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.

eBooks and the power of pricing flexibility

It’s hard not to notice how authors and publishers are finally beginning to understand the power of pricing flexibility that eBooks provide –

  1. Indie authors are using $1 ebooks to build a brand. Can’t imagine any way an indie author could afford to sell $1 physical books short of subsidizing the cost. 
  2. Publishers are learning that while readers won’t pay $14.99 for new titles, some/enough readers will pay $12.99. Thus turning the Agency Model war into a surrender by both sides. 
  3. Publishers are figuring out that books in the back list will sell a lot more if they go below $9.99.
  4. Authors and Publishers are figuring out the beauty of offering the first book in a series for free or at very low prices.
  5. Perhaps most importantly, everyone’s figuring out that they can price books to reflect the demand – and keep trying out little experiments to maximize profits.  

It’s a completely different world – It makes the pricing of books dynamic and flexible and makes repricing instant.

The Great Agency Model Compromise

Nothing reflects the power of pricing flexibility better than what’s happening with the Agency Model –

  1. Publishers said $14.99.
  2. Readers said they’d boycott $14.99 and they did.
  3. Publishers didn’t find sales – then a few Publishers tried $12.99 and it worked to an extent.
  4. All the Publishers began to do $12.99.
  5. $14.99 was anchored in users’ minds so $12.99 didn’t seem that bad. They rationalized what they’d pay for hardcovers as justification for paying $12.99 and they began to pay.

Suddenly we have $12.99 emerging as a new price point. We have –

  • 9 of the Top 25 in the Kindle Store at $12.99. None whatsoever at $14.99.
  • 17 of the Top 50 at $12.99 or so. None at $14.99.
  • 30 of the Top 100 at $12.99 or so. Only 1 out of the Top 100 at $14.99.

It’s amusing to think that inadvertently Publishers have managed to pull of a great psychological trick – anchored $14.99 in users’ minds and made $12.99 seem reasonable. How else could you justify a 30% price increase?

Yet, it’s not some great well-planned strategy. It’s simply the power of pricing flexibility.

The Other Side of the Coin

It’s worth looking at the other end – Cheap books in the Top 100.

There are 19 books under $5, and 15 books under $8 in the Top 100. That’s very impressive. Equally impressive is that around 5 or 6 independent authors are in the Top 100. We are just a few months into the Agency Model and already the weaknesses are being exploited.

It’s independent authors selling books for less than it would cost to print them (unless you’re a Publisher – then you could print them for -$1 each). It’s smaller Publishers pricing books at $1 or $3 and getting sales and being able to compete with big name Publishers on value for money. It’s Publishers themselves using pricing flexibility to generate sales from their back-list or to get free/cheap marketing.

An eBook World with 5 Pricing Buckets

We are going to end up in an ebook world that has 5 main pricing buckets –

  1. $12.99 for new releases. There will, however, be a lot of pressure on this as Authors realize they can sell more and get more by selling at $9.99.  
  2. $9.99. This will continue to remain the single biggest pricing bucket.  
  3. Around $5. Lots of backlist titles will hover around this price-point.
  4. Around $3. This will be the price at which Amazon starts giving you 70% of sales and lots of authors will flock to this.
  5. $1. This is dictated by the Kindle Store’s minimum $1 price. Outside the Kindle Store it’ll be $0. These are people just trying to make a name for themselves and get readers for their other works. Free/Cheap Marketing.

Yes, it’ll be a continuous spectrum – However, these are the 5 main clustering points.

My primary interest is in what happens to the $12.99 cluster. If we had been more patient it wouldn’t exist. Perhaps those of us who are sticking to $9.99 will still win out. Perhaps it’s just a temporary blip and will disappear as competitive pressure forces Publishers to match $9.99.

The most interesting thing is that 4 out of the 5 clusters are at $9.99 and below and the lower 3 clusters are making $9.99 seem golden. It might not be long before we see 70% of sales move to the lower 3 clusters – Perhaps in a year or two.

