How much damage does a $14.99 book do to an author?

There’s a very interesting discussion at the official kindle forum about the latest book by Michael Connelly being priced at $14.99.

Susan talks about how, despite being an avid follower of Michael Connelly, she’s boycotting him and his books -

I am an avid follower of MC and have watched his books go from $9.99 to $12.99 to $14.99 ( a mere $0.12 under the hardcover price). I’ve written to the publisher, Hachette Group, and received no response.

I am REFUSING to buy the book on the October 5th release date. His one year old release, 9 Dragons, is still selling for $14.99. Help!

There are lots of interesting perspectives. Personally, I applaud Susan for writing about it and for boycotting an author who’s pricing books at $14.99.

This post will attempt to look at all the pluses and minuses of pricing the ebook at $14.99 when the hardcover is $15.11.

The Advantages of Outrageous eBook Pricing

Well, there are quite a few, though mostly for the Publisher and Author -

  1. They earn more money from their devoted fans.  
  2. They test the devotion of people who buy their books and get them further committed i.e. if they bought the ebook for $14.99 it must mean they really value the author.  
  3. They avoid cutting into hardcover sales since there is little price difference. 
  4. They cater more to people who don’t care about $9.99 vs $14.99 - it’s a way to focus on more profitable customers. They exclude trouble-makers who expect ebooks to sell for less.
  5. They get the most value when there is the most demand i.e. right at the launch.
  6. They make the most of the release day sales rank bump (due to all the pre-orders).
  7. They stick to a price that they (Publishers) feel is more sustainable and lets them avoid making difficult changes. Authors get more money than they would on $9.99 books.
  8. They set themselves apart as a premium publisher/author – people are willing to pay $14.99 for their books.

Let’s be very clear that $14.99 is a win for authors and publishers when they can pull if off. No rational human being would sell his product/service for $9.99 if he can get more profits selling it for $14.99 without losing too much volume.

Before we look at the disadvantages of pricing ebooks at $14.99 let’s take a detour into Levels of Intelligence.

Different Levels of Intelligence

Look across the various cultures and you’ll find a lot of the same fundamental tenets – treat others the way you would like them to treat you, don’t kill others, don’t steal, help others, treat your parents and children well. It’s basically a very high level of intelligence - generations and generations of experience and wisdom resulted in people realizing that it’s much better to co-operate and prosper together than to just cut each other down.

However, sometimes the more tempting option is to take advantage of others – In fact, if you don’t factor in future consequences exploiting others can often seem an intelligent move.

In the author, publisher, reader relationship we see an interesting sequence of events -

  1. Publishers and Authors find out that they can sell ebooks and now instead of 50% or more they have to give distributors and stores just 30%. They also figure out they can cut down on other costs like ink and paper and returns. Finally, and perhaps most importantly, they now get a lot of data on early winners, early losers, and sales trends and can use that to reduce the probability and cost of failure.  
  2. They then exercise a rather inferior sort of intelligence – We could keep selling books for the same price and get a lot more money for ourselves.  
  3. It’s inferior because it doesn’t account for a few critical things – readers know costs have gone down, competitors can offer cheaper books, higher prices hide inefficiencies in the system that Publishers need to get rid of to survive.
  4. Perhaps the biggest reason this sort of intelligence is just sophisticated, short-sighted stupidity is that readers feel mistreated and with valid cause. Consider the kindle forum thread from Susan – She’s a self-described ‘avid follower of Michael Connelly’ and now she’s advocating a boycott.
  5. A lot of this is invisible to Publishers because the lure of the $14.99 price and their distance from readers makes them oblivious to what’s really going on. They don’t even realize they’re whittling away their core customer base.

The short-sighted pretend-intelligent Publishers and Authors are so happy with their semi-intelligent trickery – a larger share of the same book price – that they aren’t realizing that their sales volume is going down, competitors are rising, and their devoted readers are getting more and more upset.

Authors will probably complain about being clubbed together with Publishers – Well, they are taking a share of the money so they bear a share of the responsibility.

