Ebook Pricing: Who Chooses?

February 23rd, 2009 · 50 Comments
by Kassia Krozser

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.

File Under: The Future of Publishing

50 responses so far ↓

  • Mike Cane // Feb 23, 2009 at 9:08 am

    I love eBooks, hate publishers.

    I’ve decided to mostly ignore all the pearl-clutching going on. It’s too aggravating. You’re saying what everyone else has said for years and years and years now. They won’t listen. Maybe we actually DO need for them to all drop dead before common sense prevails. And hey, publishers, when you do drop dead, don’t expect flowers. From anybody.

  • Michlt // Feb 23, 2009 at 9:20 am

    As a bookseller, an avid reader, and owner of the Sony eReader (which I love), I’m impressed by how well you’ve made your point here. I like the Sony eReader much better as a device but am disappointed by the pricing (which has fallen somewhat due to Amazon’s ebook pricing pressure).

  • Anon // Feb 23, 2009 at 9:25 am

    Kassia, thank you for this post. I had been wondering what was up with the pricing difference between Amazon and other eretailers when it came to new releases.

    I’m kind of stunned to read a publisher say that it only costs $2.50-$3.50 less to produce an ebook.

    What I don’t understand about that statement is then why do paperbacks cost $7.99? By that reasoning shouldn’t paperbacks cost $21 or so?

    If they can produce paperbacks for $7.99 then by his reasoning shouldn’t the ebook version sell for $5?

    As a writer of course I’d like to make a living from writing. I’m not suggesting that ebooks sell for nothing but that reasoning just doesn’t make sense to me.

  • David Nygren // Feb 23, 2009 at 9:39 am

    I’m glad you didn’t abandon this one, Kassia. Those reasonably pure digital publishers you mention, or at least those who adopt something similar to their model, are the answer I think. And I think that those publishers, their authors and their readers will all be better off if they figure out a way to cut all the profit-sucking middlemen (Amazon being the largest) out of the picture. If publishers can figure out how to sell directly to their readers, not only do they stand a much better chance of building a community around their content, but they also will be able to make that $9.99 price point work.

    Mike is right that “they” won’t listen, but to hell with “them.” I’d like to see a just a handful of publishers (maybe Mike won’t hate those pubs) do it right, ignore the existing system and start doing whatever they can to sell directly to their readers. This kind of thing would probably work better and be more profitable at a smaller scale, so the little guys hopefully have an advantage for once.

    Authors can help by rising up from their collective peasant mentality and demanding that their publishers stop filling the pockets of the middlemen and start filling the pockets of those who actually created the content. Enough with this “please buy from an independent bookseller” crap (why are independent booksellers supposed to be able to make a living from a lofty book life while 99% of the authors of those books are not?). Instead, how about hearing some authors say: please by from my publisher, join our community and let’s get to know each other a little bit.

    There are plenty of people ready, willing and able to help readers discover new content and those people do it for free. They are the new middlemen and they don’t need to get paid.

    I’m about to wander way off topic, so I’ll stop now.

  • Don Linn // Feb 23, 2009 at 10:03 am

    Dead on. The unspoken conclusion is that a greenfield or better yet, virtual greenfield digital publisher has a better shot at success than those burdened with current business models. It might be that building a new ship is faster/cheaper/better than trying to transform the current behemoth. (Spoken by one who is trying to do the latter.)

  • Kat Meyer // Feb 23, 2009 at 10:21 am

    Kassia does it again. Hope they hear you. “They” being the publishers. The readers too, though — understanding that there’s a lot that goes on behind the scenes and the issue of quality control could become a nice “value-added” for the ebook market. Get crappy file for free, get readable file for $. Heck, I’d pay.

    Anyway, I love ebooks and I love publishers even more. :)

  • nicola griffith // Feb 23, 2009 at 11:38 am

    Since I got my Kindle, my fiction reading has quadrupled–the individual books I’ve bought were all under $10 but the sum spent is significantly greater than my print spending. Why? Convenience.

    A beautifully formatted book should cost $10 or less. A crappy no-format book $5 or less. A beautifully formatted DRM free book should cost <$12. I should be able to take my Kindle to Kinko’s and have them print me a book on an Espresso machine for, say, $4 while I wait, and to have it on my screen if I wish.

    Bob Miller’s notion of bundling is just plain silly–just give us DRM free and it’s essentially the same thing. For the reader.

    Publishers exist to serve readers. (That is, it’s why they sprang up in the first place. Now they exist to make profits for their shareholders.) Readers, admittedly via Amazon, are setting the price. Publishers need to comply or die. I don’t think it’s any more complicated than that.

  • David Nygren // Feb 23, 2009 at 11:53 am

    Nicola, Amazon is not your friend. Neither is Amazon the friend of the authors whose books you’re buying. If you think publishers are bad now, just imagine a (horrible) world where the Kindle was dominant and Amazon controlled all pricing. Amazon also exists to make profits for its shareholders. They are biding their time, just waiting until they can fully take advantage of all of us.

    Take your White Master (Kindle) and smash it on the ground.

    Perhaps I’m being a tad hyperbolic here, but not much.

