From author Larry Correia:
This review was posted for Son of the Black Sword.
1.0 (odljout of 5 starsThis rating has NOTHING to do with the writing!
(Name removed because he probably meant well, and this isn’t personal)
Format: Kindle Edition
I read and absolutely loved, Correia’s monster hunter books. Own each and every one of them. I was so looking forward to reading this one after I saw the blurbs for it. However, I cannot bring myself to allow the publishing company that Correia has his contract with, to take advantage of me. Like many of the ‘main stream’ authors, or rather, those that aren’t taking advantage of self publishing, the cost of the book is inane. The Ebook. Which costs the publishing company NOTHING to create in comparison to hardback, and paperback books. Costs more than the Paperback. That alone, will prevent me from purchasing this book, until the price is fixed to something reasonable.
I know writers aren’t supposed to respond to reviews, but I’m not responding to this as a writer, I’m responding to it as a retired accountant.
I am the author in question. Your review doesn’t hurt anything except my overall average. You aren’t sticking it to the man. You aren’t harming the corporate fat cats. If you think the book sucks, give it one star. That’s awesome. That’s what the stars are for. But you don’t use one star to bitch about the price of eBooks. That just makes you look stupid. We shouldn’t still be having this conversation with anybody who isn’t a Bernie Sanders supporter.
Now, Accountant Hat on. This is pretty basic stuff. This is how basic costing works, not just for books, but quite literally everything. But today, we’ll talk about books, because your ridiculous review has pissed me off. I’m going to dumb this down and keep it simple as possible.
I produce a product, which I sell to a publisher. Under that contract I am given an advance against royalties (money up front), and then I get royalties based upon a percentage of the sales price. This is good. This is how authors GET PAID.
Now, over on the publisher side they have a bunch of costs associated with the production of my product. Some of these costs apply to both ebooks and print. However, contrary to what most people think printing isn’t the big deal, as much as all the other stuff.
. . . .
Some products are more profitable than others. When you go to a fast food restaurant, the margin on the burgers is slim. If they sold nothing but burgers they’d be in trouble. However, the margin on soda is amazing. That soda you spent a couple bucks on? The most expensive thing involved was probably the cup. When I was selling guns, guns were cut throat, high competition, and on most brands I’d only make 10-15% on the sale of a gun. But then I’d made 40%-50% on accessories. That was how I kept the lights on.
Ebooks are like that. Publishing is an industry with crappy margins. Don’t believe me? Ask Borders. Yes, ebooks have a lower direct cost, but that is all still going into the same company bucket. Some lines are more profitable than others. Duh. It isn’t about “fairness”. Business has nothing to do with fairness. Business is about staying in business.
That’s the basics of how costing works.
But wait, there’s more!
Now we get into Econ 101! (I love Econ).
So now that you know how much you have to make in order to keep the lights on, you want to maximize your profit. You want to sell it for as much as possible, but not for too much because that will turn some people off and you’ll sell fewer units, so you want to get that sweet spot where the supply and demand curves meet.
Some people are willing to pay more, others are willing to pay less. Go super cheap, make less per unit, and sell more, and at the other end you go super expensive, make more per unit, but sell less. Which is why the Nissan Versa and Aston Martin DB9 can both exist.
. . . .
Books aren’t cars, but they’re basically interchangeable entertainment products. Some authors’ brands can get away with a higher cost because they’ve established that they’re a Honda, and some new guy is going for moped prices because his quality isn’t established and the only way he can hope to attract customers is by low price. The super cheap customer isn’t going to buy the Ferrari, and Ferrari is just fine with that. But when cheap guy posts a one star review for the Ferrari, we’re all going to laugh at him. For the record, I’m not a Ferrari. I’m more of a Ford Expedition.
Since there isn’t some super easy way to tell you what the perfect sweet spot is, publishers guess. Some guess too high, and others guess too low. Who guesses just right? Well, we don’t know, because it isn’t like you go around showing your competitors your P&L (that’s a Profit and Loss statement for you Bernie fans, for those guys, think of it as magic voodoo).