Authors can no longer pretend pricing is outside their control

We’re really beyond the point where authors can pretend they have no say – They’re getting 25% or more from Publishers (and passing on 70% from Amazon) so if the price of the book is too high they are as responsible as Publishers.

If authors really are too blind to realize they are angering their devoted fans and laying the foundation for their competitors to destroy them then they deserve what’s coming.

Which brings us to the net result of all this pretend-intelligence and short-sighted strategizing by Publishers.  

The Disadvantages of Outrageous eBook Pricing

Here’s what $14.99 prices do ($12.99 prices do this too – just to a lesser extent) -

  1. They punish your most loyal customers. People who love your work now have to pay a premium to read it early on.
  2. They alienate your customers – There’s nothing that breaks bonds as quickly as readers feeling you’re taking advantage of them.
  3. You lose out on word of mouth. Customers who don’t buy a $14.99 book are obvious losses. So are customers who begrudgingly pay $14.99 for a book – They will almost certainly recommend your book less and recommend it with less enthusiasm.
  4. Instead of talking about how good your book is some of your most devoted fans will start boycotts and complain and cause you to lose sales. It takes a particular brand of genius to get a ‘devoted follower’ to start a boycott thread. Someone like Susan was probably handing out 5 star reviews and gushing about Michael Connelly’s books to her friends - now she’s caused at least 1 person to decide not to buy any Michael Connelly books.
  5. They highlight the author’s ‘us vs them, let’s take advantage of them’ attitude. Susan mentions another Connelly book is $14.99 after a year – That’s really pushing it. Instead of co-operation you’re encouraging conflict.
  6. They give upcoming authors and smart competitors a relative advantage. The indie author with the $1 book and the author with the $9.99 book will get more customers.
  7. You get fat and lazy. Instead of optimizing and taking advantage of all the efficiencies ebooks provide Publishers are getting complacent. All $14.99 is going to do is guarantee they won’t be able to cope when the competition gets tougher.

Let’s take a quick look at an Economics 101 comment from Colin MacQueen.

It’s no longer Economics 101

Here’s a typical comment justifying the $14.99 price -

 Economics 101 – cost and price are unrelated.

Price is determined by what customers are prepared to pay. DVD’s are far cheaper to produce than VHS tapes were but customers happily paid more for the improved functionality. In the vast majority of Kindle titles you’re not being asked to pay more than the paper version, just more than you’d like to pay. If so, don’t buy.

The mistake is that all of these comments assume customers are stupid. Customers are no longer stupid. They know exactly what every product costs to make.

Customers don’t mind paying well for a good product and they certainly don’t mind if the company and the author/creator make a good profit. However, they certainly mind being treated like idiots. The old rules don’t apply because now everyone is smart. We’re dealing with people who read a lot. It’s not TV where people will smile at you and nod if you tell them converting a book into ebook format costs as much as printing physical books.

You can’t use the old model of hardcover first and paperback later

One of the big defences of premium pricing is that it’s copying the hardcover and paperback model.

That’s just extreme short-sightedness. We’re close to a level playing field where any publisher, no matter how small, and any author, published or unpublished, can reach customers. Hardcovers could be sold for so much more because Publishers had control over distribution and financing. That control let them get control over most of the best books and thus they could create this artificial hardcover concept and make money from it.

It was an artificial scarcity. Hardcovers were a very profitable figment of Publishers’ imagination.

Look at the signs of change around you – hundreds of thousands of independent authors, Amazon winning exclusives, Andrew Wylie temporarily upending Publishers, 15 free books a week, backlist books for $3 to $5, millions of public domain books for free, independent authors selling their books for $1.

We are in a very different world - the things that allowed Publishers to pull off the Hardcover trick just don’t exist.

Hardcovers cost 1 to 2 dollars more to produce but sell for 7 to 8 dollars more. At least that’s my understanding – Publishers and pro-Publisher entities will argue against it and claim hardcovers cost $10 more to make. We can’t really know because Publishers don’t reveal any hard facts – they just make vague claims. If their aim is true all they have to do is show us the real figures – What are they trying to hide?

The ‘Expensive Hardcovers/eBooks for the first 6 Months’ dream is quickly fading.

