The Race to Zero – $6.94 and £2.18 are the new $9.99

As we end 2010, a year that started with the Agency Model, it’s worth taking a quick look at what prices the bestsellers in the Kindle Store are at.

The Agency Model was introduced because Publishers felt $9.99 wasn’t a good enough price for them. Were they able to raise book prices above $9.99?

Keep in mind that we supposedly had just 2.4 to 3 million Kindles in January 2010, and now we supposedly have as many as 9 to 11 million Kindles. So, the new price standard replacing $9.99, will be far more important than $9.99 ever was.

The Top 100 Paid Bestsellers List in the Kindle Store

The price distribution -

  1. Books at $1 – 17. That’s 17 out of the Top 100 at just $1. You get the feeling $1 is threatening to take over, and that Amazon’s Deal of the Day page is an attempt to replace $1 books with $3 books.
  2. Books at $3 –  12.
  3. Books at $5 – 13.
  4. Books at $10, or between $6 and $10 – 28.
  5. Books above $10, or at $12.99 - 20. Just 3 out of the Top 20, and just 1 out of the Top 10.
  6. Books at $19.99 – 1. Take a bow, Mr. Follett. You are the champion of the Agency Model.
  7. Apps – 9. Average Price of Apps – $2.43. You get the feeling Amazon will have to move these to a separate list.

That list shows that there are 18 Agency Model priced books in the Top 100, but 51 books and apps at or below $5.

If we assume the price of all items is at the upper limit of the buckets they are in ($5, $10, $12.99, and so forth), we get an average price of … ta da … $6.94.

Publishers didn’t think they could survive on $9.99, they waged a war using $14.99 and $12.99, and they ended up with $6.94 per book in the Top 100. Of course, the fun doesn’t stop at $6.94 being the new $9.99.

The Top 100 Free Bestsellers List

Right beside of the Paid Bestsellers list, is a list of the most downloaded free books.

There are 5 free Kindle Apps, 43 offers on new books, and 52 public domain books in that list. Given that there are over 20,000 public domain books in the Kindle Store, and over 200 offers on new books, it’s safe to say that a lot of people are reading those – instead of buying new books.

So it keeps getting worse for Publishers. All those public domain books they could print out, and make money from – Gone. Even Oprah couldn’t get public domain books to sell well – What hope do Publishers have?

Let’s amble across to the other main stores – We want to confirm that prices aren’t just low in the Kindle Store.

Does the Nook Store save the Agency Model?

Here’s what we get in the Nook Store -

  1. Books at or around $1 -  3.
  2. Books at or around $3 – 5.
  3. Books at $5 – 29.
  4. Books at $10 or between $6 and $10 – 42.
  5. Books above $10 – 21.

Again, assuming all books are priced at the upper limits of the buckets they’re in, we get an average price of … $8.54 per book. Once again, Publishers attempts’ to go higher than $9.99 have been soundly rebuffed. In fact, there are just 21 books above $10 in the bestsellers list.

Surprisingly, B&N is managing to keep the average book price at a healthier price point than Amazon is. Those 17 $1 books, 12 $3 books, and 9 $2.50 apps, that crowd the Kindle Store bestsellers list, are all missing from the Nook Store. Insteads we have a mere 8 books priced below $5.

Kindle Store in the UK – Perhaps readers in the UK love Agency Model

Actually, they don’t.

  1. Books at £1 - 17 of the Top 20, 61 out of the Top 100.
  2. Books at £3 - 3 of the Top 20, 21 out of the Top 100.
  3. Books at £5 -  16.
  4. Books at £7 - 2.

No wonder Kindle is doing well in the UK. Amazon is giving away all these books for £1 each. There are just 2 books at £7 or higher in the entire Top 100. There are 82 books at £3 or less – 61 of which are at £1.

The average price for a Top 100 book in the UK Kindle Store is a ridiculously low £2.18. How is anyone making money from these books?

Kobo Store – How’s Canada doing?

Kobo Store only has a top 50 list. It often has 10% off to 30% off sales, and has a 33% off coupon for all new members. So, we’ll subtract 15% from the list price of books, to factor in these discounts. We’ll do this at the very end.

Note: These are prices in Canada.

  1. Books at $1 – 3.
  2. Books at $3 – 1.
  3. Books at $5 – 7.
  4. Books at $10, or between $6 and $10 – 30.
  5. Books above $10 – 9.

A mere 9 books out of the Top 50 are priced higher than $10. The average book price comes out to be … $9.16. We cut off 15%, to account for all the coupons, and get $7.79.

Even outside the US, Publishers can’t manage to get $12.99 and $14.99 to work.

The Agency Model is in ruins

How do you interpret it when -

  1. Publishers say $9.99 aren’t sustainable prices.
  2. They push $12.99 and $14.99.
  3. They end up with an average price of $6.94 for the Top 100 books in the Kindle Store, and an average price of $8.54 for the Top 100 books in the Nook Store.
  4. They end up with an average price of £2.18 for the Top 100 books in the UK Kindle Store.
  5. They end up with an average price of $7.79 for the Top 50 books in the Kobo Canada Store.

