Pricing

What price an e-book?

8 June 2015

From author Mark Lawrence:

I was asked today to ‘have a word’ with my publishers as The Liar’s Key ebook is £9.97 on Amazon.

I don’t have any say in setting the price for my books, and while my publishers would listen politely if I were to talk to them about it … they would do exactly what they think is right for the company, to maximise their chances of earning back the sizeable investment they have already made.

£10 is not an insignificant amount to me – I would have to want something quite a lot to put down a tenner for it. Even if it was a book that could entertain me for a week. So I’m not dismissive of people’s concerns about cost.

However, here is the breakdown of that cost as I understand it:

£9.97  —-   Amazon take 20% of the price as Value Added Tax. You might imagine this is then paid to the government, and I understand from the news that bad press has finally convinced Amazon to do that in the near future – but certainly until recently they were registered in a tax haven and kept the bulk of the VAT for themselves. This leaves:

£8.31  —-  For all self published books over £1.99 Amazon takes 30% of the sale price (after VAT) for themselves. I’m assuming it’s similar for everyone. This leaves:

£5.82  —- As with all big publishers Voyager take 75% of the money that Amazon hands over from the sale of ebooks. This is standard and much better than the deal on paper books. I’m not complaining. This leaves:

£1.46  —- My agent takes the standard 15% from all my royalties. He’s a good hard working chap and I wouldn’t be an author if he hadn’t risked his reputation on me. This leaves:

£1.24 —- The tax man takes 20% of my income. Given that I benefit from free healthcare for my very expensive disabled child, I can’t complain. This leaves:

99 pence.

99 pence to buy (on publication day) the longest book I’ve ever written and one that I laboured on night and day for 12 months.

Link to the rest at Mark Lawrence and thanks to Matt for the tip.

Here’s a link to Mark Lawrence’s books

Are You Willing to Pay as Much for a Book as You Are for a Burger?

3 June 2015

From author Jody Hedlund:

I’ve been thinking a lot lately about the price of Ebooks. Since I’m traditionally published, I don’t have the luxury of setting the prices of my Ebooks. That means, sometimes I like the prices of my Ebooks and there are times when I don’t.

Obviously, most readers are aware by now that traditionally published Ebooks sell at a higher price than self-published books. There are a couple of reasons for the disparity.

1. Self-published authors are “in charge” of setting their own prices. In a free enterprise market, everyone knows that you’re better able to drive business your way if you can under-price your competitor. That’s why we all go to Walmart to buy milk for $1.98 rather than paying $2.50 at Meijer. Indie books are able to draw shoppers through the lower prices they offer, prices that traditional publishers can’t offer on a regular basis. That leads to my next point . . .

2. Traditionally published books have more people involved in the publication process, thus need to generate more revenue in order to pay everyone who had a hand in the book: two or more editors, office staff, the cover design team, the cover model, photographer, the marketing staff, publicist, sales representatives, and more. And let’s not forget, the author also has to be paid! No, Ebooks may not require the same “print” costs that a hard copy or paperback may incur, but as you can see, the costs of traditional publication go beyond the price tag of paper and ink.

Let’s face it, low indie prices have changed the Ebook market, and so traditionally published authors who are selling their Ebooks at $9.99 are often losing out to indie authors who are selling theirs for $2.99-$4.99.

. . . .

Part of me also wonders if having such low priced books is really a good thing anyway. Over time, I’ve noticed a subtle shift in the mind-set of many readers. Since so many of us have grown accustomed to cheaply priced or free Ebooks, we balk if we have to pay full price on any Ebook. In fact, I’ve had readers comment irritably about the higher price on some of my Ebooks. After reading my free novella, Out of the Storm, which kicks off my historical romance lighthouse series, some readers have been upset that they have to pay $9.99 for the full length Ebooks.

When I get those kinds of negative comments, I want to say, “If you went to Applebees for dinner, I bet you’d pay at least $9.99 for a burger which you’d consume in an hour and have nothing to show for it later.”

Link to the rest at Jody Hedlund and thanks to Charmaine for the tip.

Here’s a link to Jody Hedlund’s books

My personal list of what should be top-of-mind for publishers around digital change today

20 May 2015

From veteran publishing consultant Mike Shatzkin:

What are the most important digital change issues publishers face?

. . . .

1. Ebook pricing. Publishers get anywhere from 50-to-70 percent of the retail price from most ebook retailers. Unlike the print world, where price-setting must take place before the book comes out and is, because the price is printed on the book, very hard to adjust, ebook prices can be changed quickly and frequently.