You can’t sustain it when you no longer have power and customers are far more intelligent than ever before. 

In Closing

All these authors are angering their most loyal customers and losing readers at the very time when they should be doing the most to keep readers happy. It’s amusing – Publishers and published authors are now an endangered species but instead of working well with readers they are trying to make even more money and are fleecing their customers even more.

It’ll be fun to see the destruction when readers finally realize how much power rests in their hands.

29 Responses

  1. I’m an editor and have worked in the production end of publishing all of my adult life. It costs publishers little to no extra money to produce an ebook–the electronic files have already been created in order to produce the hard-copy version of any book. In addition, ebooks don’t accrue any costs related to printing, binding, warehousing, and shipping.

    I cut back on my ebook purchases when prices jumped to $12.99. For titles that have been jacked up to $14.99, I plan on checking the books out of my local library and thus depriving those publishers of any of my money.

  2. I would also like to offer as another exhibit Ken Follett’s newest book, The Fall of Giants, where preordering the Kindle edition (at $19.99) is more expensive than preordering the hardcover (at $19.40). I love Follett and snapped up A World Without End when it was available on the Kindle, but I will not be buying the Kindle edition or the hardcover from Amazon. I don’t blame Amazon, since they didn’t set the price, but I will be buying it elsewhere. Most likely I’ll get it from the library.

  3. While I absolutely agree that $14.99 is more than I would pay for most any book, physical or e-book, I don’t understand the philosophical problem with it – just don’t buy the $14.99 books and convince as many other people not to buy as well. The market will either support $14.99 or not. It’s capitalism at it’s best.

    The issue is instant gratification vs delayed gratification. If an author/publisher can get people to pay a high price because they must have the book on day one, they should. If no one ordered the book at $14.99, I suspect the author/publisher would drop the price until people started buying it. People who can delay gratification don’t care if they price it high – they’ll never buy it and instead buy the 1000′s of other books that are priced more reasonably. It doesn’t bother me a bit that people that need instant gratification pay higher prices. In fact, I like it, because they subsidize my later lower price.

  4. If we ever get to the point where all books are going for $14.99, it’ll kill ebooks entirely. No way am I going to pay full price and have nothing to hold in my hand. We understand that the real value of a book is the content, but there’s no way that the paper, ink, cover and art are literally worth nothing!

    I think it’s insulting to charge the same price for ebooks as you would for paper books. I would be willing to allow for that when a book is first released, to allow publishers to take advantage of the initial feeding frenzy. After that, prices should fall, especially after some significant time has passed.

    If publishers want to insist on this kind of pricing, it’s back to the library and yard sales for me!

  5. I’ve refused to pay high prices for some of my favorite authors — Connelly, James Lee Burke, Turow, and others. I’ve bought their books for years, usually in hardcover because I love their work. But I don’t want to subsidize publishers who see as marks rather than loyal customers. So, if I have to wait to get the book from the library, so be it. If they ever start pricing the books reasonably, maybe I’ll fill in the holes on my shelves.

  6. For me, this is the heart of the matter: Publishers and published authors are now an endangered species but instead of working well with readers they are trying to make even more money and are fleecing their customers even more.

    It’s like they’re saying, “let’s grab what we can before the whole thing sinks!”

  7. $14.99 for a year-old book? That’s what I was afraid of with the whole agency model thing. Yeah, the whole notion of books starting high and then reducing in price over time (“even under $9.99!”, they unconvincingly promised) sounded great, but I always knew that in reality it would look more like this. Ugh.

    Unrelatedly: the Kindle WiFi is no longer on back order now. It’s listed as “In Stock”. 3G one is still at September 22.

  8. My Wish List is full of ebooks that are full-price and I will be waiting until the USED version is around a dollar to purchase them. That way, neither the publisher or the author makes a dime. I will also be picking up a bunch at the semi-annual sale our library system holds. Sunday is $5 per box or bag.

    It’s not just the perceived cost of an ebook vs physical book, it’s the loss of value. eBooks can’t be lent, sold, or given away, thereby reducing their value. Also, physical books can be forever, digital files may not be. Why should I pay the same for something with less value?

