Is there an ‘ideal’ price for books? Do boycotts work? Would group buying work?

With the Kindle and the Nook continuing to do well, and going well past the ’40,000 total eReaders sold’ prediction experts had made in 2007, we are running into a completely different issue.

What price should books be? Is the Agency Model justified? Is it winning?

There are so many differing opinions on this that it seems like a possibility sword – everyone seems to believe and see a different possibility.

  1. A few people firmly believe the Agency Model has won out. That’s hard to agree with when the #1 book in the Kindle Store is an indie book at $1.
  2. A few people feel the Agency Model is a failure. That too is questionable since the #2 book in the Kindle Store is an Agency Model book at $13.
  3. Some people seem to feel that prices between $5 and $10 are reasonable. It sounds perfect and very reasonable – except there are lots of books below $5 and lots of books above $10.
  4. Other people feel that everyone should stop complaining about prices and not buy books they think are too expensive. It’s an interesting perspective – However, protesting is a way of bringing down prices and also a way of banding together. It is unrealistic to assume people will ever stop protesting about prices they don’t like.
  5. A few people feel ebooks should be $1 or $2. That seems unsustainable but indie authors are pulling it off.

You could take absolutely any possible outcome of the eBook Pricing Wars and piece together enough evidence to make that particular outcome seem the one and only true outcome. Take the Top 100 Bestsellers list for example -

  • 4 $1 books in the Top 10. That’s proof ebook prices are going to zero.
  • 3 books above $10 in the Top 10. That’s proof the Agency Model has worked.
  • 25 indie books in the Top 100. That must mean indie authors are taking over.
  • 10 Publisher published books over $10, and another 13 between $3 and $10, in the Top 40. Publishers must be growing stronger than ever.

Which is it? What’s going on with ebook prices? Who’s winning?

At the moment no one knows.

The Ideal Price for eBooks might not exist

People assume there is a rational price for ebooks – one which makes sense to all involved parties. That once we arrive at this price, ebook prices will stabilize.

There is no such ‘magic price’.

Prices for ebooks can never stabilize because we have some very emotional factors and some very unexpected things coming into play -

  1. Readers’ inability to wait for prices to drop. Why are $15 books still selling? Because some readers just can’t wait a few months.
  2. Readers’ refusal to pay more than what paper books cost. Lots of readers absolutely refuse to pay more for an ebook than what the paperback costs. This makes it very difficult to settle on any price that lies between the paperback price and the hardcover price.
  3. Publishers’ need to prop up their physical book business. Publishers’ attachment to their existing book business, and the fact that it’s 9 times bigger than ebooks, means that for the next few years ebooks will continue to pay for the sins of physical book publishing.
  4. Publishers are trying to maximize profits. That means they are constantly trying to tweak prices. If we arrive at a stable price, Publishers will soon try to get 10% more. Of course, it cuts both ways – as soon as a stable price is arrived at, readers will ask for 10% less.
  5. Readers have rationalized away any possible floor for ebook prices. We have begun to feel that there’s no reason ebooks couldn’t keep going lower and lower.
  6. Authors are competing ruthlessly against each other. You arrive at a balanced, sustainable price on Monday, and on Tuesday some author is going to try to get an advantage by going 10% cheaper.
  7. For new Authors it’s all upside. They have nothing to lose. Whether they sell a book for $10 or for $1, it doesn’t make much of a difference since their sales are so low.

There is no ideal price for ebooks. You could argue that the ideal price for Publishers is $100 per book, for readers is $0 per book, and for indie authors its any price that gets readers to read their books. However, all of these are competing against and coexisting with each other.

Boycotts do work – but not quite in the way people expect them to

The $9.99 boycott did some interesting things – it led to the rise of indie authors, it made Random House very successful in ebooks, it helped spread eReaders, it showed the power of readers.