Oooooh, but there’s even more!
What? Pricing eBooks is even more complex? Unpossible!
Yes, because now lawyers get involved!
Did you know that Amazon is actually a business too? And that it exists to make money? And that it also wants to maximize its profit? Crazy. Bernie should do something about that.
Publishing houses don’t work off the same contract as lone self-published authors. In fact, for a publishing house to set up an ebook distribution deal with Amazon there is a lot of wrangling, and Amazon gets a say in how those books are priced. This involves lawyers (see that line about Overhead, they probably go in that bucket).
. . . .
Once my publisher got that contract hammered out, and Amazon was happy with the minimum prices they agreed to, I was super happy, because now on my personal P&L I was making a whole lot more money by having my eBooks in the biggest marketplace. Yay.
. . . .
Now if you’re self-publishing and trying to decide how to price your book, it is simpler. You don’t have a bunch of lawyers involved, and you don’t have all that G&A and Overhead. Lots of self-published folks go 99 cents, others do the $2.99 to maximize the royalty percentage. Same principle. You’ve got your market and your demand curve, and you’re going to price accordingly. You need to figure out the price that maximizes your return. Whatever you set it at, somebody is going to come along and say it is wrong. ONE STAR!
This all boils down to a question of entertainment dollar value to the customer. If you want it now, and you really like this particular brand, you’ll realize that you spent more than that on your burger combo at lunch today and buy the book. If that isn’t worth your entertainment dollar value, then you won’t purchase.
In pricing, nobody is “taking advantage of you” unless you are stuck in a monopolistic situation. Ruth’s Chris costs more than Sizzler, but Ruth’s Chris isn’t taking advantage of you, they are pricing according to their brand and their product to maximize their position in the marketplace. If they price too high, then they will not make a profit, and will have to adjust or lose market share. Which is kind of funny, because in this tortured analogy, I’m actually priced more like Sizzler, and you just gave a one star review to Sizzler, because I’m not priced like McDonalds.
Link to the rest at Monster Hunter Nation
Here’s a link to Larry Correia’s books. If you like an author’s post, you can show your appreciation by checking out their books.
PG has enjoyed Larry’s books and also several of his blog posts. He has no doubt Larry was a good accountant back in the day.
However, the new reality for ebooks is that authors who use publishers are becoming high-priced options for readers. Indie authors and Amazon are in a continuing process of resetting pricing expectations for readers.
Publishers and authors don’t like to think their books are commodities, but, for some percentage of readers, they are. If I’m at the grocery store and see a bottle of something priced at $7.99 sitting on the shelf next to bottles priced at $2.99 and $0.99, even though I know the $7.99 product is high quality, my mini economic self-interest analysis might conclude that the $2.99 or $0.99 product might suit my needs as well. Maybe I won’t even notice the difference.
Larry is correct that, generally speaking, publishing is an industry with terrible margins. As he points out, publishing is also an industry with lots of costs. PG will observe that most publishers are not paragons of efficiency. When an author uses a publisher, the author is requiring his/her readers to pay for the publisher’s costs, regardless of how expensive or inefficient the publisher may be.
In a typical ebook publishing contract, the publisher receives three times as much as the author receives for each ebook sold. Given a choice, many readers would likely prefer to pay the author three times as much as the publisher because, in such readers’ minds, the true value of a book is created by the author.
Simply put, indie authors are far more cost-efficient producers of ebooks than authors combined with publishers are.
Ebooks sold via ecommerce are technology products. While Walmart is a retailer, Amazon is a technology company. The rules for technology companies and the products they produce were established in the late 20th and early 21st centuries: add features and push prices down. Relentlessly.
Even without adjusting for inflation, computers cost much less today than they did in 1990. Ditto software, particularly software that lives on the web. Ebooks are web-delivered software and pricing has changed accordingly.
Perhaps Larry’s one-star reviewer broke some unwritten rule that prohibits complaining about pricing in an Amazon review, but that reviewer is also the reading market sending a signal to authors and publishers: Your pricing is too high. I can buy perfectly good ebooks for much less. Change or die.