    There are plenty of indie authors out there that I can enjoy for a reasonable price.

  9. The issue with price is the ‘impulse buy.’ I’m willing to pay hardback prices for a few authors’ e-books. But honestly, the last one was a disappointment, so now I’m ‘gun shy’ to pay over $10.

    I now have enough books ‘waiting’ on my Kindle that I feel no need to buy most e-books priced excessively. I’ve found too many new *excellent* authors. Some the best (in obscure genres) that I’ve read in a decade.

    Common sense: I just cannot do p-books anymore. For the sake of my marriage, the clutter had to go. (My once vice was books everywhere…) Why waste space with bookcases full of books?

    The agency model has unleashed a horde of new excellent authors. In their greed, the gatekeepers knocked down the wall.

    Neil

    • i wouldn’t call this greed, simply stupid. If they’re were smart, they could charge $1 per book and make more sales and make lots of money at virtually zero cost

  10. I should have noted:
    One of my favorite authors has ignored the Kindle. This I do not get, as the publisher was an early supporter of e-books… Oh well. Yawn.

    I give credence to the theory that over-priced e-books are to slow the adoption of the format. (Keep print/bookstores alive for the publishers.)
    [Link Removed]

    To say the least, it is not working.
    Neil

  11. Went through this with David Limbaugh’s newest book. I sent an e-mail to Amazon to forward to the publisher that I would not buy the book at the current price of $14.99 A few weeks later it was reduced to $9.99.

    I am sure my e-mail had nothing to do with it. I believe they are practicing perfect price discrimination. The try to get ppl to buy at a higher price then lower it to those who didn’ when the price was higher.

  12. My one concern with the statement that authors now have control over pricing because they could go get 70% for their ebook is that you’re ignoring the ones who:

    1) make most of their money from paper, but can’t get a paper contract with their publisher without signing over e-rights

    2) wrote the book under a contract that was signed prior to the announcement of the 70% royalty option

    3) contracted with the publisher to publish the book prior to the announcement of the 70% royalty option

    In the last 2 cases, the author doesn’t have the rights to their own book until they regain them back from the publisher (years, usually). In the first case, they had a choice, but it was between “alienate 85% of your customers by not releasing only in e-book” or “alienate 15% of your customers by having the e-price too high”.

    Yeah, authors have more say now, and certainly the big authors can negotiate in case 1… But I wouldn’t say that they now can control prices.

  13. Tuxgirl,

    It takes a very successful author to make more in print then if they self publish at 70% (for a $2.99 e-book).

    I do agree with you, many authors are ‘stuck’ in out of date contracts. It is the publishers that control the pricing. But the authors are granting them that control.

    I see quite a few new authors that will ‘push aside’ established authors due to poor pricing of e-books.

    The only question is when will e-books be a significant portion of the market/ My guess is by 2012 they will dominate the profit (not revenue, but overall publisher and in particular author profit).

    Neil

  14. I just WILL NOT DO IT. Period. If it means that I read nothing but classics and the like, then so be it. The main reason I stopped buying books was the cost. As a person living on less than $800 a month in SS, I have a choice to make and I had been choosing not to buy physical books that I couldn’t get for a really good price.

    I haunted used book stores and (as much as I hate to admit it) WalMart, Sam’s & Target to get paperbacks at “affordable” prices. I have to say that since getting my K2 at the beginning of May I have pretty much abandoned tv and read all the time. Okay, I twitter a lot, too. Reading has always been a joy in my life. When I was young, we didn’t have a lot of money for toys but my mother NEVER once denied me a book. When the Scholastic order forms would come out, I always took home a large bag of books…more than anyone else in my class. I lived in the library. I loved the way the books smelled. They were my friends, never criticizing me for being the chubby smart outcast who stuck up for the underdog. They showed me worlds I never knew existed…places I longed to visit, escaping my small West TX home.

    Now I find myself in a quandry. After being reintroduced to those long ago friends I may have to forego them as they have become too “uppity” in price for me once again. I will make do with the classics and public domain if the publishers insist on pushing us (the E-Book Generation) and trying to see just how much we are willing to give. Well, Publishers, (pardon the language here) Screw you and you’re over the top pricing on new ebooks! I’ll be damned if I am going to pay more for my ebook than people are paying for the paperback or even hardback version! You can choke on them.

