How to Fight the Commoditization of Books

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By Mark Coker via Publishers Weekly:

The mere thought is at once repulsive and terrifying: books as commodities. After all, a book is the original divine creation of its author, right?

We typically think of commodities as undifferentiated products such as corn or wheat. To a consumer looking for flavor and nutrition, one kernel of corn is the same as another. Though higher-quality corn can command premium prices, the price ceiling is ultimately determined by what the market is willing to pay for a given product.

In this respect, books are similar to any other commodity. Books are delivery vehicles for reading pleasure. Although each book is unique, the primary reason readers purchase books—reading pleasure—can be measured and commoditized.

If we divide the hours of reading pleasure one book offers by its price, we can create a simple metric: cost per hour of reading pleasure. This metric allows one book’s pleasure-delivery potential to be compared to another’s.

Readers are unlikely to consciously intellectualize their cost per hour of reading pleasure. Yet this metric guides consumer behavior much as gravity guides water to flow downhill. In a marketplace of interchangeable options for pleasure, consumers will gravitate toward the best-quality option with the lowest price, whether that quality is measured by brand, average review, or word of mouth.

How low can prices go? With agricultural commodities, the price floor is ultimately determined by the cost of production. If farmers can’t turn profits at the given market rate for their products, they stop producing those products. When farmers stop growing, supply decreases. This then causes prices to stabilize or increase to the point where new growers are incentivized to enter the market.

For decades now, most writers—even traditionally published writers—have maintained day jobs to make ends meet. This means authors are personally subsidizing the publishing industry by continuing to write books that don’t pay the bills.

Would we expect farmers to work for free? Certainly not. Yet many writers will continue writing even if there’s no money in it. Though one writer may write for the joy of writing and another to afford groceries, both require readers. And price is often the determining factor for finding readers.

. . . .

Kindle Unlimited causes significant devaluation on two fronts:

1. Amazon is training the world’s largest community of readers to expect five-star reading experiences for what feels like free. This makes readers reluctant to pay for books, which harms sales.

2. Because Kindle Unlimited decouples book price from author compensation, it means that Amazon has stripped authors of pricing power and can pay them less.

. . . .

2. Don’t underprice: readers will pay for quality. The e-book sweet spots for quality bestselling full-length indie fiction are typically $3.99 and $4.99, and $7.99 to $9.99 are good prices for quality nonfiction.

3. Avoid exclusivity. When indie authors make their books exclusive anywhere—even for a short time—it undermines their ability to build readership at other stores. Exclusivity makes the author vulnerable to exploitation when a single retailer controls the author’s access to readers. True independent authors publish, price, and promote with complete freedom.

Link to the rest at Publishers Weekly

PG says it’s a bear competing with Amazon.

The market value of an item is what a willing buyer will pay a willing seller for a book.

If market demand is elastic, the supply will adjust itself to the demand created by prospective purchasers.

PG suggests that Kindle Unlimited is wonderful for less-known authors because buyers don’t have to risk any money to see if they like what the author has written.

The factors governing the ebook market is different than the printed book market because, in the ebook market all the author’s (or publisher’s) costs to create the product are incurred upfront. Once an ebook is created, for the author, the direct costs of selling one ebook are the same as the direct costs of selling one million books.

Amazon incurs some per-unit ebook costs in the form of server time, credit card processing fees, etc., but for someone who is already running the world’s largest server farm selling zillions of different products, the incremental costs of selling a single ebook are the tiniest drop in an enormous ocean. For the cost of sending a single printed book to a customer who takes advantage of free Prime shipping, PG suspects Amazon could sell and deliver hundreds of ebooks to customers.

On a couple of specific points Mark makes in the OP:

Because Kindle Unlimited decouples book price from author compensation, it means that Amazon has stripped authors of pricing power and can pay them less.

Authors are not stripped of anything with Kindle Unlimited. They can price their ebooks pretty much any way they want to on Amazon, subject only (as far as PG knows) Amazon’s overall $200 max price for ebooks on KDP.

If PG writes a wonderful ebook for which he decides to charge $99 for each copy, he can do so. If a purchaser believes PG’s written ramblings are worth $99 or more, PG has demonstrated he has the pricing power to sell his book for $99 to an unknown quantity of readers numbering greater than one.

Pricing power in an open market is determined by supply and demand. Does the purchaser want $99 more than she wants PG’s book or does she want PG’s book more than $99? If PG prices his book at $1.00, the purchaser’s decision analysis is the same with $1.00 substituted for $99.

