Pricing

When is the Right Time to Discount Your Book?

12 January 2016

From BookBub:

Discounting an ebook can be an effective way to drive a high volume of downloads, increase revenue, boost a book up the retailer rankings, build author buzz, and more. And promoting that discount via services like BookBub can expose the book to millions of power readers eager for a good deal. But when should you consider dropping the price of one of your books?

. . . .

 When you’re launching a new book in a series

When you launch a new book in a series, discounting the first book of the series can be a great way to drive sales for that new release. The lower price point will attract new readers who will be eager to find out what happens next in the series. And they’re often willing to pay more for the subsequent books — 77% of bargain readers also buy full-priced books.

If you decide to run a discount to promote the newest book in a series, there are a few best practices to keep in mind:

  • Discount the first book in the series. On average, our partners have seen a 5x higher increase in sales of the other books in a series when the first book is discounted vs. any other book in the series.
  • Make the first book free. Downloads of free books featured by BookBub are 10x higher than downloads for $0.99 books. Also, if you make the first book in the series free, the later books in the series will sell 8x more copies than if you price the first book at $0.99 or higher.
  • Promote the subsequent book in the first book’s back matter. Our partners see a 3x higher increase in sales of other books in the series if links are included in the back matter of the discounted book. Go in order so readers know which book comes next in the series without getting confused.

. . . .

When you’re releasing a new standalone

If you’re releasing a new title that’s a standalone or isn’t part of an existing series, discounting one of your backlist books is still an effective way to gain exposure for the new release. After all, 63% of bargain readers have purchased other books by an author they discovered as part of a price promotion.

Make sure to promote the new release in the back matter of the book you’re discounting. Because readers aren’t already hooked on the story or characters of your new release, include a short excerpt or the first chapter from your new release. Make sure this excerpt ends on a cliffhanger so readers are intrigued enough to purchase the new book.

Link to the rest at BookBub

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A year of living digital

22 December 2015

From Futurebook:

FutureBook’s top stories reflect a year of transition for the sector as the continuing softening of e-book sales gave way not, alas, to any great new digital innovation, but instead to rising print sales, and a broader but blended future.

At the beginning of the year there was recognition that the e-book plateau first reported in 2013 had become a reality for many trade publishers during 2014, and this was already informing their thinking about 2015.

In January, with numbers provided by all of the big trade publishers, The Bookseller noted that the rate of growth of the big trade publishers continued to fall with volume sales up 15.3% year on year. Some now see the market further dividing as the bigger publishers dust off their agency deals, providing room for the small and nimble. Yet though there remains this growing shadow market of untracked e-book sales, 2015 was also a year when print book sales began to rise again:

Rather than seeing the print book and e-book markets as two countervailing forces, it may be wise to figure out how they are working together. If the big fiction bestsellers are now predominantly being bought digitally, then has this created space within book stores to focus on different books? For journalists looking to report on this sector, the narrative might be how digital has helped revive and reinvent print, rather than the other way round.

Yet, this view also needed to be modified by acknowledgement that the e-book market could still be driven by self-published authors and by stand-alone e-book publishers such as Endeavour, Canelo and Bookouture.

. . . .

In May, the annual Publishers Association’s Stats report provided more background on sales, confirming that consumer e-book sales have softened for most trade publishers, with sales growing just 5.3% in 2014, and in the UK alone by 6.8%. It also confirmed another of the themes of the year: that the bigger publishers may be eschewing volume business for value, an analysis many other commentators later picked up on as the big trade publishers in the US, and latterly in the UK, used their new agency deals to raise e-book prices.

If volume sales are rising ahead of value growth then we can surmise that average prices are shrinking—and that publisher margins are being squeezed. In other words growth comes at a cost. The backdrop to this is the reintroduction of agency pricing in the US (but not yet in the UK), and one might further deduce that while publishers are continuing to experiment with pricing, they are watching the value of their e-book business like hawks—providing further opportunities for those willing to chase volume at the expense of turnover. In the UK, this will only be exacerbated by the imposition of VAT on e-books at the UK rate of 20%. What looked like a high margin business for sometime, now looks like a race for the bottom (agents take note). In fact, since the average selling price of printed books is on the rise, publishers might actually be banking on print to back up their e-book growth.