  • kaigou // Feb 23, 2009 at 12:02 pm

    Speaking up for all those profit-sucking middlemen, there’s a very good reason for outlets like Amazon, BN, all the way down to the bookstore I owned: it’s another form of convenience.

    Currently, if I were to list the publishers from whom I’ve purchased ebooks, it’d be around 10 to 15 companies. Then again, I can go to eBooks or Fictionwise and there are hundreds of publishers, and it’s not just me picking the one or two books I like from this company, then figuring out yet another navigation system to find what I want, and finding only one or two books for the effort… No, I’m more than happy to know that Fictionwise gets the usual cut as a retailer because they make it oh-so-convenient for me, much as Amazon does, to look through pages and pages of listings of all sorts of books, and not just the limited offerings of one publisher.

    (And I honestly wish it were a lofty life, owning a bookstore. But it’s not. Maybe if you own a franchise ala BN or the other major names, but not if you’re independent — and the recent flurry over making books non-returnable is just cruelty to booksellers: it means they assume the entire risk, really, if a book doesn’t sell. That’s just not right, at least IMO.)

    As for the “only $2.50 less” part, that’s because the vast majority of a book’s costs exist regardless of eventual format: the editor, the copy editor, the agent’s cut, the author’s cut, paying for the slush readers and the editor’s assistant and the fact that a fair number of the major publishing houses are salaried or at least benefits-laden for employees. That money comes from somewhere. Take out 8% for the author, another 40% for the bookstore, and all the rest, and the amount it costs to actually turn the text into “paper product” is about 15% of the retail price, from what I recall. So on a $25 book, you save $3.75 or so, but then you turn around and lose some of that savings because it takes technology and expertise to format the plain text doc into something that will work in PDF — let alone for Kindle, Mobi, whatever other format named.

    The reason paperback books are cheaper than hardback is because a) the quantities are much greater — or are expected to be — so it’s selling by volume not by profit, b) if there was a hardback first, the bulk of the front-loading is done — editors et al — and it’s a matter of reformatting. In that sense, ebooks would be a possible third wave, and (as Kassia said, or I think she said) could be considered gravy at that point — but there would still be an associated cost due to the expertise needed to render the original text from document into ereader-formats, and the cost increases exponentially when you add in DRM tech. It’s not cheap; it’s not just cut-and-paste.

    One other note about publishers selling direct: they’re publishers. They’re not retailers. The two skills sets are only marginally aligned, but those who do one best do not always also master the other. The majority of trad. publisher sites I’ve been on are great on the info and PR but laughable when it comes to understanding the customer mind as it is in a *retail* situation. Just not their forte, so I don’t blame them for shying away from going at it whole hog.

    Me, I’d actually be willing to pay maybe $10 for an ebook, maybe more if: I got it in cross-platform PDF (with at most a hidden friendly DRM); I could transfer without any struggle from Mac to PClaptop to Maclaptop to whatever ereader I ever get and not have it expire or go dead on me. I’d pay $11 if I also knew I’m getting extras, like a full interview with the author, full-color frontpiece and maybe an appendix with “here were the other covers we considered” or perhaps “pictures of the story’s setting” or a music file or a short-short like the reverse of a pre-movie cartoon, something! And I’d possibly even pay $12 if I knew that I could give/transfer the file to a friend if I read the book and didn’t like it enough to keep it — that’s a value with print books, as Kassia mentioned, that just doesn’t exist with ebooks and it drives me bonkers.

    Also, the double-spaced paragraphs really annoy the hell out of me.

  • David Nygren // Feb 23, 2009 at 12:28 pm

    “Speaking up for all those profit-sucking middlemen, there’s a very good reason for outlets like Amazon, BN, all the way down to the bookstore I owned: it’s another form of convenience.”

    A convenience that was essential in the print world but is not in an ebook world.

    “Currently, if I were to list the publishers from whom I’ve purchased ebooks, it’d be around 10 to 15 companies. Then again, I can go to eBooks or Fictionwise and there are hundreds of publishers, and it’s not just me picking the one or two books I like from this company, then figuring out yet another navigation system to find what I want, and finding only one or two books for the effort…”

    There are more blogs/web sites than there are publishers, but we all manage to go to the sites we like best. Publishers can cooperate to create an online database off all available content, with links to the publishers site.

    “Take out 8% for the author, another 40% for the bookstore…”

    That’s the problem in a nutshell. How about 48% for the author, 0% for the non-existent bookstore? Sounds more fair to me.

    “One other note about publishers selling direct: they’re publishers. They’re not retailers.”

    Yes, most publishers are incompetent at this now. But if they were to learn the new skill set of community building, they could move beyond what is now merely “retail” and create something much stronger, more profitable and more satisfying for readers.

  • bowerbird // Feb 23, 2009 at 12:36 pm

    well, that was a quick turnaround.

    last week, i was the one telling you
    the major publishers are doomed.