With respect to Amazon and authors, if Amazon can attract the kinds and quantities of books its customers are willing to purchase by paying an author 50 cents, why would a rational author expect that Amazon should pay more?

Traditional publishers and bookstores are a far less sophisticated system for determining optimum pricing than Amazon is. Their pricing decisions are pretty much a shot in the dark. For one thing, they’re dealing with thousands of different books and authors. They’re not set up to find the optimum price for any single book because they can’t pay as much attention to sales results for a single book as the author of that book can.

If Author A writes a 300-page romance novel that 50,000 readers are willing to pay $8.99 to acquire and Author B writes a 300-page romance that 50,000 readers are willing to pay $1.99 for, how likely is it that the publisher/physical bookstore will price each book at an optimal manner? If the publisher/bookstore releases each romance at a retail price of $4.99, Author A and Author B will both have lower royalties than each would have had with optimal pricing.

Whatever pricing power publishers and traditional bookstores have does not benefit any individual author. Rather these players use their pricing power to maximize prices from a large group of books. Ultimately, they don’t care if Author A sells many more books priced at $4.99 than Author B sells for the same price so long as the total take from all books, including those from Author C through Author Z, meet the store’s and the publisher’s sales and profit objectives.

PG says some authors will always make more money from their books than other authors do. However, Amazon has developed a much, much more sophisticated and powerful system for determining the optimum sales price of an author’s books than any publisher or bookstore has.

If the author permits Amazon to set the price of a book at zero under Kindle Unlimited and the author is satisfied with the amount of royalties the book generates, is the author treated unfairly?

The author is not permanently locked into Kindle Unlimited (unlike an author dealing with a traditional publisher), so the author is free to withdraw the book from Kindle Unlimited (and KDP Select) every 90 days and engage in more price experimentation through Kindle or through Smashwords.

27 thoughts on “How to Fight the Commoditization of Books”

  1. A bit too late me thinks. And this seems geared more to the already well-known/well-read writer rather than those of us less well known.

    “Don’t underprice: readers will pay for quality.”

    But will they pay to discover that you do indeed have any quality? This is where having your first book or two set low let’s them think you’re worth the risk at the price of a coffee.

    “Avoid exclusivity.”

    Unless you think that that exclusivity can get more readers trying you out.

    More than a taste of ADS in the OP, but then again anyone the convince to get out of KU just means more of a share for those staying in KU. (While my other stories are ‘wide’ I am thinking of writing one just for the KU – just to see what all the shouting is about you understand. 😉 )

  2. Kindle Unlimited is a rental service.
    Comparing its pricing to discrete sales, especially print, is like comparing Netflix or Hulu pricing to 4K BluRay pricing.

    Ignorant at best disingenuous and self-serving at worst.

    Mr Coker might better spend his time improving his own business which has been overtaken by Direct-to-digital and others. His Amazon diatribes got old ages ago. Even Melville house has toned it down.

    • Your first hint/warning was at the very top:

      “By Mark Coker via Publishers Weekly”

      MYMV and you always consider the source. 😉

  3. Easy discoverability and availability of books published 1923 or earler makes it harder for a current-day writer to maintain any kind of pricing power. Not only is the writer competing with his or her peers, but also with all the books in the public domain – millions of which are priced at zero.

    Easy access to used books available on the internet makes it less likely someone will buy a new copy. Bad pricing strategies that make new e-book editions cost more than used paper editions of the same book cause sales to bleed off to the used market.

    DRM pushes people away from the copyright market toward the public domain. With good reason – their book might disappear tomorrow.

    • Don’t forget the “eternal backlist” in both digital and used. New releases not only compete with this year’s new releases but last year’s and last decade’s and further back.

      There is no shortage of known-good titles in most genres.
      And for all the griping about Amazon and KU the BPHs use the backlist as their lower price product line via regular discount sales.

    • Never mind books… if you’re writing fiction, you are competing with all the modern entertainment options for people’s “fun extras” budget. Everything from the 99 cent in-game purchase in their latest game app on the phone to the newest Avengers movie ticket. That’s all the same slush: “money leftover from expenses for entertainment.”

      You have to think past your medium these days, or you’ll wonder why you’re poor. :,

  4. If people are so damned hot to have us leave KDP Select, then they need to give us a place to go that actually SELLS books. Right now, the #2 guy is Apple and they couldn’t care less about selling books.