Yet if straightforward e-book business was becoming tricky, the new models did not rise to the rescue—at least not yet. US subscription companies Oyster and Scribd drew a lot of attention at the beginning of the year, as did European start-ups Mofibo and Blloon. Oyster eventually announced a shut down and move to Google in September, while Blloon admitted in October that it would close (or pivot) its operation. Scribd had its own problems, pulling a number of romance titles from its service, precisely because it could no longer maintain the heavy readers drawn to those titles. It was a fundamental move and recognition of just how tough it will be to make subscriptions work in the book field, which has traditionally focused on heavy readers.

Link to the rest at Futurebook

“The average selling price of printed books is on the rise”

“Consumer e-book sales have softened for most trade publishers”

“Yet, this view also needed to be modified by acknowledgement that the e-book market could still be driven by self-published authors”

PG says when publishers use agency contracts to raise ebook prices, why is anyone surprised that ebook sales soften? Of course, the ebook market is not only driven by indie authors, as Author Earnings has shown us, it’s dominated by indie authors.

Where’s the real growth in the ebook market?  In self-published ebooks. Publishers are seriously overestimating the value readers place on books printed by Big Publishing. Readers are learning that books sold by the authors of those books are just as good and often better than books published and priced in the New York/London style.

Whether publishers like it or not, with the help of Amazon, indie authors are resetting ebook price expectations for readers. And readers who become accustomed to reasonable ebook prices will inevitably resist higher-priced printed books.

Increasing the average price of printed books is pouring gasoline on the same fire that was ignited by using agency to increase the price of ebooks. The corporate “Want more money? Increase prices!” mindset is another nail (or perhaps a big barrel of nails) in the coffin of traditional publishing.

Why is Amazon the world’s largest bookstore and still growing sales rapidly? (Hint: It’s not because they increased prices.)

The biggest question for tradpub in 2016? Will anyone wake up?

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Cheaper books, squeezed writers get Government nod

27 November 2015

From Publishing Arts Hub:

When the Federal Government released the Harper Review into competition in April, hidden among the dozens of recommendations regarding retail, online sales, cars and liquor licensing was one which promises to change the cultural landscape: a recommendation to remove parallel import restrictions on books.

The recommendation, which will see Australian publishers face increased competition from overseas publishers, was entirely consistent with the Harper Review’s overall thrust to deregulate the Australian market and open up business to a level competitive playing field, particularly in the face of online shopping and a global marketplace.

But publishers and writers argued passionately that books are a special case and that the Government should reject this recommendation.

. . . .

Current competition rules in relation to the publishing industry are based on what is known as the 30/90 day rule. Under this rule, an Australian copyright owner gains a territorial copyright and can prevent others importing commercial quantities of a book – known as parallel imports.

The territorial copyright applies when a book is first published in Australia or when an Australian publisher publishes an international title within 30 days of its overseas release.

The territorial right is retained as long as the publisher keeps the book available in Australia. Publishers must restock a title within 90 days of any retail demand to avoid losing their territorial copyright.

. . . .

The system worked more effectively when bookshops were the only retailers, but now booksellers face competition from both e-books and personal imports. Australian consumers can order overseas editions directly through online sources, often more cheaply and without waiting up to 30 days.

Supporters of the change say the restrictions make Australian books artificially expensive and damage Australian booksellers because consumers are driven to buying online. They say an open market will reduce administrative overheads and drive down the price of books, placing Australian retailers on a fairer footing against online competitors.

Book buyers will get cheaper books in Australian bookshops and will be able to access new books at the same time – or closer to – the date they are published overseas.

Booksellers benefit because they are not undercut by online publishers and have an offering that is more equal to online competition both in timing and price. But while major retailers such as Dymocks are in favour of the change, independent booksellers have sided with the publishing industry and oppose the changes because of the broader losses articulated by publishers and writers

. . .  .

Australian publishers are the big losers as they will no longer have exclusive territorial rights to books first published outside Australia.

But the publishers argue that the loss is not simply to their bottom line. They say if parallel imports are allowed, the Australian market will be flooded with cheap, foreign-written and foreign-published books. Australian authors will find it harder to publish, royalties will decline, and Australia’s cultural independence will suffer.

Link to the rest at Publishing Arts Hub and thanks to Matt for the tip.

PG predicts that Australian authors are completely capable of competing at home and abroad with authors from other countries.