Pricing variation has historically been the province of the retailer. In the physical world, markdowns were almost never shared: the retailer voluntarily gave away part of their margin to gain market share or to build customer loyalty.

In the agency world that four of the Big Five have now created (with Penguin Random House almost certain to follow on), pricing is not only mostly controlled by publishers, they are the direct beneficiaries of higher prices and lose margin if prices are lowered.

It is true — and the indie authors who like it better when Amazon is in control rather than the publishers often point this out — that publishers have almost no experience with pricing and the impact of changes. But it is also true that the retailers, who do have more experience with it, have different objectives than publishers. Retailers want a competitive advantage against other retailers and, as part of that, they want to build customer loyalty. Publishers want to maximize revenue for each SKU, build awareness of authors, and use one book by an author or in a series to sell other titles under the same brand.

Publishers are starting very near zero on knowledge. How does discounting one title in a series affect the audience’s likelihood of getting started with it and then buying other titles at higher prices? If a book is in the news, is the right strategy to raise the price (to maximize revenue) or to lower the price (to get better market penetration on the back of the news). And is the strategy the same if the story is about the book, rather than the book being about the story? Do pricing strategies need seasonality rules, and how is that different across genres or topics?

. . . .

7. Allocating effort across a large backlist. The biggest opportunity and the biggest challenge for publishers, as they have historically operated and as they are currently structured, is maximizing their opportunities across their backlists. The big houses are dealing with many tens of thousands of titles. We advocate techniques that require some human application so scale techniques have to be used to pinpoint the titles worth an effort.

Although we are developing tools to help digest the external cues that might affect where the focus should be — cues from the news and social graph — each publisher has to start with a combination of knowledge of the list, intuition, and a sense that sales can be improved to pick those titles worth reviewing for better audience understanding and descriptive copy improvement. Almost certainly, titles that are more than a couple of years old will need work for several reasons: the house knew so little about SEO when copy was written; time will have changed the search terms that matter; and reviews and awards and other things from the book’s experience in the marketplace might need to be incorporated.

Link to the rest at The Shatzkin Files

Fixed Book Price in Foreign Book Markets

14 May 2015

From Publishing TrendSetter:

Earlier this year, France made publishing news headlines when its court ruled ebook subscription services like Kindle Unlimited illegal. The law cited was theLang Law, which gives publishers the exclusive right to set the price of a book. Retailers are not allowed to discount more than 5 percent from this set price.

You may be thinking, A measly 5 percent? Here in the United States, we’re used to seeing 50 percent or more slashed off our books.

. . . .

But in other parts of the world, price fixing is even welcomed— especially when it comes to books. Many countries have a fixed book price (FBP) system like France’s Lang Law.

An FBP system is an arrangement between publishers and retailers that establishes a (more or less) fixed price for each book sold in that market. Because retailers can’t compete on price, big box stores and online retailers have less advantage in the market, and independent bookstores have more opportunity to thrive. This diversity in the distribution network, in turn, is supposed to promote bibliodiversity. An FBP system assumes that variety— in booksellers and in books— is necessary for nurturing a healthy reading culture.

In practice, FBP systems look different from country to country. In some countries, FBP is a law; in others, it’s a trade agreement. Other variables include duration, discount rate, and format. For example, how long after publication does the fixed priced apply? What, if any, is the maximum discount allowed? Are ebooks included?

. . . .

The United Kingdom pioneered the FBP system, but doesn’t have one anymore. According to a report by the International Publishers Association, FBP began in the UK as pricing agreements made between publishers and booksellers in 1829; a nationwide Net Book Agreement came into effect in 1900. Then, just short of 100 years old, the Net Book Agreement collapsed in 1995 after major publishers and retailers withdrew. In 1997, it was finally ruled illegal and anti-competitive. By then, one writer for The Guardian reflects, the UK had fully converted to free market capitalism and price had become first priority.

The collapse of the Net Book Agreement has made the British book market more like ours, as predicted by the publisher John Wiley & Sons in 1996, in that it has narrowed. British independent bookstores are on a steep decline (after more than 500 closures in the past decade, the total number of stores dropped below 1000 last year). Though the loss of FBP isn’t the only cause, the worrying situation overall has prompted discussions about bringing the Net Book Agreement back in the UK.

. . . .

Paris-residing writer Pamela Druckerman provides insight into the radically different approach. She clarifies in her New York Times Op-Ed that “what underlies France’s book laws isn’t just an economic position— it’s also a worldview.”

