Till now, eBook pricing policy discussions have been theoretical at best, most proposals prefaced with a flippant, “Of course, it doesn’t really matter all the time there’s no market.” The ground has ever so slightly shifted in 2008: a subtle combination of the Kindle launch in the US (it didn’t light the world on fire, but on the other hand it is generating a not altogether insignificant sideshow for many US publishers) and a general sense that maybe, just maybe, a small but growing percentage of the reading population would quite like to read on a screen after all. Whatever the truth in that, publishers are currently faced with the challenge of setting eBook list pricing in a very nascent market. There is the instinct to protect future revenues, to prevent cannibalisation of print. That instinct leads to pricing that floats at or around comparable print product pricing, which from a consumer point of view, simply appears nonsensical – there’s no palpable ‘product’, no physical warehousing or distribution required, so why the high price? But will this instinct also ultimately turn out to be nonsensical for publishers? I think there’s a very real risk that publishers price themselves out of the market altogether, allowing new, tech-savvy companies to move into the content delivery space, develop a pricing model that appeals to consumers, develop direct relationships with authors on the one hand and consumers on the other, and wipe the floor with all the traditional players.
Seth Godin’s post about how much the movie studios should start charging for digital movie downloads, strikes a chord with me:
“It’s important to charge something, because the act of paying fundamentally changes the dynamics of the relationship. The question is this: at the start, is your goal to maximize profit or to build a platform that scales? The fact is that the market is too small right now for the price to matter. What matters is whether you can build an audience that is in the habit of paying you, an audience that wants to hear from you, an audience that you can build a business on.
At fifty cents a rental, all desire for piracy goes out the window, replaced by convenience, ease of use and a clear conscience. More important, entire new services show up, habits are built and the studios end up with a direct relationship with consumers who want to hear from them. If they don’t get greedy at the start.”
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Books in Ireland and the UK (and elsewhere) are not subject to VAT as long as they are ‘bound’ , presumably ebooks will be ‘vatable’?
Yes, that’s correct, Sarah. I do wonder why we are still differentiating in this way between ‘printed materials’ (non-VATable) and ‘digital’ (VAT-able)…
From a writer’s perspective the whole business of signing e-book contracts for backlist titles is extremely tricky, regardless of what the unit price on a e-book might be. A publisher of mine has recently approached me with a series of contracts for backlist titles that they want to convert to e-books. They are offering a royalty of 20%. Frankly, this makes me sit up and bark like a dog (luckily, it makes my agent bark too). The cost of converting a backlist title to e-book format is minimal – I’ve recently done this myself for another project, and preparing the digital file cost less than £50. Gone is the expensive business of printing, shipping and warehousing books. While I value the publisher’s brand and don’t doubt the value of having my e-titles distributed via their networks, as well as via any deals they can make with online booksellers, I can’t see how they can justify earning back 80% on an e-book title. Seriously, the time is ripe for writers to sit up and take a long hard look at these contracts – traditional publishing business models can not apply to the digital realm.
Hi Sara,
The second part of the question has an answer, what price flies will eventually be determined by the market and how it values the content. However ‘what’s fair’ depends on several still ambiguous factors, not least the actual nature of the ebook itself. I think a distinction should be made between print books that are converted or reformatted; essentially ‘additional revenue streams’ and those ebooks that will emerge from innovative use/convergence of new reader technology and new literary forms. Just as software trails yet actually fuels the (next) hardware cycle, so too will ebooks evolve as their content/technology cycles begin to gain momentum. The difficulty for publishers and writers alike is we are at the very beginning of the first cycle, lack of investment in new content will mean failure of the technology to trickle down the user pyramid beyond early adopters. The TV and games industry both provide business and production models of mass market approaches to this cyclical phenomena, I know which approach I consider to be the most successful. I therefore must agree with Kate Pullinger above, traditional print percentage paradigms simply cannot apply.
Publishers should price eBooks so they are indifferent to whether the customer buys an eBook or physical book – then let the customer choose which to buy. In most cases this balance should be set based on the profit margin per customer being equivalent. The idea that ebooks should have a premium profit is bad because the number of ebook customers is in its early growth phase. In this way the real economic advantages of ebooks will be the force to drive market expansion of ebooks:
Some factors that publishers and authors should consider are:
- eBooks don’t become part of the used book market which reduces new book sales. So one might estimate that one ebook is used by members of one household but a physical book addresses 1.1 (my guess – real data is needed for a better estimate) households. So if the profit margin per physical book is $5 the ebook needs margin of $5/1.1 = $4.54
- The variable cost of stocking, inventory, distribution clearing out books that no longer sell well need to be included in the cost of paper books.
- Lower prices for ebooks Vs physical books will be the case when priced for equivalent profitability. The incremental benefit to publishers/authors will be that the numbers of books a customer buys in a year will increase – as people choose the convenience of ebooks over used books and libraries, this may also spark a resurgence in book reading and benefit from the increase in reading people do with the web.
- For books the publisher may not be sure has a good enough market to publish in paper, publishing an ebook version first may be a way to test the market at a low cost. If the response is good – publish the paper version as well.
Customers that prefer ebooks to physical books are on average more web oriented. Just as publishers learned how to promote physical books with book tours, attractive cover graphics, promotions in stores, etc., publishers need to get more web focused. For example, posting a video & Mp3 of the author in an interview or other talk about the book, or a group talking about the book if the author does not come across well on video/audio. Letting customers have opt-in email – which use is limited controlled by the user as to frequency (only when author has new books, will be speaking in the readers area, other books of a similar nature from the publisher, etc.).
Music, video and newspaper publishers have had difficulty making the change to a digital world because they made the change resisting and having the marketplace beat them over the head. In many cases, they still have not yet figured out, or implemented strategies to thrive in a digital world. Book publishers have yet to make the change to a digital world – and ebooks will be leading the change.
e-book pricing is (of course) important. But it aint gonna keep you warm at night. I see the point though that we could get ourselves into trouble if we get it wrong. With journals we managed to maintain a premium price, why not books?
Hi, Annette. Well, actually, with journals we started from the standpoint of online-free/cheap-with-your-print sub! As the market built and the community moved further online, we were there with an online relationship that we could build, we added value to the online offering, and then finally we were able to de-couple the two and build a site license business. What I’m saying in the blog piece is that we need to assess our goals – do we want to get in early and be the ones developing relationships in the digital space betw authors and readers, a position from which we can build, or do we want to price ourselves out of that relationship and let other tech-only companies move in and occupy that space? We already have players who act as publisher /retailer all in one (notably Amazon with its CreateSpace offering). Amazon has already nailed its colours to the mast in the eBook space: leading the way with cut-price eBooks just as it has for print books.
That is a great point to bring up. Thanks for the post.
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