    So please, stop putting this on the authors. We have nowhere else to go that is a viable seller.

    • KDP Select is a way some authors compete with all other authors. Price is another way they compete. What we see in many of these lectures is a desire for the stability the publishers provided to the market in 1980. Many authors don’t like competition.

      Those days are gone. They left with the disruption. They depended on barriers to entry that no longer exist. If authors look around, like Pogo, they will find that “We have met the enemy, and he is us.”

      • The best way to compete with other authors (not that we’re in competition with each other, because readers read a lot faster than even their favorite author can produce books) is by providing the intended audience with quality books, or a hopefully-bigger audience with acceptable books.

        And I don’t believe the good old days were.

  5. Just for fun, lets apply Coker’s economics to the real world.

    He says consumer reading hours can be commoditized.(Note: if you have to argue that something is a commodity, it isn’t.) But if those hours are a commodity, what’s the supply of the commodity? How does it compare to demand?

    There is little evidence that people are spending more hours reading, even with free and low priced books available. Yet, with all those books, there’s lots of evidence that supply of those hours is increasing everyday. The supply never falls.It keeps increasing.

    Back to Coker economics, and we can see price per hour will fall. That’s what happens when there is more corn than the population can ever consume. So, if hours are indeed commodities, prices head south and never come back.

    But, unlike real commodities, stocks and annual carry-over never decrease. Consumption does not decrease stocks. Therefore, accepting the Coker model, authors are toast, and always will be. They will never pay the bills with books.

    It doesn’t matter is KU stays or goes. It doesn’t matter if authors shun exclusivity. It doesn’t matter if Amazon trains readers or seals. It doesn’t matter if authors control price. All that matters is a supply that always increases, never decreases, and can never be depleted.

    Now, the fun’s over. Forget about Coker economics.

  6. I was lost at the point when the value of a book was defined as hours of reading pleasure. That describes one sort of book, including the bulk of self published books. But it hardly describes all books, including most nonfiction. Is the value of a cookbook, for example, in hours of reading pleasure? Yes, some people enjoy reading cookbooks, but surely the point of a cookbook is the quality of the recipes. If I read a history of the Roman Republic, I hope to enjoy the experience, but the real point is to learn from the book, not to pass the time reading it.

  7. 3. Avoid exclusivity. When indie authors make their books exclusive anywhere—even for a short time—it undermines their ability to build readership at other stores.

    I’ve been getting into reading LitRPG and GameLit lately. Literally the only place to go to read that sort of stuff is Amazon. There is nowhere else to go, at least at present. Barring fan-run sites like Royal Road, of course, where users post their epics for free, but that’s hardly what Coker was talking about.

    As an aside, a couple of very popular LitRPG authors got banned from Amazon about a year ago, probably for the usual shenanigans, though they all deny this vociferously. One has a Facebook group with over 20,000 members. He’s still not writing, since he’s still off of Amazon.

    I generally like Amazon, but it does give me a pause that one venue is literally the only place to go for fairly a large and popular if rather niche style of writing.

    • “I generally like Amazon, but it does give me a pause that one venue is literally the only place to go for fairly a large and popular if rather niche style of writing.”

      And why is Amazon the only place to find them? Because readers have discovered they can find what they’re looking for there – and writers put their stuff where the most readers might find them.

      Far too many of us don’t want to ‘waste’ our time on a hunt, so we go where we are most likely to find what we want/need. Every now and then I will try a new store/website to see just what all they have, but that’s when I’m bored. Though I have run into a couple sites that quickly had me closing them when you couldn’t even browse them without giving them an email address.

      MYMV and you and your readers find what you seek in a timely manner.

    • “One has a Facebook group with over 20,000 members. He’s still not writing, since he’s still off of Amazon.”

      Huh? If he has a pipeline to 20,000 people, he can point them to somewhere other than Amazon. Amazon is not literally the only place you can do this stuff. It merely is the place with by far the most networking effect. But with 20,000 people reading your Facebook posts, you don’t need any networking effect.

      • That’s what I would have thought, too. I’m really surprised that he’s just giving up. I don’t read LitRPG, so until Patrick’s post, I would have just assumed those are sold on DriveThruFiction, which is connected to DriveThruRPG. It seemed like the perfect online store for the genre. They sell e-books, and have their own version of CreateSpace as far as I can tell.

        Twenty-thousand fans? I wouldn’t want to let them down by just giving up.

