I have been thinking for days, weeks, months, heck, years about ebook pricing and traditional publishers. Just for fun last week, I ran some numbers using the general figures from Bob Miller in the comments on his ebook pricing post*, plus a guesstimate of 12% general overhead (high or low, doesn’t really change the bottom line on a per unit basis), and they’re not pretty if you’re a publisher. After modeling various scenarios, two words come to mind: creek and paddle.
Amazon isn’t setting a table for one, they’re throwing a dinner party.
Especially if you are trying to port traditional publishing practices to the digital market. You can’t win if you persist in applying the same old, same old to today’s digital marketplace. In some cases, it’s arguable if that same old approach will work in the physical marketplace.
Stop the madness now!
Wow, that felt good.
There are two major forces in this game: Amazon and readers. Amazon has a device, a marketplace, and a robust business model based on the iTunes store. Readers have a whole lot of WTF? in their corner, and that’s without factoring DRM into the mix.
At this moment in time, an increasing number of people are investing good sums of money in electronic reading devices. As early adopters, we know things will change, our technology will be rendered obsolete, the next lust item is just around the corner. We buy now because we believe that we’re investing in a better future, better devices, better reading experiences. Prices will drop, functionality will increase. As we make our investment in this future, your investment must necessarily come in another form.
Get over your (silly) fear that the digital customer is a lost print customer, especially in hardcover. Yes, there is a customer migration to electronic, for many reasons, but if you’re worried that one format is going to cannibalize another, you are truly focusing on the wrong problem. Consider a marketplace where customers get to choose the format that best suits their needs. Don’t protect your windows and get over your territorial squabbles.
Amazon is creating a $9.99 high end price point expectation for readers. Other retailers, retailers you need in this game because competition is good for everyone involved, are less able to subsidize the difference in your price and theirs — your “price”, I think it a better way to frame it — are going to force you to allow them to be competitive with Amazon. They can’t sell ebooks for $26.99 while Amazon plays in the shallow end of the pool.
Amazon isn’t setting a table for one, they’re throwing a dinner party.
My recent survey indicated that $10 is the top price most readers are willing to pay, less being preferable (logic: they can buy more books, and buying more is always a good thing for them and you). Readers are also dealing with the lack of tangible goods (digital versus paper), DRM and lack of portability, and a general loss of rights associated with a print book. Those are the essential elements of the WTF? Factor.
Once upon a time, you had the power to decide pricing in the marketplace. Now it’s the customer, and the customer has all the power. Free content is bountiful and readily accessible. In many ways, it can and does replace the content of print books. People will pay for content as long as it meets some basic needs. Digital books offer as much pleasure as print books, but digital books are also viewed as something slightly different.
In the digital marketplace, books have to remain competitive with other media. It’s not so much your opinion of the value of your product that matters; it’s all about how the customer values your product. And, lordy, if you think they’re fired up by ebooks that cross the $10 threshold, you are not talking to real people who live real lives and buy stuff with real money.
You can trot out your business model and your profit-and-loss statements, but your customers don’t really care. They’ve grown accustomed to this power, and if they can’t get what they want from you, they’ll get it from someone else, Including, yes, non-legal sources if that’s the only alternative you provide. Your competition has changed, and you must change. Yep, it’s a variation on the publish or perish model.
Now is the time to pick up the model and shake it around some. You, dear publishers, are right. You can’t make the $9.99 price point work in this current environment. But you’ve run the same scenarios I have, you’d played with the numbers in the same way, you’ve even used (ahem!) real facts and figures. I’m guessing that you even, as I did, turned the model around and realized that interesting things happen when you build from the bottom up. You know full well that you can grow this market, maybe even increasing your customer base in the process, by re-imagining the way you manage this aspect of the business. You’ve been staring the iTunes model — let’s call it the 30% model — in the face since late 2003.
I look at pure-play (or reasonably pure) digital publishers who base their royalties on variations of net receipts. They are better positioned to bob and weave with market changes and expectations because they approach the business from a different perspective. These new publishers are offering higher royalties to authors, the same broad distribution, and, ahem, more timely royalty reporting. We’re moving into the third wave of digital publishers, and with the mainstreaming of ereaders and a growing market, authors will be shopping around more.
Think about it: in the world of digital distribution, the traditional publisher has lost a key advantage. Two key advantages. On the plus side, you still have more marketing dollars.
Since I’m guessing most current releases were acquired before ebooks were as much as a blip on the financial projections, it’s hard for me to fathom why you don’t just go for and sell the books at the price point people want. You weren’t really looking to recover much of your expenses, nor the advance, from ebook sales. Let them be the gravy. You might surprise yourselves by picking up unanticipated sales from customers who balk at paying hardcover prices while shrugging at paying Kindle (now being used in the broadest possible sense) prices.
Think about all of these things as you endure yet another pricing meeting. Plus one more factor. We get to pay for your learning curve as you create digital editions of your bound-for-print product. Including your crappy conversion process. Give us a break.
I mean, I’m buying books with double-spaced paragraphs (cannot begin to describe how annoying this is, especially when one is reading on the treadmill). Missing paragraph breaks. Weird line breaks. I can assure you that if I had paid full list price for these books, I would be an unhappy-and-vocal-about-it customer. Seriously. Get your quality control process down before you even begin to think about charging ridiculous prices.
Then, as an early adopter of the Kindle, I have to worry about such things as future upgrades to the Kindle DRM rendering my current books inoperable. Weird notion, huh?, the inoperability of books? My concern is rooted in history. This ain’t my first digital rodeo.
The lines are drawn in this battle, and I don’t see the traditional publisher pricing model winning. Right here, right now, you have a chance to grow this market in a way that makes everyone happy.
(By the way, this post and associated comments nearly made me abandon this one, but I figure the more voices, the better. Plus I’d already written it. No point in wasting perfectly good bits and bites.)
* – Acknowledging that there are other models, I’m guessing that the thinking outlined by Bob Miller represents something close to the industry standard.