    -bowerbird

  • Stephen Briggs // Feb 23, 2009 at 12:45 pm

    I just don’t get it.
    When a customer buys a book, they are looking to be ‘entertained’, aren’t they? Have you ever gone out to a baseball game? How much would the average visitor to any baseball park pay to watch a game? Whether your team wins or loses, chances are good that you’ll be back again for this one-time bit of entertainment and you’ll gladly fork over the cold hard cash for it without flinching a facial muscle. Or how about going out to a good movie? When it’s over, all you have (in either case) are the memories. With a book, you get to re-live the experience over and over again as often as you like. Now, who says that people simply won’t fork over a few bucks to be pulled away from the miserable reality of everyday life? I don’t know. Why do we even believe them? What sort of expertise in human nature gives them that authority? None that I know of.
    If you write it, they will come.

  • deb smith // Feb 23, 2009 at 1:48 pm

    God bless you and your realistic words, Kaigou. Everyone acts as if the process to create a finished, copyedited, professionally designed book, and the process to market that book, and the distributors who take a massive chunk of the profits for retailing that book, are magically going to disappear just because the book is in a digital format. But those substantial costs are STILL there. Can publishers cut out the middlemen and sell ebooks cheaper direct to the readers? Only in some Land of Oz where readers patiently troll the Internet for indie pubs and where readers patiently submit their Paypal or credit card in a dozen different places to buy the books they can get with a quickie one-click at Amazon.com. If you kill the golden goose (higher ebook prices) you also kill us evil, money-grubbing publishers (who are already surviving on slim profit margins). And despite all rosy, utopian dreams of authors publishing and marketing their own work successfully, the fact remains that the average author needs a publisher in order to produce a professionally vetted book that is marketed in a reasonably high-profile way. And somewhere in that process, there has to be an ebook price that pays the bills.

  • Dorothy // Feb 23, 2009 at 2:33 pm

    @kaigou: ” but there would still be an associated cost due to the expertise needed to render the original text from document into ereader-formats, and the cost increases exponentially when you add in DRM tech. It’s not cheap; it’s not just cut-and-paste.”

    Alas, I’m not seeing much “expertise” going into the conversion. For instance, RosettaBooks seems simply to scan the printed text with OCR technology and sell it. I don’t see what’s “not cheap” about their shoddy conversions. As an example, in their conversion of Pat Conroy’s BEACH MUSIC, the protagonist’s daughter’s name is Leah, and about 50% of the time in the Kindleized text it’s rendered as “Lean”. Do I feel the price of the Kindle version is too high for this sort of shoddy workmanship? Yes, I do. I was “good” and bought an authorized version, but I got the quality of a cheap pirated version.

  • David Nygren // Feb 23, 2009 at 2:49 pm

    Deb, I don’t see anyone in this conversation calling for the elimination of publishers. I myself want to see publishers’ power and significance enhanced for the sake of both readers and authors.

    Surely Amazon is not the only way for readers to discover content and purchase it conveniently. The point here is to explore how readers can obtain the content for a reasonable price AND how publishers and authors can still profit at the same time. That cannot be done if you prostrate yourself before Amazon and look to their parasitic model as the only option.

  • Anonymous // Feb 23, 2009 at 3:03 pm

    One other note about publishers selling direct: they’re publishers. They’re not retailers . . . Just not their forte, so I don’t blame them for shying away from going at it whole hog.

    They should. Adapt or die.

    Quite frankly, I don’t see how they can look at the middleman and think that’s an acceptable way to strengthen their bottom line.

  • MoJo // Feb 23, 2009 at 3:03 pm

    The “adapt or die” comment was mine.

  • MoJo // Feb 23, 2009 at 3:07 pm

    @Dorothy

    As an example, in their conversion of Pat Conroy’s BEACH MUSIC, the protagonist’s daughter’s name is Leah, and about 50% of the time in the Kindleized text it’s rendered as “Lean”. Do I feel the price of the Kindle version is too high for this sort of shoddy workmanship? Yes, I do. I was “good” and bought an authorized version, but I got the quality of a cheap pirated version.

    Kindle’s conversion platform is horrible. I spent far too many unnecessary hours formatting THE PROVISO when I had already formatted it for Mobi and it should’ve taken that HTML code perfectly. It didn’t.

    Re: Kindle e-book prices.

    Don’t think Amazon won’t pull a Wal-Mart and raise prices as soon as they think they have a strong enough foothold in the market.

  • bowerbird // Feb 23, 2009 at 4:11 pm

    > Can publishers
    > cut out the middlemen
    > and sell ebooks cheaper
    > direct to the readers?
    > Only in some Land of Oz
    > where readers patiently
    > troll the Internet
    > for indie pubs
    > and where readers
    > patiently submit their
    > Paypal or credit card
    > in a dozen different places
    > to buy the books they can get
    > with a quickie one-click
    > at Amazon.com.

    collaborative filtering will soon
    whisk readers directly to books
    — hundreds, or _thousands_ —
    that will appeal to every _one_
    of those readers, individually,
    as surely as “word-of-mouth”
    from people you know have the
    _exact_same_taste_as_you_
    (as proven by a good correlation
    between their ratings and yours
    on books you have in common).

    it might take _two_ clicks
    — because amazon patented
    the one-click purchase, since
    that was their “nonintuitive”
    contribution to our culture —
    but i don’t think it will strain
    anyone’s finger _too_ much.

    and publisher “marketing”
    in this new environment will be
    equivalent to telemarketing —
    i.e., an intrusion on your dinner.
    — like trying to sell size-6 shoes
    to a person who wears size-7…

    so remind me again exactly why
    any writer needs a publisher?

