economic model”.
    A new business model is emerging and the reality is that this new business model has no room for those ridiculous prices, invented to share out the cake between the distributor, the paper business and the small bookshop while leaving a small tip for the writer that is dying on the vine. It has no room for utterly forgettable titles being hyped to sell for $25 – $35 hard covers.

    Lean and mean is the new model and make no mistake this new model will prevail. Writers are starting to take the wheel of this train and only small, agile, adaptable and versatile support agencies will thrive in the new eBook world. Yes a couple of large publishers will survive, but by the time we get to 2020, their business model will be enormously down sized and eviscerated.

    “The publishers are not in business to serve you; they’re primarily in business to serve those willing to pay 10x more for the same story, and are willing to let you eat those customers’ scraps.”

    This really is the comedy quote of the year.

  8. Howard said, “The olde world of landmark office headquarters, lavish office suites, management expense accounts and bloated publishing companies is evaporating before our very eyes. These companies are scrambling as we speak to restructure and shed middle management and many other obsolete roles.This was the business model that forms the foundation of the “publishing industry’s economic model”.

    Howard, that world of publishing disappeared over fifteen year ago, and like all other businesses publishing has been cutting costs every year. If they get any leaner, they’ll not have any editors left.

    Publishing has always had one of the smallest profit margins of any business, between 3-5%, which leaves little wiggle room to allow bargain basement prices for front list. Despite your belief that books should cost less than a box of cereal, it will never happen.

  9. Howard, a family-sized box of brand name cereal runs between $3-5. Organics and fancy cereals run more.

    It’s funny, but the only places I ever hear people screaming about the price of ebooks are like this one where a bunch of people who think they understand the publishing business are screaming “How low can they go? Not low enough!” And we’re all DOOMED if we don’t follow these people’s advice.

    Yeah, right.

    I belong to reading lists with thousands of people reading ebooks and the only time I ever hear a complaint about price is when the book is hard-cover priced. They decide to wait until the price drops and keep happily buying all other price points. If a book is worth reading, they are happy to pay for it’s within the range of their budget.

  10. Bottom-line: The price of a creative effort has been, is, and always *will* be dictated by distribution costs.

    Since publishing houses are pretty much obsolete in the new economy, and since the cost of publication/distribution is measured in a fraction of a cent, and since the object is mass distribution, look for that $2.99 to slip all the way down to 99 cents; sellers and authors splitting the take equally.

    Given a world-wide market size in the hundreds of millions and an established author able to hook 10% of the audience at that price, the question is not IF this will happen but when.

    If you’re employed in the old-world publishing biz, it’s probably time to look for another career.

  11. Swamee, I agree.

    Mainstream publishers are clueless about the virtues of worldwide volume distribution.

    They are locked into the mindset of maintaining equivalent prices for ebooks and paper books. So they settle for selling 10,000 copies of an ebook at $10 each when they could instead push for worldwide bulk distribution and sell a million copies at $1 and make ten times as much money.

    But newer and more savvy players in the ebook marketplace will see this clearly. The big traditional publishers will go out of business because they will cling the longest to archaic business models.

    The mere fact that thousands of people right now are rich enough or dopey enough or clueless enough to pay $10 to $15 for basic ebook novels does not in any way validate this pricing level as a sustainable model for the future.

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