A Penny for Your Books

2 November 2015

From The New York Times:

Ever since a university gave me a literature degree certifying that I have read Chaucer in the original Middle English, my taste in books has reverted to very specific, lowbrow stuff. I like murder mysteries, heist books and spy books, preferably from the 1950s through the 1980s. These titles can be hard to find; many of them are out of print, unavailable on Kindle, and their presence in the New York Public Library is hit or miss.

But in recent years, my bookshelves have swelled. Old John le Carré and Donald E. Westlake and Lawrence Block titles are easier than ever to find online, along with pretty much every other book published in the last century. They’re all on Amazon, priced incredibly low, and sold by third-party booksellers nobody has ever heard of.

Better-known titles with more robust print circulation quickly obey the seesaw of supply and demand; after time, their prices can sink even lower, because of the increased number of copies floating around. Take Jennifer Egan’s “A Visit From the Goon Squad”: You can buy a new hardcover or paperback copy for $18.82 or $9.19, from Amazon itself, or download the Kindle version for $8.56. Or, as with hundreds of thousands of other books on Amazon, you can click through to the “used” section and buy the 2011 Pulitzer Prize winner for fiction for a penny.

. . . .

Enter the penny booksellers. There are dozens of sellers — Silver Arch Books, Owls Books, Yellow Hammer Books and Sierra Nevada Books — offering scores of relatively sought-after books in varying conditions for a cent. Even including the standard $3.99 shipping, the total sum comes out to several dollars cheaper than what you’d pay at most brick-and-mortar used-book stores.

“At some point in the next two to three years, I predict that ‘Go Set a Watchman’ will be selling for a penny,” says Mike Ward, president of the Seattle-based used-book seller Thriftbooks. Ward would know; though it isn’t considered in the same league as Barnes & Noble or Books-A-Million, Thriftbooks sells about 12 million books a year, mostly on Amazon, and many for a penny. (In comparison, Barnes & Noble, the country’s largest book retailer, sells somewhere around 300 million books a year, but has the added weight of hundreds of enormous, expensive megastores to run and thousands of employees.)

“We are taking garbage [and] running it through a very sophisticated salvage process in our warehouses, to create or find or discover products people want, and then we sell them at a very, very cheap price,” Ward explains. Garbage isn’t a value judgment: His company, along with several other enormous used-book-selling operations that have popped up online in the past decade, is literally buying garbage. Thrift stores like Goodwill receive many more donations than they can physically accommodate. Employees rifle through donations, pick out the stuff that is most likely to sell and send the rest to a landfill. The same thing happens at public libraries; they can take only as many donations as their space and storage will allow, so eventually they have to dispose of books, too. (For libraries, the process is a little more complicated; they can’t legally sell books, so they essentially launder them through groups with names like Friends of the Library, which sell the discards and donate the proceeds to the library.)

Operations like Thriftbooks step in and buy these landfill-bound books, sight unseen, for around 10 cents a pound. Thriftbooks has 10 warehouses across the country, each with its own name. Ward says each of them is “about the size of your typical Walmart,” somewhere between 70,000 and 90,000 square feet. The enterprise is still largely a human operation: Between 15 and 18 people at each warehouse sift through the truckloads of books, sending more than 80 percent of the material immediately to the recycling plant. (Hey, it’s better than the dump.) That 80 percent may include stuff that’s obviously garbage: old three-ring binders, notebooks, half of a Bible. Anything that might possibly be sellable is scanned into the company’s database.

Link to the rest at The New York Times

Publishers Initiate Predatory Pricing on e-Books to Destroy the Market

27 September 2015

From Good Ereader:

Major publishers have gained the ability to dictate their own prices on e-books and this has dramatically increased the cost to the customer. In many cases the hardcover is actually cheaper than the digital version and this is primarily due to predatory pricing.

Publishers have been making moves to capitalize on the convenience and instant delivery of e-Books by making them more expensive than their printed counterparts. I have talked to many high ranking executives off the record and they have told me that they foresee the destruction of the e-book market and are anticipating higher profits on print down the road.

There are many companies that are heavily involved in the e-book sector that have went out of business over the course of the last year. Sony killed off their consumer e-reader division and abandoned the Reader Store in every country, but Japan. Diesel eBooks, Oyster, Entitle, Txtr, Blinkbox Books and others have all closed up shop because e-books are no longer profitable.