    -bowerbird

  • Kassia Krozser // Feb 23, 2009 at 7:02 pm

    Wow, again so many great comments on a day when all I can do is hope for a moment to catch up on email. At this point I’m losing the battle. Badly.

    Deb, as you saw from the post, I went through my annual (I think, it sure seems that way anyway) process of running mock P&Ls on ebooks. In those scenarios, I factored as best I could the various costs associated with publishing electronically (in conjunction with print, in this case), including overhead. The two elements I saw as most problematic were discounts (because the pricing structures are based off of a retail list price, in most instances) and author royalties. Only when I turned the model around did I see different numbers. I agree that it’s ridiculous to expect readers to troll the web searching for bargains — they actually hate that they have to do this.

    We need publishers, professionals to curate (must find better word because this isn’t really saying what I want it to say) and edit books. I’m sorry, but bad editing and bad selection process (read: take anything that crosses the threshold) doesn’t do a damn thing for the independent digital publisher. There are costs associated with this quality. There are also savings associated with digital versus print publishing. But that’s neither here nor there — readers are developing expectations for ebook pricing that have to be considered as you move into digital publishing, and whether or not your products sell in this market depends upon your ability to meet these expectations. I address many of them in this post. I have been calling for some time for publishers to rethink how they do business in the digital sphere — I think the biggest danger for the industry is to apply 20th century models to a different marketplace.

    And I get that some in the industry argue against my position that we’re looking at a new market. They have good points. But we are talking about a small, but growing, aspect of your business. If you’re applying traditional models, like, oh, paying royalties based on the hardcover list price, the numbers simply won’t work for your business.

  • Kassia Krozser // Feb 23, 2009 at 7:09 pm

    Michlt — I should note that my mind is actively processing thoughts about getting booksellers involved in this process. Ann Kingman has been a great advocate for booksellers, and her recent comments about the importance of keeping the sale (or a portion thereof) in your store, especially after you’ve done the hand-selling and education with the customer, have really resonated. I am sure it can be done, I am sure smarter minds than mine are coming up with workable plans. I see a role for everyone, even if that role changes somewhat from what it is today.

  • Kassia Krozser // Feb 23, 2009 at 7:09 pm

    Don — I saved the unspoken conclusion for you. I can’t have all the fun!

  • Kassia Krozser // Feb 23, 2009 at 7:13 pm

    Now, David, let’s not be too hasty about decoupling from our white master. I believe I’d go into emotional shock if I lost my books. Agreed that Amazon has, oh, a few problems (see: other posts on this topic!). This is why I emphasized the point that publishers do not (or, hmm, should not) want the throttle other retailers. Amazon has a clear agenda, though you can count me as one who does believe that Jeff Bezos loves books, and publishers are paying the price this agenda on physical product. But I don’t believe they need to be squeezed in the same manner on digital product.

  • Kassia Krozser // Feb 23, 2009 at 7:19 pm

    kaigou — you’ve said a lot here (and you did get the gist of what I was saying!) and I’m responding all over the place, hopefully not being too repetitive, but I wanted to circle back to what you’re saying about publishers not being retailers with an amen! While some publishers are moving toward that model, it’s messy and confusing for consumers. We don’t have the time or energy to flit from site to site. In fact, the great disparity in ebook prices between various sites makes them want to scream. We’ll be talking more and more in the near future about the customer experience, because it gets lost in these discussions.

    I noted that ebooks are seen as something valuable, but also something different. You hit on some elements in your comment. (and circling back to Nicola, if it were the right book, I’m not opposed to bundling. An example would be a cookbook — something I often buy just because it’s a thing of beauty [which speaks to my love of food!] — I could have the pretty, glossy book, but also an electronic version that makes shopping easier) Others are talking about the possibility that digital publishing brings. Right now it’s all about the booky book, but once you look beyond that format, then you see new book possibilities.

  • Kassia Krozser // Feb 23, 2009 at 7:23 pm

    Dorothy — you hit on the frustration I’ve had. We’re in the midst of a huge learning curve. Consumers are doing their part, but we need some love back. However, we do need to consider the various business models, such as Rosetta’s scanned books. For me, that’s about the worst approach, due to the quality issues. Of course, for those books that are native digital (books written in the pre-word processing era, and even some written in the word processing era, depending on the machine/software), scanning makes no sense.

  • Kassia Krozser // Feb 23, 2009 at 7:26 pm

    In defense of middlemen…I am very pro bookseller and librarian. While I consider myself to be a savvy reader, I am fully aware of my limitations. While there is some fat to be trimmed in the middle between publisher and reader (D, ahem, R, ahem, M, ahem), there are also roles that, due to their own self-interest, publishers might not fulfill in the best interest of the consumer. But these roles, like so much else, are evolving and changing.