In France, “‘books are seen as a cultural rather than a commercial product,’” echoed a Penguin Random House executive in a Publishing Perspectives article. And, one editor at Gallimard explained, since the Revolution, “‘the French state has always considered that culture is not a private matter.’” The government actually classifies books as an “essential good,” as Druckerman and others have pointed out.

Link to the rest at Publishing TrendSetter and thanks to Dave for the tip.

The future of Ebook prices: a history lesson from the app industry

4 May 2015

From The Writers’ Workshop:

Change is inevitable. If you had told me, fifteen years ago, that I’d soon be able to buy and read practically any book on a handheld device that was thinner and lighter than a paperback, I actually would have believed you. And why not? Technology marches forward at a terrific pace. However, if you’d told me that people would be paying little or nothing for these books, I’d have shaken my head; I certainly wouldn’t have thought that authors and publishers could just give away their revenue. And yet, that’s the way things are going. In a storefront packed with titles priced 99p or less, £2 or £3 can seem an awful lot to pay for an ebook “which”, the public tell themselves, “costs nothing to produce”.

However did we come to this?

Let’s begin by making something clear. I’m not opposed to digital, and not opposed to ebooks. If people want to read my novels on a Kindle rather than in print, that’s fine with me, and if Kindles mean that more people read more often, that’s great. I’m also fine with ebooks costing a little bit less than their physical counterparts.

So change was inevitable, and the advent of ebooks was always going to impact on traditional pricing models… but even so, how did we find ourselves dipping below the £1 mark? When did it become acceptable practice to give away books for free?

I write series crime for Hodder, so I watch the publishing industry trends with interest. However, in my day job, I run a successful app studio, making games for smartphones and tablets. My company works with a range of different brands and digital publishers – it’s a comparatively young industry, but it evolves a lot faster than other media such as books or music, quickly overtaking those more traditional media. We’re driven by innovation, but we’ve seen huge collateral damage to both people and businesses who work in the sector; my hope is that the book industry won’t blindly follow in our footsteps and imitate some of the dreadful mistakes we’ve made.

. . . .

It’s true that digital publishing delivers more choice, but there’s a catch – almost everything is harder to find. Fifteen years ago, publishers fought to get their physical products onto physical shelves, where it was tough to stand out, surrounded by hundreds of rival products. But now, in the online store, each product is swamped by millions of others. The virtual shelves are never decluttered; they just keep being extended as hundreds of hopeful new titles are published every day. Remember, I’m talking about the games industry here, but doesn’t this sound awfully familiar?

. . . .

The theory is that while you might make less money on each sale, you’ll make more sales overall, and come out ahead. It makes sense… if you’re the only one following that strategy. If everyone does it, things can turn ugly. In the app business, prices immediately plummeted to £0.69, the lowest pricepoint available at the time. In a bid to attract audiences, some big-budget titles dropped their price to zero. And of course, once they were free, everyone else had to make their games free, or risk being left behind. Within a year, the majority of games had followed suit – meaning there was more free content than anyone could possibly consume. In such an environment, charging anything suddenly seemed extortionate.

. . . .

So if the outlook is really so bleak, why doesn’t someone do something about it? The answer is simple – the new model makes money for the platform-holders.

Remember, there will always be plenty of new people who are desperate enough to give their content away for free, in return for a little exposure. This wealth of free content draws audiences away from other retail channels, and some of the audience will spend some money; it won’t be as much as before, but if traditional retailers die, then the one or two dominant platforms that remain can carve up the world between them, and take a percentage ofeverything.

Link to the rest at The Writers’ Workshop and thanks to Dave for the tip.

Is Agency Ebook Pricing Suppressing Sales? Hard to Say

30 April 2015

From Digital Book World:

The latest monthly data from the Association of American Publishers (AAP), for January 2015, show ebook sales in slump.

Comprising just 20% of trade sales, digital formats clocked in at $100.3 million, down more than 10% to what Publishers Lunch notes is the lowest monthly sales figure since April 2012, when the AAP reported digital sales at $99.5 million.

Some suspect the progressive restoration of agency ebook pricing that began late last year is a likely culprit for the decline.

While that may turn out to be the case, the fact is it’s very difficult to tell.

Publishers Lunch, which tracks and analyzes the AAP figures each month, has noticed considerable variation in what participating publishers report month-to-month, as each successive report includes revised data from the corresponding month twelve months prior.