      • The vast majority of those 20k are KU readers. They don’t have the money to buy all his books and everyone else they want to read since they read 10+ books a month. For whale readers, KU is the only viable option.

    • Guys, I have to eat some serious crow here. His Facebook group only has a little over 7,500 members. I got the 20,000 from one of his update emails, where he states:

      “If my lawyers come to the meeting with a three foot tall
      stack of printed emails from my 22,000 fans.”

      Sorry about that. And on top of everything else, I looked around for any sort of support for that figure and as best I can tell there isn’t really any. Not saying it isn’t true, he may very well know something I do not, just that I don’t see where it comes from.

      Apologies and I’ll be more careful in the future.

      Finally, that email was posted to Reddit’s LitRPG board in January. And he’s still off Amazon. He was banned last June, so coming up on a year.

  8. Coker writes:

    “1. Amazon is training the world’s largest community of readers to expect five-star reading experiences for what feels like free. This makes readers reluctant to pay for books, which harms sales.”

    I can think of a minor rewrite of that which I doubt he’d agree with:

    1. Public libraries are training their community of readers to expect five-star reading experiences for free. This makes readers reluctant to pay for books, which harms sales.

    • I have a vague memory, and thus no idea where I read it, that back when public libraries were being started there was some backlash about people not buying books any more. I don’t think that idea was born out, though. I used public libraries a lot, and then when I had income I bought loads more books.

      I appreciate that Coker has done things for ebooks that even Amazon wasn’t doing, but he also hasn’t upgraded the site in decades.

      A lot of people wonder why nothing is done to lure authors away from Amazon. No author pages, no good search engine, no good experience uploading and managing books. Some places are a bit better, but for the most part it’s hard to do things on other sites.

      (And yes, someone is going to pop in with something to refute the above paragraph, but it doesn’t make what I said wrong.)

      • Nothing to refute.

        The biggest “threat” to KDP is Kobo offering access to libraries via overdrive but Kobo itself does virtually nothing at the consumer end of the pipeline. Their whole business model is to let their local partners do all the consumer-level marketing. Particularly ebook marketing.

        In the US they have failed to find anything resembling a viable partner: Borders imploded before the ink was dry on the deal, the ABA partnership brought a handful of halfhearted, skeptical book stores, Rakuten’s US site (nee BUY.COM, a onetime Amazon wannabe) does nothing to promote Kobo, and their latest great white hope is WalMart, whose own MO is to let *their* partners do the marketing.

        Apple views ebooks as a checklist item for the iThings only (they didn’t even support reading on Macs for years–not sure if they’ve finally added it) and Google intermittently forgets they run a bookstore for months on end.

        Try stopping a random person on the street and asking them if they know what Kobo or Smashwords are. Or try word associating the term ebook.

        Amazon has been gifted with a stream of singularly inept “competitors” to the point that a majority of the market refers to any eink reading device (and more than a few tablets) as Kindles. Competitors have failed at even the most basic of things: letting people know they are in the business to start with.

        • The biggest “threat” to KDP is Kobo offering access to libraries via overdrive

          I use Overdrive to send library ebooks to my Amazon account. 99% of all ebooks I see support both .mobi and .epub, it is just that Overdrive’s ebook reader is horrible. If there’s a way to send borrowed Overdrive books to a different epub reader I’ve not found out how to do it.:\

          their latest great white hope is WalMart, whose own MO is to let *their* partners do the marketing.

          You’d think a company as astute as Wal-Mart in a boots on the ground marketing way would be able to do a better job than they’ve done thus far. Yet the interface on when it comes to books might be the most confusing thing I’ve encountered in years. Sometimes the books are bought directly on, sometimes you’re directed offsite to Kobo, and sometimes you get pushed into dead linkland. After about twenty minutes I realized I’d spent eighteen minutes too many on the site and have no plans to return.

          • At this point sending Overdrive library ebooks to Kobo is a competitive advantage for Kobo and since both are owned by Rakuten I wouldn’t hold my breath waiting for the ability to send them to other epub readers.

            I wouldn’t expect the ability to send Overdrive library ebooks to Kindle to be renewed once the existing contract expires. For the same reason.

      • And then there’s the Smashword Meatgrinder, which has driven many authors (me included) to D2D.

  9. Felix, good point. Amazon might once have had viable competition, but any platform that had a chance back then has spent the bulk of their time shooting themselves in the foot. I’m not sure a single vendor is truly committed to books.

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