  • kaigou // Feb 23, 2009 at 8:08 pm

    @Dorothy: “Alas, I’m not seeing much “expertise” going into the conversion. ”

    I think that depends on the publisher, frankly. I’ve gotten used to some publishers having decent (for onscreen reading) house formats. Others still need a little work. (Double-spaced paragraphs, anyone?) The worst formatting ever, actually, was from a non-epub (trad-pub) who’d converted the text to ebook. I think they just dumped it in and didn’t realize there’s actual, y’know, code. And stuff. Paragraph breaks lost for paragraphs on end, sentences with hard-carriage returns instead of soft, quote marks missing, all sorts of crazy stuff. Horrendous.

    But then again, the epubs do nothing but epub. Most of them seem to have their tech down pretty well, even if I have quibbles with the margins and fonts and spacing they chose. It’s the tpubs who seem to think, “oh, we can get an intern to do that.” And then they wonder why people get irked at their ebook offerings and don’t want to buy more: it’s a self-fulfilling prophecy, of a sort.

    However, when I mentioned DRM tech, I did not mean the person using it but the actual sw itself. As I understand it, the tech used to incorporate DRM into a file is some very NOT cheap stuff. If a company doesn’t want to dedicate much money to ebooks but wants to use DRM, I’m willing to bet there’s a few who just dump “convert this!” on an intern, but spend the bucks on DRM, and then get all pissy because customers don’t want to pay as much as the company has to add on top to make the DRM sw cost viable considering it’s being used on so few books. (My guess only, though, based just a general awareness of the cost of the software.)

    Kassia, a cookbook bundled with ebook version would be freaking brilliant. If anything might ever actually get me to buy an ereader, it’d be either a long commute on pub. transportation or the chance to do my shopping with a list in hand — because it’s one thing to go with handwritten list, and another to see kumquats are on sale, be curious, and have no idea if I’ve got a cookbook that will walk me through the secrets of kumquats.

    Oh, and lastly: the publishers want to sell books, but their real market is, and has been for ages, retailers — not customers. Beneath any kind of format wars, that’s really the equation: we, as customers, are forcing changes on publishers when normally it’s the bookstores who act as the megaphone for those voices. Is that good? Is that bad? I have no idea. But I do think there’s a limit to how much that fundamental facet of the economic book-selling system can truly shift — which is why I think finding a way to get bookstores, brickfront retailers that is, into the ebook game is a crucial part of the puzzle.

  • Kassia Krozser // Feb 23, 2009 at 9:13 pm

    kaigou, I am so glad you’ve joined the conversation. You fit in so well (which is to say, smart and savvy and challenging). If my fantasy world comes to fruition (still waiting for those flying cars), you won’t need a dedicated ereader as much as you’ll need a phone that offers a decent reading experience.

    I feel your pain on the conversion. I actually complained on Twitter about the double spacing, received a “I will pass this on immediately” message from the publisher. Since I know the person who responded, I know my complaint was heard, but it’s an uphill battle. There is no one-button, one-click, one-swoosh solution. Unless someone can magically figure out how to get authors to turn in perfectly formed XML documents. Not. Going. To. Happen.

    DRM *is* expensive, and, frankly, doesn’t work as advertised. It doesn’t stop piracy, but it does stop people from reading the way they want. If ever something had to be taken back to the drawing board, it’s DRM. I’ve linked to a great article on this topic in this post.

    Every business I know has changed on some fundamental level over the past fifteen, twenty years. Should publishers be retailers? I think it has to be part of their game plan, but is it a primary role? Depends on the publisher. Consumers don’t like skipping through the internet to buy books. We have a greater goal in mind. Booksellers need to be less cranky about ebooks and more “how can I get me some of that?”. They can’t carry every title in the store, but they can get me, the needy customer, to the book.

    But what I like is that we’re all thinking, and I know they’re listening. Change is hard, change is really hard. We’re asking for a lot of people to think in ways they’ve sort of avoided during this past decade or so. Publishing is still, for some, playing catch-up.

  • bowerbird // Feb 23, 2009 at 11:05 pm

    > There is no one-button,
    > one-click, one-swoosh
    > solution. Unless someone
    > can magically figure out
    > how to get authors to turn in
    > perfectly formed
    > XML documents.

    you are wrong wrong wrong…

    and you will be proven wrong
    — for everyone to clearly see —
    in a very short period of time…

    -bowerbird

  • El precio de un e-book (¡más madera!) « Booklishing // Feb 24, 2009 at 1:54 am

    […] No Comments Si recientemente nos hacíamos eco del asunto, ahora en Booksquare se ha iniciado una interesantísima discusión sobre el precio de los e-books: coste de producción, digitalización adecuada e inadecuada, el editor como vendedor, el […]

  • Deanna // Feb 24, 2009 at 3:18 am

    If you think there is confusion surrounding the business model for e-books in the US and the UK, you can’t even begin to imagine the utter chaos which is the budding Spanish e-book market. As rights manager at a medium sized publishing company in Spain, I’m currently negotiating digital rights for most of our backlist titles and I assure you that reaching an agreement that authors, agents and publishers can be happy with is no easy task.