The reason why these companies went out of business is because of predatory pricing from the major publishers. If you have never heard of this term, its basically a pricing strategy that is intended to drive competitors out of the market, or create barriers to entry for potential new competitors. The fewer e-book stores that exist, the less sales the format generates, which is resulting in a resurgence of trade paperback and hardcover sales at the expense of e-books.

. . . .

Likely the most compelling case of predatory pricing for publishers is in your local libraries e-book collection.  Very early on, publishers realized that e-books do not have as much legal protections as physical books do, because they are considered a service and not a product. This has resulted in the  e-book cost increasing by over by 800% and limits on the number of checkouts being imposed, before the library has to buy a new copy. Real books last MUCH longer than this, at a fraction of the price to the library. The sad truth is, e-book sales are falling all over the world, but libraries don’t have the luxury to abandon buying them and are at the mercy of the publishers.

Link to the rest at Good Ereader and thanks to Bridget for the tip.

How Much Money do Libraries Spend on e-Books?

17 September 2015

A breakdown of what Douglas County, CO, library pays for ebooks.

A staggering 95% of all libraries in the United States have an e-book collection. Sometimes we take this granted and get irked that there is a long waiting list for a New York Times bestseller. Why can’t libraries simply have enough titles to meet the demand? The answer, is that libraries are gouged on the price for digital content from the publishers.

This might surprise a fair amount of people, but the average library paid six times the consumer price for e-books on the USA Today bestseller list.  This is not greed due to distributors such as 3M, Baker & Taylor or Overdrive, but the publishers.

James Larue of the Douglas County Library system recently said “libraries and taxpayers who support libraries are being ripped off in ways that not only outrageously inflate the payment to publishers (surely their costs are not three times greater to provide the book to us than to the consumer), they also greatly reward distributors. The result? At a time when about half of our patrons use e-readers, we barely offer 10% of our collections to them in their preferred format. When does a vicious price become complicity between publisher and distributor, to the detriment of the public?”

 

All data is interesting, says vacation blogger Karen Myers.

E-Book Sales Fall After New Amazon Contracts

4 September 2015

From The Wall Street Journal:

When the world’s largest publishers struck e-book distribution deals with Amazon.comInc. over the past several months, they seemingly got what they wanted: the right to set the prices of their titles and avoid the steep discounts the online retail giant often applies.

But in the early going, that strategy doesn’t appear to be paying off. Three big publishers that signed new pacts with Amazon— Lagardere SCA’s Hachette Book Group, News Corp’s HarperCollins Publishers and CBS Corp.’s Simon & Schuster—reported declining e-book revenue in their latest reporting periods.

“The new business model for e-books is having a significant impact on what [the big] publishers report,” said one publishing executive. “There’s no question that publishers’ net receipts have gone down.”

A recent snapshot of e-book prices found that titles in the Kindle bookstore from the five biggest publishers cost, on average, $10.81, while all other 2015 e-books on the site had an average price of $4.95, according to industry researcher Codex Group LLC.

“Since book buyers expect the price of a Kindle e-book to be well under $9, once you get to over $10 consumers start to say, ‘Let me think about that,’” said Codex CEO Peter Hildick-Smith.

. . . .

On Thursday morning, there wasn’t a single title priced at $9.99 among the top 20 titles on the company’s Kindle best-seller list. Last summer, Amazon offered the digital edition of James Patterson’s thriller “Invisible” for the bargain price of $8.99. Mr. Patterson’s newest tale of suspense, “Alert,” went on sale Aug. 3 on Amazon for $14.99, a price set by Hachette, Mr. Patterson’s publisher. The unit sales for Mr. Patterson’s e-books weren’t available.

The precise impact of the deals with Amazon, the dominant player in book sales, is still a matter of industry debate. The drop in sales could be partly due to a crop of lackluster new titles. But some publishing executives say higher e-book prices, resulting from the Amazon deals, are discouraging purchases.

. . . .

Hachette cited fewer hot titles and the implementation of its Amazon deal as reasons that e-books fell to 24% of its U.S. net trade sales in the first half of 2015, from 29% a year earlier. Declining e-book sales contributed to a 7.8% drop in revenue in the period.

. . . .

