E-book pricing – dart, meet bull’s eye

There is a flood of opinion regarding e-book pricing. Should they be .99 or have a sticking point of $9.99? Or is the sweet spot between $5-$6? The truth is that with any new enterprise, there’s a lot of shake-out and no one knows quite sure where pricing will end up. For now, it’s a lot like covering your eyes and tossing a dart toward the bull’s eye.

This is undiscovered territory, so what parameters are used to calculate retail price?

Retail Pricing

Retail pricing is an agreement between the producer and the marketplace. A new product hits the market, and consumers decide whether the price fits within their collective ability and willingness to pay, based on desire for the product.For example, when iPads hit the marketplace, people stood in line for hours to fork over their $600 because Apple had done such a fantastic job in creating desire, which took demand to new heights.

If a product moves too slowly, the producer drops the price in order to lure in consumers. We can see this with Amazon’s Kindle. They were the only game in town, but when other e-readers began to cut into their market share, they dropped the price to undercut their competitors. Who won? The consumer!

Retail pricing is a bit more static with physical books. There’s an accepted agreement about the retail price for a hardback book, trade paperback, and mass paperback. You get outside that norm, and buyers balk, and authors scream, “Gah! SkanyPantsPublishing is charging $21.95 for my 150 page trade paperback!” Books that fall outside accepted norms suffer poor sales.

Those outside of publishing believe that production costs (editing, cover design, interior design, discounting, marketing and promotion) determine pricing. It doesn’t. Mainstream publishers (and if any of you call it Legacy Publishing, we can never be friends) shell out a ton of money to produce a single title, and we all make our money on selling a lot of units in order to not only collect our initial costs, but to also make some money in the process.

E-book Pricing

E-book publishing is a whole new can of worms. Not only are publishers discovering e-books’ viability and trying to come to some agreement regarding standard pricing, but DIYers are added into the mix, who are all too happy to undercut the market. The result is that there’s a lot of confusion over the disparity of e-book pricing.

Amazon was the first to introduce e-books, and they began with a flat price of $9.99 or lower. Consumers got used to those prices and believed they should remain static because publishers don’t incur printing costs or warehousing costs. This justification is flawed because, as I’ve already pointed out, pricing has little to do with production costs, and everything to do with established norms for book prices. E-books are the Wild West without a sheriff.

The larger publishers inverted their navels because they wanted to charge whatever they wanted for their e-books, and this brought on The Great Amazon/Big Publishing BitchSlap Fest, which saw Amazon removing the Buy buttons from certain publishers until they sat down like quasi-civilized folk and came to an agreement. The result is that publishers can charge whatever they want and determine whether they want to allow Amazon to discount the e-books.

Personally, I think it’s nutty not to allow Amazon to discount the e-books…after all, they still pay royalties on the retail price. If Amazon wants to sell our e-books for $5 less than retail, who am I to quibble? I’ll sell more books and get royalties on the retail price. Win win.

But now we’re getting into murkier waters because prices are all over the map, and we have yet to achieve pricing stability. So what should determine the retail price of an e-book?

Quality

People readily understand that a hardback book sells for roughly $25 because it costs so much to produce them. Guess what? They don’t. Depending upon your print run, printing costs for hardbacks are extremely low, so the profit margin is delicious. Where’s the consumer outrage?

No one quibbles about paying $600 for an iPad or paying higher prices for Apple/Mac software. They pay it because they want it. Yet in both those cases, the production costs allow for Apple to make a LOT of money. Consumers could easily buy a less expensive tablet or buy an IBM compatible and pay a lot less, but they don’t because they realize these are quality products.

Retail Costs doesn’t = Production Costs

Many  believe there aren’t many costs associated with an e-book because we already incurred those costs with the print production. Because e-b0oks are so popular, publishers aren’t selling as many print books and they need to recoup their production costs. There’s also the matter of employing someone to feed the e-books out to all the online venues. Those venues are growing almost daily – and so are the hoops that we have to jump through to upload and maintain the titles. It’s a full time job, and that isn’t free.

Option 

There are readers who won’t buy an e-book that’s priced over $6. That’s their right, and I can’t argue with that logic any more than I can argue my own opinion that it’s insane to pay $600 for an iPad…regardless of how much as I love them. I’ve based my personal boundaries on the price, the quality, and my desire. If I get to a point where I can justify the cash outlay, my views may change.

E-books are simply a different reading option. You can either buy the physical book or the e-book, whichever is more convenient for you. Amazon threw a dart at the bull’s eye and established a retail price they felt would attract attention to this new reading option. Publishers understand the importance of e-books and have wisely gotten into the market.

Just because more reading options exist doesn’t mean it must be given away. Competition and buyer reaction will eventually lead us all to a standard. But it will boil down to quality. The retail price will reflect the quality of a book, just like everything else. Otherwise, why would anyone pay several hundred for a pair of Manolo Blahniks?

What to Charge?

The problem is how much to charge for an e-book. Answer: Who knows? This is a new modality, and we’re all scrambling around trying to create a new normal. As I mentioned above, I look at e-books as simply a different buying option. I read off my phone or iPod, so I’m an e-gal all the way. If I see a new book that I really want, I buy it regardless of the price. The publisher has offered their author’s book with two reading options, trade ppback or e-book. I don’t feel I have the right to a book for $5.99 just because someone has said anything higher is “unfair.”

We don’t know what’s unfair yet because books are being produced in all sorts of manners.

DIY

The DIY set have fewer production costs associated with their books. Invariably they’ve written their books, maybe paid a couple hundred for cover art and formatting, and uploaded the title to Amazon. The editing and quality of writing is often spotty, but hey, they’re published. And because they’re eager to sell, they price their books at .99 because they normally lack a platform, a readership, or experience.