    This is where I hope you can lend a hand. About 80% of our backlist titles are licensed from US and UK publishing houses either directly or through Spanish literary agents. The agents are convinced that this is their opportunity to crank up royalty percentages for authors and are asking for royalties as high as 30% based on the current model proposed by one of the main (and most vocal) Spanish e-book retailers:

    10% DRM (ugh)
    40% distributer/retailer
    10% conversion process handled directly by said company
    30% author
    10% publisher (and in the case of translated books, translator)

    My question is this: Is this model similar to the one most US and UK publishers are facing in their current e-book climates? With discounts for conversion, DRM and distribution, are publishers faced with the prospect of dividing the remaining 40% of their retail price between author, translator and publisher? I greatly appreciate your answers because I believe that understanding your markets will help me to reach a greater understanding with the Spanish literary agents who represent your publishers in our marketplace.

    Thanks!!

  • Ted // Feb 24, 2009 at 9:22 am

    I’m not against the concept of digital readers, but I fear the technology of them and what Amazon and others might do with it. Consider that the technology of a real, actual book, a hardcover or paperback, is finished. All that’s ever needed is a souce of light and literate eyes. But in digital, while the books loaded into them might cost only $9.99 or $2.99 or less, the technology will change regularly, every year or two or maybe every six months. Then you’ll have to buy that new digital reader technology that’ll get more and more expensive. That’s why I’ve resisted buying Kindle. Once I get used to it, I’ll have to keep up with the technology, whereas with real, live books they’ll be available forever barring a fire. So that what you don’t pay for books to be loaded on a digital reader, you will pay for increasingly complex technology. Believe me, Amazon will do it. I think a better way to go is with POD and with everyone being his or her own publisher, and printing will get cheap. The technology of books ain’t broke, and does not need fixing! People are in love with technology, which is misplaced in this industry.

  • Jeff // Feb 24, 2009 at 9:26 am

    I think it’s going to take out a few years for this all to shake out…this is such a transition period…but small presses may very well end up having an advantage by selling directly to customers particularly as niche blogs provide the audience channel…I don’t get recommendations for literary fiction by browsing Amazon and I don’t own a Kindle but if I could buy literary fiction right now in PDF from a publisher then I would do it and pay $20 per book. (It’s hard for me to find certain books in Argentina, but that also raises the issue of territorial rights with e-books. ) The value of a product to a customer often has little to do with the cost of production.

  • kaigou // Feb 24, 2009 at 8:08 pm

    @kassio

    *doffs cap* glad to be here, ma’am. It’s been years since I’ve owned a bookstore, yet I haven’t gotten books out of my system yet. Now I feel like every time I build another set of bookshelves, I turn around to find we need more. It’s like every sock in the universe that’s gone missing gets reincarnated in stacks of books around my house. So I give up, and keep up to date with publishing world. I’m doomed.

    “Booksellers need to be less cranky about ebooks and more “how can I get me some of that?”. They can’t carry every title in the store, but they can get me, the needy customer, to the book.”

    I think booksellers are the true intersection of the new world (epub) and the old (tpub). I went on for a decent length about this awhile back, with first part for writers to understand how booksellers think, and second part to ramble about how I’d approach merging the two pub-versions in a bookstore.

    After enough rambling, the eventual (for now) conclusion is that tpubs need to get out of epubbing, except in the case of setting up a sister-house for epubs. It’s just a completely different technology, with different marketing styles, audience, expertise, etc. The only crossover is the foundation of editor and copyeditor, and after that, the two divide. If tpubs were to treat epub rights like movie rights, audiobooks, radio adaptations, translations, and so on, then they’d be more likely to see it as a concurrent audience that sometimes crosses over — instead of outright competition.

    I still think the best scenario, long-term, is to be able to purchase a backlist book in eformat, and opt to have it POD while I wait. Take a number! Get some sushi next door! We’ll call you when your book is ready! See, dinner and a book, that’s my idea of a great time.

    Probably why I’m running out of shelf space, too.

  • Jeanette McLeod // Feb 25, 2009 at 6:12 am

    I have been avidly reading the comments on here. What an interesting discussion.

    We are a fledgling digital [only] publisher for children’s picture books. We invest in slush pile readers, editors, and illustrators in order to produce a ‘book’, we then invest in voice recording artists, flash programmers and action script professionals to turn the ‘book’ into a quality interactive eBook for children. All our authors receive 30% of gross sales. We offer free books for customers to browse and the ability to see into the first few pages. Our books have animated illustrations, read-along with the story highlighting of words, click on a word and hear it, realistic page flipping, and an interactive quiz to check reading comprehension and memory.

    So, is it a fair price to then charge the magical $10 for this as a reading experience?

    In my view if the quality is compromised by a publisher trying to make a quick buck by ‘digitising’ [or worse still creating just a PDF which exists already as part of the publishing process] then I agree with all the comments that eBooks should be cheaper than paperbacks … as long as the author has a contractual amendment to receive higher royalties for the e-version. If the publisher is investing in creating a quality end product for the customer then that carries a certain price. Surely?