Pricing e-books is a Goldilocks problem for the book giants: For years they worried that consumer prices were too low, and now they are seeing the disadvantages of bumped-up prices. Publishers said the current pricing model involves some sacrifice but they felt it was worth it to keep Amazon in check. What’s more, they have noticed a bump in sales of physical books that is possibly related to the higher price of digital books.

To figure out how to set prices, a team of data specialists at Macmillan’s Manhattan offices in the Flat Iron building sifts through a database of 74 million transactions looking for trends. Amazon looms large in that decision-making: It accounted for 64% of the U.S. e-book market, by units sold, during the second quarter, according to Codex.

. . . .

One high-level publishing executive disputed that the Amazon pacts are contributing to the e-book sales decline. “This is a title-driven business,” he said. “If you have a good book, price isn’t an issue.”

Link to the rest at The Wall Street Journal (Link may expire) and thanks to Nirmala for the tip.

Of course publishers don’t know how to price books at retail. Bookstores know how to determine retail prices for books because they actually sell them to readers.

Since Amazon is the biggest bookstore in the world, one which obsessively collects and analyzes data concerning customer behavior, it is much better qualified to set optimum prices to maximize revenues from the sales of ebooks than a bunch of provincial publishers who have never run any sort of store and have virtually nothing in common with a typical reader.

If you give a kid a stick of dynamite, why would you expect anything other than trouble?

Smashwords and Flipkart to End Distribution Relationship – Amazon Scores Victory

26 August 2015

From Smashwords:

Smashwords and Flipkart are ending their distribution agreement first announced in August, 2013.

The unfortunate news effectively hands the market for indie ebooks in India to Amazon.

A few weeks ago, I notified Flipkart that Smashwords was placing its distribution agreement with Flipkart under review.

I provided Flipkart a deadline by which Flipkart was asked to repair certain problems related to the listing and removal of Smashwords titles, and to provide Smashwords an acceptable plan to prevent such issues from recurring in the future.

I informed Flipkart that if these requirements were not met that Smashwords would request the immediate removal of all Smashwords titles.  The deadline was missed and an acceptable plan was not presented.

This morning Smashwords received word from Flipkart that after careful consideration, Flipkart determined their systems are not yet capable of supporting the dynamic nature of the Smashwords catalog.  As a result they will begin winding down the relationship with Smashwords and remove our titles.

. . . .

Our primary concern was Flipkart’s delays associated with the removal of Smashwords titles that had been unpublished. Most of these titles were removed because the Smashwords author or publisher made the decision to enroll their book in KDP Select, an ebook self publishing option offered by Amazon that requires authors to make their books exclusive to Amazon.

Once authors enroll a title in KDP Select, Amazon requires the author to immediately remove the book from all competing retailers otherwise the book is removed from the KDP Select program and the author is warned that repeated offenses could lead to the termination of their entire KDP account.

As you might imagine, these fire-and-brimstone emails from Amazon are unnerving to authors.

. . . .

Many indies don’t understand the long term implications of KDP Select.  The million or so books enrolled in KDP Select are almost entirely provided by the indie author community. Amazon coerces authors to enroll their books my making KDP Select books more discoverable and more desireable to Kindle customers, while making non-exclusive books less visible and less desirable.   The message is quite simple:  If you want to sell more books at the world’s largest ebook retailer, you must be exclusive.

I don’t blame indies for their difficult decision.  I met with one indie author a few weeks ago at a conference who told me words to the effect of, “I hate the exclusivity of KDP Select, yet I’m in it because I have a mortgage to pay.  Books in KDP Select sell better than non-exclusive books.

. . . .

I believe KDP Select is toxic to the future of indie publishing because it forces authors to abandon competing retailers and become more dependent upon Amazon.  When competing retailers lose access to this important inventory of indie titles, they can’t compete.

Amazon wields its dominant market share like a club to bludgeon authors who don’t fall into compliance with Amazon’s exclusivity or pricing requirements, even when the lack of compliance is not the author’s fault.  No other ebook retailer practices such draconian punishment of authors.

. . . .

To be clear, the termination of our agreement with Flipkart is not Amazon’s fault.  However, Amazon was a catalyst because the harm they’re causing our shared authors made it impossible for us to give Flipkart the runway they needed to improve their systems.

Although Flipkart is a small ebook retailer and the financial impact on Smashwords authors will be negligible, I’m more concerned by what this signals for the future of ebook retailing around the world.