So the fix was in – .99 is the new norm…until new data comes out suggesting .99 is too cheap and can actually hurt sales because the perception is that the low price = inferior writing. Today I read that the new sweet spot is between $5-$6, and that anyone charging $14.95 for an e-book is a diseased yak on crack.

I think what we all need is patience. We should resist flinging arrows about how stupid mainstream publishers are or poking fun at DIY (which really is ignorant). This will shake itself out eventually. Now if you’ll excuse me, I have a date with my e-reader…

9 Responses to E-book pricing – dart, meet bull’s eye

  1. This is such a difficult subject – what should an e-book COST? I can see paying more for a paperback, even though, as you point out, they are deliciously cheap to produce. They still use up tangible resources. if nothing else, I’m paying for the paper, the ink, the glue, etc. Maybe I’m paying the salaries of the people who box them up in a warehouse, the storage costs, I could go on rationalizing why I’m paying the full $25 at an author event for a signature.

    But after I pay for my cover art and an editor, I am able to format my own manuscript and upload it ONCE to sell over and over and over. Even at 99 cents, I’m breaking even pretty quickly. Joe Konrath, John Locke, Lee Goldberg are all singing the praises of selling at 99 cents. Others, like John Vorhaus, won’t settle for less than $2.99. I’m seeing a lot of backlash from readers on the Amazon discussions – they think 99 cents is synonomous with “typo-riddled, unreadable, cheap.”

    I started out at 99 cents to try to encourage readers to try my books – how can you not take a chance for a dollar? But I’m thinking of raising the prices on a couple of them, just to see where the price point is.

    Gah-d, this business is such a crap shoot.

  2. NinjaFingers says:

    The short story ebook I have up is priced at 0.99 – which I think is a fair price for a 4,000 word standalone short story. Unfortunately…people are starting to expect standalone short stories to be free and novels to be 0.99.

    Just to give people some idea, based off of my own research, and not including ANY payment to the author.

    Producing a short story ebook:
    Cover art: $35-50
    Editing: $50-100
    ISBN: $27.50 per ebook version (10 ISBNs currently costs $275).
    Conversion: About $50 per ebook version if you don’t do it in-house.
    Minimum cost (assuming conversion done in-house): $112.50

    Producing a novel-length ebook:
    Cover art: $35-50
    Editing: $500-1200
    ISBN: $27.50 per ebook version
    Conversion: About $100 per ebook version
    Minimum cost: $562.50

    Realistically, a DIYer who does their own conversion or uses a free conversion service should budget probably $150 per short story and about $1000 per novel or collection.

    That is the money this DIYer needs to recoup before they get a penny for themselves. And if you do digital printing…guess what? It’s the same cost except you need an extra ISBN for the print version. Ebooks are NOT actually cheaper than print books if you use the digital printing/no print run model. Not to produce. Actual publishers may pay less for editing because they have an in-house editor, but if you are hiring an editor freelance, that’s the range you’re looking at. I cite these figures a LOT so people understand that yes, this is WHY people charge what they do.

  3. Aston West says:

    I imagine things will come around full circle eventually…many people price their books at 99 cents in order to gain a following, but once they gain readership, they realize they’re losing out on profit by not pricing it higher. Eventually, they’ll raise it once they’re confident they have the readership. I don’t think anyone considers 99-cents the new “norm” for all e-books…

  4. Lev Raphael says:

    Lynn, I bought an iPad and thought it a wise investment for when I went on tour in Germany because I did not own a laptop or netbook so I could Skype, surf, do my email, take notes (written and voice), write, watch movies and read books. It had everything I needed.

  5. Don’t get me wrong, Lev, I WANT an iPad like the beagle wants another margarita. But I don’t leave the batcave enough to warrant the expense. If I traveled more, I’d absolutely get one because they’re fantastic to haul around instead of a laptop.

  6. Great discussion Lynn! Setting a price is one of the trickiest parts of marketing even once your target market has been determined. Some believe it has to stay flexible to market conditions, while others see it as an integral part of branding. I have no clue, but I agree that setting it too low makes for bad perceptions.

  7. Tom Brosz says:

    What I’ve observed as a new Kindle owner is that e-book-only authors who are successful have two things in common: first, they produce a lot of product rapidly that’s at least good enough to sell, and second, they rarely charge over $3, and some make money with a lot of 99 cent product.

    With e-books that are versions of books already published in paper there is a lot of variation. For example, I’m collecting Nero Wolfe books, and many are in the $8 range. I pay it because I don’t have a lot of choice if I want the book. What’s irritating is that in this case the publisher doesn’t really bother with quality. Typos are common, usually of the sort that are obviously OCR errors. They didn’t really bother to edit and correct the product after the scan. There really is no excuse for this. To be fair, I’ve seen a few cases of similar laziness in some of their paperbacks, where it looks like they’ve just photographed an older version and printed it.

    I’m guessing someone at the publisher went to a guy at a desk and said “cough up Kindle versions of this so we have them to sell.”

    Classics that are out of copyright have quality issues all over the map since anyone or their cat can legitimately produce one. Shop around, and read the reviews!

    Anything that’s free is usually worth exactly that.

  8. claudenougat says:

    Good post. You’re right, it’s early days and too soon to tell what price ranges ebooks will eventually settle in. What strikes me as remarkable is that few people talk about the use of 99 cents as a “loss leader”. If you have a series, then you should price the first book at 99 cents, and the others at a fairer price (whatever you the author is comfortable with: $2.99, $3.99, $4.99 etc up to but not including $10. Because that (for now) is the boundary between DIY and traditional publishing…

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