  • links for 2009-2-24 « Birdbrain(ed) Book Blog // Feb 25, 2009 at 6:45 am

    […] Ebook Pricing: Who Chooses? | Booksquare “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.” Kassia always says it better than me (and everyone else). <3! (tags: books ebooks) […]

  • kaigou // Feb 25, 2009 at 8:40 am

    @jeannette:

    “We offer free books for customers to browse and the ability to see into the first few pages. Our books have animated illustrations, read-along with the story highlighting of words, click on a word and hear it, realistic page flipping, and an interactive quiz to check reading comprehension and memory.”

    This was exactly my point about the situations where I’d pay more. Someone who uses the power of digital to its full effect, as you’re listing here, is selling not just a story but an entire experience, and the price should reflect that. I could see such a ‘book’ as being $15, $18, in that range — because it’s no longer just a book.

    Plus, being able to read the first few pages (or the first chapter) is something I’ve noticed epubs do as a matter of course. Tpubs, converting to epubs, have NOTHING. They just list the book on their site, or on Fictionwise and its ilk, and provide the teaser and expect me to decide then whether it’s worth $8. In the bookstore, I’d flip open and read the first chapter. Epubs know this, and give me a digital version of doing that, but tpubs just skip it altogether — one more reason I find myself buying more ebooks from epubs and dismissing tpubs’ ebooks altogether.

  • Amal Douglas // Feb 26, 2009 at 5:04 am

    Boy! All i was looking for was an idea how to price my 55 page ebook about fundraising, but it’s been great being privy to such a dialogue from people in the business. Thanks (plus any other promotional tips for a self-publisher would be great)

  • Gary Jordan // Feb 26, 2009 at 12:07 pm

    “Everyone acts as if the process to create a finished, copyedited, professionally designed book, and the process to market that book, and the distributors who take a massive chunk of the profits for retailing that book, are magically going to disappear just because the book is in a digital format. But those substantial costs are STILL there. ”

    Those costs do not disappear – but they are ALREADY SPENT to prepare the hardback (or paperback) book. Said book came from a word processing file, probably even MSWord or something similar, and that’s 98% of the work when making an eBook. The publisher DOES NOT pay yet another set of editors and proodreaders and so on to create an eBook from the WP file.

    “Can publishers cut out the middlemen and sell ebooks cheaper direct to the readers? Only in some Land of Oz where readers patiently troll the Internet for indie pubs and where readers patiently submit their Paypal or credit card in a dozen different places to buy the books they can get with a quickie one-click at Amazon.com. ”

    Actually there are any number of choices for retail sales. Fictionwise has been mentioned, and eReader.com, and eBooks, and many others. A Google search will turn up pages and pages of them. Baen Books, a small but mainstream publisher of Science Fiction and Fantasy, uses Webscriptions.net. More about them to come.

    “If you kill the golden goose (higher ebook prices) you also kill us evil, money-grubbing publishers (who are already surviving on slim profit margins). And despite all rosy, utopian dreams of authors publishing and marketing their own work successfully, the fact remains that the average author needs a publisher in order to produce a professionally vetted book that is marketed in a reasonably high-profile way.”

    Unlike some few, I do not espouse the Individual Self-Publishing paradigm. I’m not certain I read any posts from anyone who does. That’s a straw man argument.

    “And somewhere in that process, there has to be an ebook price that pays the bills.”

    The dead-tree books are paying the bills – eBooks are pizza money on top of that. Are there people who make a choice between eBooks and TreeBooks? Yes, there are. But they aren’t lost sales – they weren’t going to buy the Hardcover anyway. What making the eBook available at a reasonable (low) price does for the publisher is put a copy of that book in the hands of a potential Treebook customer. It’s advertising.

    I use eReader Book Studio (under $20 from eReader.com) to make eReader/Palm versions of my stories. I use Readerworks Publisher ($119 from OverDrive) to make the MSReader version. I use Mobipocket Creator (free) to make the Mobipocket Versions. I use OpenOffice to make the Rich Text Format, the Text format, and the Adobe PDF versions. HTML I make myself with NoteTabPro from Fookes Software.

    For the versions with DRM, it takes a few mouseclicks to install. I don’t use it. Putting DRM – “copy protection” – on my files is the same as telling every reader, “I know you’re a thief, so I’m locking away your ability to migrate these files to another computer or program to read them with. If you try to give it to someone, I can prosecute you.” Would we tolerate the publisher telling us we couldn’t give the book to cousin Harvey after we’ve read it? Or selling it to a used bookstore?

    The late publisher Jim Baen didn’t believe DRM was necessary. He looked on eBooks as advertising for the Treebooks, and it works. You hardly ever find Baen eBooks on peer-to-peer and similar sites, because it’s reasonably priced, and a big chunk is outright free!

    Baen eBooks are typically $6.00, though some eARCs go for as high as $15. Even better, you can buy the monthly output from Baen for $15. That’s usually the eBook versions of 3 or 4 Hardbacks and 3 or 4 paperbacks, every month.

    Has Baen gone bankrupt? Not only “No!” but the authors find their backlist selling at higher than normal rates as people read the older books as eBooks and want the Treebook in their hands.