Link to the rest at Smashwords

Zombie Publishing Memes #2 – Low Prices Devalue Books

24 August 2015

From Joe Konrath and Barry Eisler:

Low Prices “Devalue” Books.

The premise behind this zombie meme is not only wrong; it’s also exceptionally strange. After all, if you love books, why would you focus on their monetary worth rather than their worth in society? Isn’t what makes books valuable how widely they’re read, absorbed, and discussed, rather than how much money they make? And if books cost less and more people can afford them, doesn’t it stand to reason (assuming everyday experience is valid and what they teach in Economics 101 is correct) that more people will buy more books (in fact, they are doing just that)? If books are indeed valuable for society and we don’t want to devalue them, shouldn’t we look for ways to make books less expensive and therefore more widely accessible?

But even if you think the sole value of a book lies in how much money it makes, it’s silly to believe higher prices automatically mean more revenues. As a thought experiment: it’s unlikely anyone would maximize revenues with a five-cent price point, but then why not charge a hundred dollars for a book instead? Wouldn’t that $100 price point value the book even more?

Of course not. So intuitively, we all know there’s a sweet-spot price — the price at which volume x unit price maximizes revenues, and logically, this would seem to be the price that derives the greatest (financial) value from the book. If we make more money from our books at a five-dollar price point than we do at ten (not a hypothetical for us, by the way, but empirical fact), which is the price that’s “devaluing” the book?

Link to the rest at Joe Konrath and thanks to Stephen for the tip.

Here’s a link to Joe Konrath’s books and to Barry Eisler’s books. If you like an author’s post, you can show your appreciation by checking out their books.

Price Wars and Victims

6 August 2015

From Kristine Katherine Rusch:

I had an interesting experience this week: I just bought a brand-new hardcover novel for less than I would have paid for the ebook. I wouldn’t have noticed except that I’ve been doing a lot of stuff online this week, and Amazon, good marketers that they are, sent me an e-mail to let me know that I had received a preorder discount of 90 cents.

I prefer to read paper books, although I do read ebooks, especially when I’m binging on a series.

The thing is, I’d ordered the book six months ago from Amazon. The book, Sara Paretsky’s Brush Back (which I’m enjoying, thank you very much), has a publisher’s list price of $27.95 for the hardcover. Amazon never listed the book at full price. I believe I initially ordered a $17.95 hardcover. I kept getting notices of discounting from Amazon, until this last, which arrived after the book was shipped.

Caveat here: I preorder because it makes some random day feel like Christmas. Suddenly, a book I really, really want shows up in the mail, almost like a surprise gift from a special friend.

I had forgotten that the Paretsky was coming out in August. If you’d asked me, I would have said September, because that used to be her release date. So when I received the most recent notice of the preorder discount—one that sounded final, final—I went to Amazon and looked up the publication date for the book.

And just about fell off my chair when I saw that the Kindle edition was $13.99 and the hardcover was listed at $13.

. . . .

As I searched for the publisher’s list price, too lazy to get up and pick up my copy from the other room, I found that Barnes & Noble lists the book at $16.83 for the hardcover and $11.84 for the Nookbook.

. . . .

Agency pricing has returned to ebooks, which means that publishers are setting their own ebook prices and the retailers, like Amazon, are not discounting. The ebook price on Amazon is clearly a price-match with Barnes & Noble, not something that Amazon has done.

I poked around Amazon, looking at e-book prices, and almost fell off my chair for a second time. Lisa Scottoline’s next book, which releases in October, has a $14.99 ebook. So does Michael Connelly’s November release. And Stephen King’s November release. Robert Crais’s next book shows a $12.70 Kindle edition paired with a $13.37 hardcover. Does that sound familiar?

And what’s fascinating to me is that these books, and the dozens of other traditionally published upcoming releases that I looked at are coming out of different publishing companies. Not different imprints of the Big 5, but each of the Big 5.

Once again, pricing seems…agreed upon.

. . . .

Nonetheless, Amazon is leaving the ebook prices—set by the publisher—alone…and messing with the paper prices.

I mean seriously messing with the paper prices. I should not have been able to get a brand-new hardcover for more than half off the list price on the day the book released. Maybe at Christmas. Maybe nine months from now, as the publisher gets ready to release the mass market paperback.