    Amazon has one feature that I absolutely LOVE and that the price comparison chart on each books page. I think it keeps things as honest as it can and it helps us find the book affordably. If the publishers keep insisting on upping the prices of ebooks, I will buy used books EXCLUSIVELY and neither they nor the authors will see a dime of my money.

  15. One more thing. The overpricing makes the AUTHORS look greedy to the public. The public, in general, doesn’t think about the publisher as being the bad guy, as being Simon LeGree out to squeeze a nickle until the buffalo squeals.

    In the end, the authors and their readers will be the ones to suffer. The authors, as they will see a sharp drop in royalties. And the readers, who will be doing without new material to quench their thirst for something new from their favourite author. Instead, the readers will learn to survive on “leftovers” and the authors will learn to live on less.

  16. I often pay more than $9.99 for Kindle books but it’s always for non-fiction, non-mass market titles. Even then I wonder: Oxford can sell its magisterial History of the United States series for $9,99 a volume, so why can’t others?

    For me, the combination of easy of storage and lighter weight (I have carpal tunnel syndrome) overcomes my objections to the higher price, especially since the kind of books I like to read are usually more expensive than the stuff on best-seller lists.

    But I will not pay more than $9.99 for a book that I’m certain I will read once and probably never refer to again. If “The Girl With the Dragon Tattoo” and the rest of the Millennium series could sell for $9,99 or less there’s no excuse for the rest of the Times’ best-seller list.

  17. I started purchasing e-books to minimize “clutter” around the house (as if books could ever be considered clutter) and because I have disabilities which are taking over parts of my life and hope the technology will respond to those disabilities, so I can continue reading for a longer period of time. But I used to buy books at garage sales and other inexpensive places; these e-prices are out of control! BTW, you can loan an e-book for two weeks but there seem to be no sites to facilitate this.

  18. Amen! As much as I love e-books, when my beloved authors release new works that are above the $9.99 price, it’s off to the library I go. *Maybe* I’ll buy it later, but probably not.

  19. Here is what I find interesting…when the ebook world first arrived many authors fought it because they were afraid that people would start “stealing” their books by downloading them illegally.
    If you ask me, authors that are charging $15/book are asking for that. I would imagine many more people would try to find and download a $15 book than one that is cheaper. It is not worth the trouble for $5 or $6 to search for illegal copies.
    I would be interested to see how much an author that charges more for a book loses to piracy compared to those that charge less. Something tells me that they are actually losing more money than they realize because they are charging more.
    Either way, I am with the buying boycott. I will not pay that much for a digital copy of anything. I understand a hardback book has costs in the paper, ink, jacket, shipping, etc. So, when we buy digital where are those costs going?

  20. And let’s not forget that books that aren’t agency model and go for $9.99 down to $2.99 earn a very generous commission from Amazon and end up making substantially *MORE* money with the ebooks reasonably priced.

    The agency model is getting ready to die an ugly death soon – probably in the 2nd quarter 2011 at latest.

  21. I have had my (new to me) Kindle now for two weeks.

    In that amount of time I have purchased enough content to nearly equal the cost of the Kindle. So in a way, Amazon’s stratagem has worked, in that the sale of a Kindle generated eBook sales. If every person that buys a Kindle follows my example (some less, some more), that’s a LOT of dollars for Amazon.

    That said, most of my collection is made up of classics. I will pay for QUALITY compilations for certain authors, when it’s more convenient for me, i.e. when I can get the complete works of Dickens (63 volumes) for under $5 with a search-able TOC…

    I have paid *nearly* hardback prices for several books, but they’re photography reference books that I believe will be valuable to have with me all the time.

    There are many books I’d *like* to buy, but won’t, because like most others that have posted, and in the spirit of the original article, I’m not buying the publishers’ arguments. eBooks simply shouldn’t cost as much as they’re charging.

    I’m not stupid and I won’t be sold a “silk purse” made out of a sow’s ear…

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