  • Ed Roberts // Feb 26, 2009 at 6:47 pm

    It is interesting to hear allthe debate about e-books. I really think the market is just now beginning to establish itself. I released my 4th book in print last November, it is currently listed on Amazon.com and actually it is in contention for the Pulitzer Prize in Poetry.
    I have also signed an agreement with Sony to list all of my books as e-books on thier site. (Sorry Kindle but Sony pays a better royalty.)
    Writers do have to eat. :)
    We actually priced the first 3 books at $4.95 each; they are all out of print and I would rather make a small amout of of a lot of sales than try to make a bigger chunk from fewer. My main goal is to get my poetry to those who need it. Most of these people don’t have a lot of money to begin with.
    We priced the new book at $7.95, the retail on the printed version is $14.95 but right now it has been marked down on Amazon to $11.66.
    Since there are no printing cost on an e-book readers should expect to pay less for one. Printing cost is a major reason e-books are becoming so popular with publishers as well. I honestly feel though that they must be ready to let go of a little bit more of the profit they are seeking from them.

  • FrancisT // Feb 27, 2009 at 6:54 am

    I’m going to write something longer at my blog, but as a brief note. In decemeber 2005 I did some posts looking at Bean’s ebook strategy – firts here (http://www.di2.nu/200512/28b.htm ) links at bottom to others.

    Baen sells ebooks at $4-6 each (or $15 for the eARC available in rough before the paper edition). It has been doing so for about 10 years now. I’m pretty sure it’s making a good deal of money doing so. If other publishers can’t sell ebooks at $6 each and make a profit then they are doing something wrong.

    $6 each allows Baen – if they wanted to – to sell via Amazon to Kindle readers for $10 and make more money I think

  • Fiction Writers Review » Blog Archive » more (and more and more) e-reader and Kindle links // Mar 4, 2009 at 5:16 pm

    […] Booksquare argues that the text-to-speech verdict, supposedly a win by Authors Guild (who aggressively pursued this issue), might (ironically) benefit Amazon the most in the end. Check out her earlier post on e-book pricing. […]

  • Rick Spilman // Mar 10, 2009 at 6:14 am

    When I read a publisher who claims that an e-book costs only about $2 less to produce than a hard cover book, I wonder whether he is telling me the truth and if so indeed he is, how long his firm will stay in business. To suggest that pricing a hardcover at $26, an ebook at $24 and a trade paperback at $12 makes any reasonable sense, is to insult the intelligence of the reader.

    Getting books into the hands of readers at reasonable prices is in the best interest of both publishers and writers. Failing to adapt to changing markets and technologies does no one any good.

  • Mathew Ferguson // Apr 1, 2009 at 12:28 am

    I’ve worked as an in-house editor in children’s publishing and thanks to the chaotic nature of our business I got to do almost everything (short of designing books myself). As a result, I now possess almost all the skills to be a one-man publishing house. If I outsource design, I have the skills to edit books, write marketing and sales material, create blurbs for websites and do a whole lot of other clever web stuff to get the book out there (like free content distribution via Minova and the like).

    If I did this for a 10% cut of any sales, then the ebook could be sold for $2 and the author would take $1.80 and I would take $0.20 per copy.

    All that blather about an ebook requiring extensive marketing and sales is just that – blather! I used to write the marketing materials which the marketers would simply use directly! How is that value-adding? I would write the sales materials and the sales emails and they would be used directly! No value-adding there!

    I see editors/writers who can pick up some design and marketing skills as the natural successor to the large publishing house. Their expertise lies in running a distribution network. Eventually they’ll outsource design, editorial, marketing, sales, etc and focus on their core business. Only people who have sold 10, 000 ebooks will be able to get in the door … and the royalty agreement will need to be higher than a paltry 10%.

    The days of the middleman taking huge chunks of money are fast coming to an end.

    I’m talking to you, marketing air-heads.

  • Brad’s Reader » Blog Archive » Friday Link Love 2/27 // May 18, 2009 at 4:48 pm

    […] Ebook pricing: Who chooses […]

  • Lessons Learned From a $27 eBook | Oxford Media Works // Jan 6, 2010 at 7:31 pm

    […] the past year we’ve witnessed heated debates over the issue of ebook pricing. Publishers want to charge as much as they can for new releases, […]

  • The eBook Price War | Jeff's A.D.D. Mind // Feb 1, 2010 at 5:05 am

    […] http://booksquare.com/ebook-pricing-who-chooses/ […]

  • My nook… and ebooks in general at In a state of thixotropy // Feb 22, 2010 at 4:01 pm

    […] Krozser at Booksquare.com brings up many interesting points regarding the pricing of ebooks: You can trot out your business model and your profit-and-loss statements, but your customers […]

  • The Struggles of Ebook Pricing by Emma Tarswell « The Book of MPub // Mar 19, 2010 at 2:24 pm

    […] 2 Kassia Krozer, “Ebook Pricing: Who Chooses?” BookSquare. February 23, 2009. http://booksquare.com/ebook-pricing-who-chooses/ […]

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