There are some things it didn’t do -

  1. It didn’t get Publishers to lower prices to $10. This is because a segment of readers aren’t willing to wait months or even weeks for the books they want. Nothing wrong with that. It just means that Agency Model Publishers were weakened but not killed when it came to ebook sales.
  2. The actual impact of the $9.99 boycott is partially hidden. This is because ‘new releases’ always sell more in the first few weeks. So new releases at $13 still make it to the Top 10 and the Top 100. We don’t get to see all the $13 books that miss out because of the higher price – We do get to see the $13 books that make it to the Top 100 despite the higher price.
  3. It didn’t get Publishers to kill the Agency Model. This is because 90% of their sales are still physical books. Their aim with the Agency Model is mostly to slow down and kill eBooks and eReaders. If they don’t manage to do that, and so far they haven’t, they will pretend that all along their aim was to preserve prices.

We can look at the 20% of books in the Top 100 that are at $1, and the 40% that are below $5, and call the $9.99 boycott a victory. We can look at the 25% of books in the Top 100 that are over $10 and call the $9.99 boycott a failure. It’s whatever you want it to be.

One thing we do know, is that prices are lower than they were two years ago. 

Group Buying is certainly worth trying

What if we set up a site where 10 million Kindle and Nook owners got together and said -

  1. Mr. King, set your next book at $5, and 1 million of us will sign up for a preorder.
  2. Harper Collins, release Book X from your backlist and 200,000 of us will sign up for a $3 preorder.
  3. Bundle the Harry Potter Series at $40, and 2 million of us will pledge the money up-front.

No publisher or author in their right mind would refuse. At some level, this ‘power of the group’ is what’s really needed – readers have to get every single reader of ebooks on the same team. It’s pointless to discuss Kindle vs Nook when owners of both devices are looking for the same thing – a much better range of ebooks at much better prices.

The only way for eReader owners to make their 10% share of the market more impactful is to get better organized. This applies to the boycotts too – more important than whether $3 over $10 is stealing or not, is whether eReader owners can band together or not. There are a variety of benefits that will accrue if eReader owners work together – more range, better editing, better graphics and covers, lower prices, earlier availability.

If, on the other hand, eReader owners start arguing with each other, over things like which devices they use or what they think the ideal price for ebooks should be, then it’ll slow down the rise of eReaders and readers.

15 Responses

  1. I’d like to agree with you, because I love people power! However, I’m not sure low cost items like books could inspire sufficiently strong and sustained emotions in consumers that such a movement would be possible.

    However, Seth Godin did a similar thing as a marketing ploy for his new pubbing venture in conjunction with Amazon. If you go to the Domino project, you can read about how he worked it.

    Incidentally, with his book priced between $3 and $5, it was apparently showing up on the Amazon top 100 at about the fortieth spot over the weekend. This is interesting, because I’ll just bet the sales that got it to that spot were all at $1. That’s what his pre-orders sold at.

    • Yeah, he’s just doing a marketing gimmick. It’s very different from users banding together. The fact that he immediately increased the price from $1 once he got into the Top 100 shows what he was really after.

  2. “The $9.99 boycott did some interesting things – it led to the rise of indie authors, it made Random House very successful in ebooks, it helped spread eReaders”

    It proved the ‘long tail theory of retail’ too. :)
    Some will pay more… some will search for good ‘cheap reads.’ We… have a market!

    It will only become more interesting as:
    1. Ebooks gain further market share
    2. More successful indie authors emerge.
    3. Established authors put up their backlists.

    I’m really waiting on #3… an author has promised a *large* volume of prior works will be put online in ebook form. About 3 months worth of reading for yours truly.

    There is no one ideal price for ebooks. The market will grow showing there are quite a variety of strategies that work. :)

    Neil

  3. I think that the question misses the point and could be phrased better: Is there an ‘ideal’ price for a license to read a book?

    Its important to remember that even though you are talking about buying a book, with ebooks its different, you are buying a (non transferable, technology dependent) license to read a book.

    Most people have a gut feeling that there is a difference between buying a book and licensing a book to read even though its difficult to articulate clearly. We all instinctively know that there should be a huge price difference.

    If you re-read the article and mentally replace ‘book price’ with ‘license cost’ then it changes the discussion in a subtle but important way. I think that’s why the publishers would never refer to it this way and the only way for readers to get lower licensing costs is argue about the right thing.