But now? Release day? Seriously?

. . . .

The traditional publishers are screaming about Amazon. I’ve learned over the years that when someone screams about something, they’re doing so because they feel some kind of pressure, some kind of pinch.

How could traditional publishers be feeling a pinch from Amazon? After all, in the United States, Amazon is selling more books than any other retailer. Why would that hurt traditional publishers? Is it hurting traditional publishers?

Oh, my friends. One should never ask these sorts of questions. Because the answers are often surprising.

From the evidence that I’m seeing, here’s what I believe is going on.

Amazon is clearly fighting the price war on a variety of fronts, and I’m sure Amazon’s policy is pretty simple: They want affordable ebook prices. So if traditional publishers want to charge $14.99 for a Kindle edition, then Amazon will make sure no one buys the expensive Kindle edition by lowering the price of the hardcover.

My unscientific examination shows that when the Kindle prices are high, the discount on the paper edition is deeper.

. . . .

When publishers returned to Agency Pricing, they had to agree to the same ebook royalty schedule that indies have. Which means that for any ebook priced over $9.99, the publisher will receive 35% of the sales price. (If the publisher prices the books between $2.99 and 9.99, then the publisher receives 70%)

The publisher, with a $14.99 ebook, will receive a royalty payment per sale of $5.25. If the publisher had priced the ebook at $9.99, the publisher would have received $6.99.

So traditional publishers are deliberately receiving a lower percentage royalty to keep the ebooks prices artificially high.

But traditional publishers aren’t the only ones taking less money to prove a point. If business is being conducted as it usually is, then traditional publishers sell their books to Amazon at the discount they use for all of the other big accounts (Wal-Mart, Costco, and so on).

That would be 60-64% of list price. This is known as a deep discount.

So, if Amazon pays 64% of $27.95 for the hardcover of, say, the Paretsky book, then Amazon is paying a little over $10 per book. Amazon is currently selling that book for $13, making a $3 profit.

If Amazon sells the Kindle edition of that book, Amazon makes $7.57 per sale. (65% of $11.64) If Amazon sells any of the $14.99 ebooks, it makes $9.75—over three times what it’s making on these discounted hardcover new releases.

Why is Amazon doing it?

I’m guessing here that the price wars continue. And Amazon is trying to force publishers to return to $9.99 ebook prices.

. . . .

Publishing contracts have changed in the past 15 years. Now, each contract has a discount schedule, reducing the royalty if a book is sold at deep (or what the average person would call high) discount. In the past, many contracts didn’t have a discount schedule; the publisher would eat the loss.

Now writers get a much lower royalty if the actual discount to the retailer is low.

At 60-64%, some writers are receiving only a 1-2% royalty. Let’s be charitable and give that writer a 2% royalty. That’s 2% of $27.95, which comes out to 56 cents per hardcover sold.

If the book sells at full price, the writer would get 10 to 15 to 20%, depending on the royalty schedule. (Often royalties are based on sales numbers—10% to 150,000 copies, 15% to 500,000 copies, 20% over 500,000 copies.)

Let’s be realistic instead of charitable this time. Most writers traditionally published in hardcover never sell 150,000 copies of that hardcover. The writer will get the 10% royalty, which is $2.75 per book. Not 56 cents. That’s a significant loss for books sold at deep discount.

But it’s a fact of life. That writer would get the 56 cents if Amazon sells the book at $27.95 or if Amazon sells the book at $13.37. It won’t matter to the writer at all.

The squeeze occurs on the ebook prices. Currently traditionally published writers across the boardare getting 25% of net income received on ebook sales.

So…if the publisher sells the ebook through Amazon at $14.99, and Amazon pays the publisher a royalty of 35%, then the publisher will receive $5.25. That’s “net income received” of which the writer will get 25% or $1.31.

However, if the publisher sets the ebook price at $9.99 on Amazon, the publisher will receive $6.99. The writer will get 25% of that $6.99 or $1.74. A little better.

But the other bonus at the lower ebook price is this: It has been proven over the years that the lower price point brings in more sales. So the writer would receive more money per sale and also make more sales.

The traditionally published writer is losing out here.

Link to the rest at Kristine Katherine Rusch and thanks to David for the tip.

Here’s a link to Kristine Katherine Rusch’s books. If you like an author’s post, you can show your appreciation by checking out their books.

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