Are $0 ebooks inevitable?

There are quite a few signs that the race to zero is on for ebooks and books -

Hardcovers at $10 and Kindle Editions at less than $10 

  1. The $9.99 price of ebooks put pressure on WalMart and they retaliated with $10 hardcovers (10 of this holiday season’s most anticipated books).
  2. Amazon and Target matched prices. Prices are around $9 at the moment – That’s way less than the $24 suggested price.
  3. Kindle Editions for some of these books are now at $6.72 to compete.

 Advertising Supported eBook Patents

  1. Amazon filed a patent for books with ads in them.
  2. Google is almost certainly going to use advertising in some form to lower book prices.

Google Public Domain Books and Google Books Settlement

  1. Google is giving out a million free public domain books to every eReader company.
  2. The Google Books Settlement (if it goes through) will create a pool of millions of orphan books Google can sell at very cheap prices.
  3. Amazon is retaliating and has increased number of public domain books in Kindle Store from 7,000 or so to 14,000 plus.

As more and more free public domain books become available (which earlier had to be bought or read on an unsuitable PC screen) the value perception for books goes down further.

Free Book Offers

  1. Amazon has 13 free book offers in the last 4 days. These are new books.
  2. B&N yesterday added a page for Free eBooks including new ebooks (same ones as Amazon has, not all of them).
  3. Lots of authors are giving out the first book in a series free. This helps their sales – However, it further reduces the value perception of ebooks.

Independent Authors are desperate and can now give away ebooks for free

  1. Distribution is now easy. 
  2. Cost per copy keeps going down.
  3. Independent Authors are flooding the Internet with free and cheap ebooks.

Independent Authors are so focused on building an audience and being heard they don’t care about the long-term repercussions of giving away their books for free or $1.

Why are Book and eBook companies participating in the race to Zero?

Different reasons -

Amazon – Initially to jump-start ebooks, and now to compete

  1. Amazon used $9.99 to get ebooks jump-started. $10 is not a bad price.
  2. Amazon would prefer $10 ebooks. However, they might not have a choice given Google and WalMart and everyone else are reducing prices.

 Wal-Mart and Physical Stores – Using Books as Loss Leaders

  1. Wal-Mart probably want to get people in store to buy other things.
  2. Perhaps they feel they’ll lose book sales to kindle editions and must compete on price.

eReader companies to sell eReaders

  1. A lot of the smaller eReader companies are happy just to sell the hardware.
  2. They are happy to let the value perception of ebooks go to zero since they either don’t care or don’t think they can match Amazon.
  3. In fact, you could argue that $0 ebooks would help eReader companies sell more eReaders.

Book and eBook Companies – To catch up with Amazon

  1. Amazon have scared everyone.
  2. Google and Barnes & Noble are desperate to catch up with Amazon. They might use low prices to catch up. 
  3. If Amazon starts pulling away Google and other companies might decide to use $0 ebooks to destroy Amazon’s revenue stream.
  4. Some newer ebook companies might push low prices to get a foothold.

A key point worth considering is that eBooks are just one revenue stream for a lot of companies entering the space i.e. these are not publishers or authors.

eBooks are just one of numerous revenue streams

There are lots of revenue streams and models that can be tapped including –  

  1. A model where some books (first in a series, bestsellers) are Loss Leaders and the remaining books generate the actual profits.
  2. eBooks themselves.
  3. eReaders. 
  4. Advertising things in ebooks or at other points in the buying and reading process. 
  5. Using book reading behavior to develop targeted advertising and a profile.

What this means is that a lot of companies will consider ebooks as potentially a loss leader and play around to find a model that suits them best.

To be more precise -

  1. eBook Stores will try to push the notion that the store and buying experience is more important than the book.  
  2. Google will push the notion that search and finding ebooks is more important than the content.
  3. eReader makers might push the notion that the eReader is the actual value.
  4. Different Channels will push the notion that ‘channel’ or ‘where you read’ is more important than what you read.

These are all just companies trying to grab as much of a share as they can.

It’s extremely unfortunate for publishers and authors that pushing ebooks to $0 benefits a lot of these companies.

Are $0 ebooks sustainable?

A lot of authors and publishers are complacent about the dangers because they feel publishing couldn’t exist at lower prices.

Unfortunately it can. It might not be quality – However, it will exist.

How Companies would Survive

  1. Amazon would use $0 ebooks as a loss leader to get people to buy everything from Amazon. 
  2. Amazon and Sony and other eReader companies would go with eReaders as the money makers.  
  3. Google would make money via advertising.
  4. Google would club together their books into subscriptions for businesses and libraries and use that money to subsidize every day readers.  
  5. Companies would get sponsorships for books – Anthropologie sponsors Price and Prejudice and so forth.

Why Would People Still Write?

There’s always the love of writing. However, there would also be a financial carrot being dangled for them.

It’d be very similar to a lottery model or the Apple App Store model -

  1. Top authors and publishers would still earn a lot because of the volumes involved. The top 1%.
  2. Authors and Publishers just below that – the top 5% – would still earn decent amounts.
  3. Everyone else would struggle. However, the promise of huge riches would keep them going.  

Interestingly this sort of situation would give the channels and the companies that control those channels all the power and most of the profits.

They would profit from both the very successful authors and the unsuccessful ones. 

Are $0 ebooks inevitable?

 Yes.

The Internet allows for infinite competition. What that means is -

  1. Every company will try to profit off of eBooks. They’ll end up undercutting each other.
  2. Even if one company wins other companies will do their best to destroy that revenue stream.

We’re seeing relentless competition on both eReader prices and eBook prices.

Most scary for publishers is that -

  1. There are some business models (advertising based, eReader profit focused) where it benefits everyone except authors/publishers to have ebooks at $0.
  2. People are trained by the Internet to expect Free.
  3. It strengthens lots of companies to make ebooks free.

The only possibility for Publishers is to create a Hulu for books or get Government intervention. In every other case Publishers are totally overmatched and $0 ebooks are inevitable.

4 Responses

  1. Writing as a quality art-form, RIP!

  2. Good analysis. I think that eBooks will go the same route as MP3′s did. They won’t be free, but new distribution models will emerge (some already have) that make it simple and easy for the consumer. The best example of a new distribution model is the Kindle’s ability to download books wirelessly. This model can be compared to Apple’s iTunes in the MP3 world. I do, however, feel that consumers will find free eBooks either illegally via file sharing or, as you mentioned, via authors giving them away for free.

    The advertising model might come in to play with the creation of a system similar to AdSense. If Google, or whomever, set up an easy system where publishers/authors could embed ads within their eBooks, just like AdSense does for Web sites, that could be a success. However, you will always have the consumers that don’t want ads in their eBooks and will pay a premium to not have them.

  3. I just found your site and added it to my favorites on Google Reader. As a traditionally published author AND a self-pub one, I’m watching this battle with keen interest. Thanks for the low-down!

  4. as long as i still have the option to PAY for my books so that they dont include any advertising, i dont care how the rest of it shakes out.

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