Which is just one of several reasons why the latest snapshot, as Michael Cader commented yesterday, “shows how far we still have to go in obtaining reliable, consistent basic statistical measures of what’s happening in even a portion of our marketplace.”

Link to the rest at Digital Book World

Higher prices reduce sales? Amazon knows more about pricing ebooks than Big Publishing? Impossible!

The Definitive Guide to Pricing Your Book

20 April 2015

From Wise Ink:

Just like the actual writing of a book, pricing is part art and part science. There is an uncountable multitude of influences that go into finding the perfect price for your book, but we’ve compiled seven of the most important factors here for you.

1. Figure out your goals

Some authors see their books as businesses. These “authorpreneurs,” as we like to call them, put an investment into their work, and they want to get the biggest return on investment possible. They should price their books like any other profit-driven business would price an item.

Some authors just want as many people to read and love their books as possible. These authors are fine with not making any money—or even losing money—as long as they get to tell their stories.These authors will give their books away for a pittance or for free.

Most of us authors are somewhere between the two. If we wanted a good investment, we’d throw our money at Google. But we’d also like to skirt bankruptcy, if at all possible. Where you fall on this spectrum is one of the most important factors in pricing your book.

2. Charm Pricing

Charm pricing—also known as psychological pricing—is a strategy based on the theory that certain prices have a psychological impact.

The most common example of charm pricing is ending a price 99 cents. There’s a mildly interesting scientific explanation for why it works, but you just need to know that the number nine is extremely powerful in pricing. Studies indicate that, counterintuitively, you can sell more of the same item for $39 dollars than for $34. Not that you should be selling a book for anywhere near that amount of money—unless you’re J.K. Rowling, of course.

In the case that you’re enneaphobic—afraid of the number nine—fear not. Setting a strange price, like $3.43 or $15.27, can make consumers think you’re selling your product for as cheap as possible. This strategy was used on Water For Elephants, which topped the ebook charts at $4.13, and at the time of this writing is a $9.12 ebook and $9.60 paperback.

. . . .

7. Think Less About Production Costs

 It’s tempting to price your book from the bottom up. Ideally, you’d predict how many books you’re going to sell, and then figure out how to break even on production while paying yourself a minimum wage for the time you’ve put into it. However, consumers don’t know or care how much it costs to produce a product, only how much the product is worth to them. That could be more—but is probably less—than you think it should be, but c’est la vie.

Link to the rest at Wise Ink and thanks to Scath for the tip.

Can you really make a living by selling used books on Amazon for a penny?

15 April 2015

From The Guardian:

Sometime in early 2013, in Dallas, Texas, a generous reader donated his impeccable first-edition copy of Philip Roth’s Our Gang to the local Goodwill store, its royal blue dust jacket gleaming as brilliantly as it did in 1971.

There it sat on a shelf, priced at $1, until a semi-trailer from Books Squared whisked it away among 3,000 other leftovers. At the Books Squared warehouse in south-west Dallas, Our Gang was checked and processed by receivers and a scrupulous quality-control team, who deemed the book “like new” before scanning it into their computer system to be sold online.

Dynamic pricing software cross-referenced every active listing of a used, like-new, hardcover copy of Our Gang across online marketplaces like Amazon and Abebooks, then matched the lowest price. Last March, four months after it was listed, I bought the book for a penny, and Books Squared shipped it to my apartment in Toronto. This handsome volume is sitting proudly on my desk right now.

. . . .

Online, such literary treasures are in ample supply. But deals this good raise an obvious question. It clearly took a lot of time to usher Our Gang from the backrooms of Goodwill to Canada, where I live. So how does anyone make money selling a book for a cent?

. . . .

The only trouble is the low quality of that yield. Mike Ward, owner of Thrift Books – the largest of the used book sellers in the US and parent company to a number of subsidiaries, including Books Squared – likens the book collection process to “a very large salvage operation”. His network of warehouses is bringing in, on average, 15 semi-trailer trucks full of used books every day, but less than 20% of those books arrive in saleable condition.

The first thing Ward’s handlers must deal with is the garbage: “three-ring binders, Bibles, old Reader’s Digests, books that aren’t even books, books that are totally destroyed”.

From there the stock moves on to the receivers, who inspect each book’s condition and determine, by computer, its likely demand. “At that point they’re throwing away about 65% of what they touch,” Ward says – in part for the poor state many of them arrive in, of course, and in part as a consequence of supply and demand.