    “Readers’ refusal to pay more than what paper books cost. Lots of readers absolutely refuse to pay more for a license to read an ebook than what the paperback cost”

    • Marco’s point is critical. Two factors could be working on publishers here: (1) If we (publisher) acknowledge and highlight the license issue, we’re creating a whole new debate, and we’re not sure we want to go there. (2) A book is a book, isn’t it? We feel more comfortable with the economic and business model that’s been in place over the last 50 years, so we’re going to conservatively (fundamental aspect of businessmen in large, broadly based, well established industries) work on the assumption that the customer is going to change only incrementally and slowly.

      • Yes, it is. However, no one talks about licensing. It’s a can of worms and will pretty much kill ebooks if everyone starts focusing on it.

  4. I remember sometime last summer there was a publishing exec who, in defense of the higher eBook prices, said something like “If the people can afford to buy an eReader, they can afford our books.” That was said before B&N dropped the nook wifi price to $149 and Amazon responded with the $139 Wifi and $189 3G.

    Rumors fly around talking about “Free Kindles to Prime members,” and “Free Kindles by November.” While those are just rumored, I feel that we will be seeing the big eReaders dropping to the $99 maybe this summer. At this point, the entry level into eReaders is at the same level as cellphones – namely relatively cheap! While it may have been the more affluent buyers who were early adopters in eReaders, and they matched the publisher’s expectations of being able to buy “higher priced books”, the eReader base is much broader than it was, even just a year ago at the dawn of the Agency model. We’re seeing that broader impact by the rise of the less expensive self-published books.

    Just as a curious inquiry, the $13 book at #2, is that a new release? As you mentioned in your article, new releases always get that jump, even when you had to spend $18-26 for the hardcover. Personally, if I really want a book on release, I will spend a little extra for it ($15 for Rothfuss’ new book was a no-brainer to me). 6 months from now, I wouldn’t spend $15 for it though, since the immediacy is gone.

  5. Why do you think it will kill ebooks if everyone starts focusing on the can of worms that is licensing?

    Perhaps some relentless PR to refocus the model of deriving entertainment or cultural value from the experience of reading a text (or text-and-pictures) creation, away from the physical aspect of “[dead-tree] book ownership” might be just the thing?

    • Because it’s a real downside if you remind people of it.

      It’s something people don’t really notice much when reading an ebook. But if you remind them of the lack of ownership it buries into them and bothers them.

      There’s no point reminding people of a downside they are not even noticing. It’s an idea-war. You don’t address the idea at all or you give it strength.

      • What about a new way to address the idea? Mark my words: someone will think of a way to make it sound like the best thing since…well… ;-)

        You recent post highlights the fact that ebooks produced by major publishers look to have huge downsides, at least to the unintiated, now that everyone’s jumped on the agency bandwagon. What if one of the major booksellers sets some great creative minds on that task of making those uninitiated “get” ebooks/ereaders prior to purchase? Or do you think Amazon’s not likely to do that, because they’re quite happy reaping their agency share of dead-tree book sales, plus whatever they make off Kindles and their 30% minimum share of indie ebooks?

      • Amazon will want to first expand the market share of ebooks. They’ll think about profits later.

        I’d ignore it rather than try to ‘reposition’ it.

      • The thing is that people are reminded of this ‘can of worms’ every time they try to read an ebook on a different device, or they hear about library book lending limited to 26 times, or they hit some DRM glitch. Its in your face all the time but we’re all supposed to pretend its not there.

        At the moment the ebook model has a lie at its core driven by greed. publishers are trying to rent us a book for the same price as selling it to us. People might be stupid but they are instinctively aware that something is not quite right and you can hear them trying to explain it when they try to justify piracy or why ebooks should be cheaper.

        Nobody is bothered about renting movies, so why would renting books be different? “Buy this paperback for $10 or rent it for an unlimited time for $2.”

      • Don’t know what to say. At $10 I think it’s pretty reasonable. Do you also want to be able to resell it and loan it infinitely?

  6. Okay, I’m getting a better idea of the issues. I’ve never been a dead-tree book collector, always either borrowed books from the library, or bought them marked-down then “liberated” them after reading. I look on books as more stuff to dust–perhaps because the significant other has a huge collection of professional reference material which takes up just about all the bookshelf space I’m willing to allow in my home!

    I do agree that DRM is an anathema, and also that the Big 6 pricing of ebooks is going to kill the market — but I think it will kill the market for books published by those publishers that keep on “not getting it.”

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