Publishers to Readers – $9.99 isn’t good enough. It’s time to pony up $14.99.

Readers to Publishers - How do you like them apples?

Readers have destroyed the Agency Model, and the Race to Zero is on. In 1 year we’ve gone from $9.99 to $6.94, in the US, and £2.18, in the UK. As more and more people buy eReaders, and the market gets more and more competitive, we are going to see prices go down further. All the companies hoping to make money from books are the Queens of Wishful Thinking.

16 Responses

  1. The British stats are a bit misleading because of the exchange rate. 1 pound = $1.56 USD. So 7 pounds is the equivalent of $10.87, not quite as dire as portrayed. The average then becomes $3.38, still low though.

    One of the greatest strengths of the Amazon Bookstore, in my opinion, is the large number of low-cost back-list and indie books. It shows that Amazon supports authors and readers more than publishers.

    $2.99 is a sustainable price.There are several authors that have told their stories of making it in the indie market. One of them realized over $200,000 during the last year. Publishing independently at that price gives them more money than the publishers do in the old agency world, as it should be.

    Authors make more money for their books and readers reap the reward of low-cost reads, the perfect world.

  2. Washington: A LIfe is still at $19.99. He and Mr. Follet are the Kings of the Agency Agreement. I am waiting for the price of the Washington biography to drop remarkedly before I buy it.

  3. I received a Kindle for Christmas and I refuse to buy ANY book above $9.99 on the Kindle.

    • welcome to the Club.

    • I’ve had a kindle for quite some time – bought quite a number of them – only one for more than 9.99 – a Rhyming dictionary I bought for convenience because, at the time. there were no other rhyming books available for the kindle. If the kindle version is too high, I’m more than happy to purchase used treeware through Amazon.

  4. To support what Common Sense says above, I think one of the reasons why the Kindle sees a lot more books under the $5 limit is that they have a much larger and firmer foundation for self-publishing than Barnes & Noble does. Many self-published authors do not want to price their books at the $6-10 range, since then they’d be competing with the more well-known names from the established publishers. They get eyes and readers to their books by having the lower prices, and Amazon just makes it easier for them to do this.

  5. Say goodbey to the profession of ‘author’.

  6. I can only speak from the UK experience but I think there is a longer term strategic play here and the current lists reflect the holiday season in particular (although I wouldn’t rule out a longer term trend towards lower prices though).

    Lots of new Kindle owners will want to load up their devices with free or very cheap books (particularly if gifted the device empty of books).

    Amazon (in the UK) met this demand by discounting a load of ebooks to £1 in their 12 days of Xmas promotion.

    In the longer term I think this helps because it gets reader used to buying and reading Kindle books.

    Self published authors can still make a good living out of these prices (just ask J.A. Konrath).

  7. Observations from a writing student.
    My first degree economics module taught me something about diminishing returns, ie when it no longer possible to reduce costs and make a profit.So something does not add up here and raises a lot of questions to me:
    1.Are kindles really a loss leader to grab the market and knock everyone else out?
    2.There are some costs, no matter how little, so if the costs are not covered with the sale of the book, in whatever format, they will be collected elsewhere. The saying that there is no such thing as a free lunch is still true, everything has a value.
    3. Won’t this all settle down once the novelty of ebooks and kindles has worn off?
    4.Is Amazon a beneficent charity supporting authors and readers?

  8. [...] The Race to Zero – $6.94 and £2.18 are the new $9.99 [...]

  9. Then say goodbye to the book.

    • No. Not only “ebook prices tending to zero” doesn’t mean the article’s “companies hoping to make money from books” true (should be “make money directly from ebooks”), but also it doesn’t mean that the “book is dead”, only that the “ridiculously priced e-book is dead”.

  10. Get used to it, all. The Web is all about slashing transactional costs. And in the US book publishing market, the “traditional” markup from direct cost (ie, printing) has been 10 times: from a $3 print cost to an average “list retil price” of $30. These prices don’t include authoe royalties. The economic heart of the silicon revolution has simply been well nown as Moore’s: stacking twice as many silicon chips on an integrated circuit every two years (max) means slashing most manufacturing prices in half. Yet for years three industries have declined to allow their cusrtomers to benefit: banking (especially credit card charges), universities (can anyone rember fees going down?) and book publishing. Forecast: next Christmas will be the last we see when sports books for men and colored cookbooks for women will be domlinant gift sellers if presented in the “old way”. So sports writers: get used to working with touch-screen publishing, where a touch on sporting photo turned it into an action video. Ditto chefs (note New Zealand chef Annabel Langbein’s great New Zealand TV program and self-published cookbook and DVDs in 2010). And if you’re a textbbook writer go look again on YouTube at “Elements eBook for iPad”. This is why extbooks wil soon be obsolete. Gordon Dryden, author and publisher, New Zealand

  11. [...] are now calling the shots. They want e-books. And they want them cheap. (I just read a comment on a blog post about the failure of the agency model that said: “I refuse to buy ANY book above $9.99 on the [...]

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