“There’s a limit to how many copies of Jurassic Park I can sell,” he explains. “If I already have a thousand in inventory and I think I’m only going to sell 500 in the next three months, I don’t want any more.”

. . . .

Root through enough charity shops and library discard piles, and you’re bound to come across a few valuables. In such cases the used book seller becomes a sort of antique dealer: with a few keystrokes they can put a true rarity online where those most interested can find it. Perhaps that’s why Mike Ward says Thrift Books is in the business of “matching people up with the treasures they want”.

. . . .

Penny books, of course, don’t seem quite so lucrative as a $45 volume on cattle. “If you talked to me 10 years ago and said that you’d be selling books for a cent on the internet, I’d have said that’s impossible,” Roberts says. But there’s some money to be made for those who are, as he puts it, “extremely efficient”.

The price point is partly a result of the market’s downward pressure: at a certain level of supply and demand the race to the lowest price swiftly plummets to the bottom. What remains inflexible is the $3.99 fee Amazon charges the buyer for shipping. From that $4, Amazon takes what they call a “variable closing fee” of $1.35. They also charge the seller 15% of the item’s price – which in the case of a penny book is zero. That leaves $2.64 to cover postage, acquisition cost and overhead.

“All told,” Mike Ward concedes, “we only make a few cents on a penny book sale like that.” Now that hardly seems like much, true. “But keep in mind,” he adds, “that last year we sold 11.5m books.”

Link to the rest at The Guardian and thanks to Dave and several others for the tip.

Does Agency Pricing Hurt Reading Consumers?

10 April 2015

From GoodEreader:

Mark Coker, CEO of Smashwords and a long-time supporter of the agency model, spoke to Good e-Reader about why this model is good for authors and publishers–the two stakeholders who must secure a profit in order to continue providing books–and good for smaller retailers who otherwise couldn’t compete with a corporate behemoth in terms of pricing. More importantly, Coke addressed one often overlooked concern:does the agency pricing model hurt consumers?

. . . .

“If an author or publisher is trying to screw them over with a price that is just outrageous, readers can say no. And publishers will hear that. Authors will hear that. Readers can put pressure on authors…if a reader feels like an author’s book is priced too high by the publisher, you can bet that all they have to do is tweet at that author about the book being priced too high, and the publisher’s going to be hearing that customers are angry. The marketplace has a lot of power. If readers can accept that it’s important that authors and publishers profit from the sale of a book since it’s their profit that allows them to continue this great service of providing books, then everyone can be happy. If readers think everything should be free, that’s obviously an attitude that is not sustainable.”

Link to the rest at GoodEreader

PG says price competition is a fundamental fact of life for most consumer products in most of the prosperous nations of the world.

The argument that books are special and shouldn’t be exposed to the horribleness of price competition is designed to protect traditional publishers and physical bookstores. PG doesn’t see that authors as a group have received great benefits from publisher-enforced pricing for books.

And why would anyone believe that Big Publishing knows enough to set the optimum prices for books? The last retail store owned by a publisher closed decades ago. Tradpub’s lame direct sales attempts are a joke.

For all of its attractions, New York is a fiendishly expensive place to live and the concentration of publishing headquarters in that metro area means publishing executives have no experience with how the rest of the country responds to pricing.

OTOH, from the viewpoint of indie authors, PG says choosing legacy publishing prices on the forty-first floor will mean more readers buy indie books and indie authors make more money.

 

U.S. Announces First Antitrust E-Commerce Prosecution

7 April 2015

From re/code:

The U.S. Department of Justice’s antitrust division on Monday announced its first prosecution specifically targeting Internet commerce, saying a man has agreed to plead guilty to conspiring to illegally fix the prices of posters he sold online.

David Topkins was accused of conspiring with other poster sellers to manipulate prices on Amazon.com’s Amazon Marketplace, a website for third-party sellers, from September 2013 to January 2014, according to papers filed in San Francisco federal court.

The Justice Department said Topkins also agreed to pay a $20,000 criminal fine and cooperate with its probe. His plea agreement requires court approval.

. . . .

Topkins was accused of conspiring with other poster sellers to use algorithms, for which he wrote computer code, to coordinate price changes, and then share information about poster prices and sales.

The Justice Department said this activity violated the Sherman Act, a federal antitrust law, by causing posters to be sold at “collusive, non-competitive” prices.

. . . .

Amazon was not charged in the case against Topkins.

Link to the rest at re/code and thanks to Joshua for the tip.

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