Publishers love the pricing flexibility as it lets them figure out the most money they can get out of readers – In time they will realize that it gives their competitors the ability to get the most readers to try them out. In a year or two we’ll figure out what’s the better strategy – acquiring lots of readers at a low price point or maximizing profits by going with $12.99.

Looking at some kindle book bargains, Agency Model's future

The new Top 100 Paid List has given a lot of indie authors and lower priced books a chance to shine. Here are a few kindle book bargains from the Top 100 list and from the Movers and Shakers list –

  1. Deadlock by Bartholomew Fox. Just $1 and published by Gramercy Park Press.

    This nail-biting political thriller envisions a tie in the Electoral College that forces the election for President into the House of Representatives where the final decision comes down to the vote of 29-year-old Congressman-elect Matt Hawkins of Wyoming.

    Two days after the election slalemate, afraid to wait any longer, the Russians invade China across the Xinjiang Desert in a last-minute effort to thwart the unstable Chinese premier’s move to deploy new long-range missiles against the Russian homeland. With the Democratic candidate supporting the Chinese and the Republican candidate supporting the Russians, foreign ambassadors in Washington work feverishly behind the scenes to sway the election.

    The incumbent Republican President Jeffrey Norwalk is ruthlessly exploiting secret files he’s been keeping on House members. And Matt Hawkins, newly arrived in Washington — he’s just fallen in love with socialite Patricia Vaughan — days before he realizes the importance of his vote.

  2. My King the President by Tom Lewis. Rated 5 stars on 5 reviews. At #24 in the Kindle Store.

    Investigative journalist, Jeb Willard, learns that his old college friend, a Secret Service agent, fatally shot the controversial President of the United States and then killed himself. Devastated, Jeb attends his friend’s funeral where he is approached by a priest who gives Jeb a note from his Secret Service agent friend hinting of treason within the highest levels of the government.

    … the new President, Helene Fordham, calls him to Washington for a personal meeting. Jeb cannot refuse the persuasive first female President or her close friend, his former editor, and reluctantly agrees to begin his own investigation. It isn’t long before Jeb, Cal, and Liz McCarty, the beautiful sister of the murderer, are running from the chief suspect, former Chief Justice Ezekial Koonce, as well as the FBI, police, a professional hit man, the Mafia, and even the U.S. Army!

  3. Coming of Wisdom by Dave Duncan is $3.21 and rated 4.5 stars on 9 reviews. Book 2 of The Seventh Sword Series. It’s at #180 in the Kindle Store.

    So Wallie became the Goddess’ champion — and promptly found himself on the losing side in a battle against magics far beyond any the priests of the Goddess could hope to summon, After eons of exile, sorcerers walked the World again, claiming lands and souls for their Fire God.

    Wallie quickly found that swords were no match for spells — and how could mere mortals prevail against the powers of magic

  4. Destiny of the Sword by Dave Duncan is $3.21 and rated 5 stars on 13 reviews. Book 3 of the The Seventh Sword Series. It’s at #230 in the Kindle Store.

    Wallie Smith had been dying on another world when the Goddess transferred his mind to the body of the barbarian swordsman Shonsu. Then She gave him the great, magical Sapphire Sword of Chioxin and sent him on a mission.

    All he had to do was to lead the arrogant band of swordsmen to destroy the sorcerers and their Fire God.

    Now Wallie discovered that he’d already tried it — and been hopelessly defeated.

  5. The Elect by James Gilbert is rated 4 stars on 9 reviews and costs just 99 cents. It’s at #402 in the Kindle Store.

    Reed Thompson is the country’s leading conservative talk radio host. His wife Sandy is a successful public relations executive. Together, they enjoy the rarified life of wealth and comfort in their urbane Chicago social circles.

    Yet that uncomplicated existence is turned upside down when the frontrunner for the Republican nomination for President is killed in a helicopter crash on the eve of the New Hampshire primary and Reed is cast into the unlikely role as the heir apparent for the Republican nomination for President.

    Rapidly drawn into a high stakes battle for the Republican nomination, the couple remain unaware that Reed is the intended victim in a complex web of blackmail, murder, and religious extremism that threatens to destroy any remaining wall of separation between church and state. Reed is faced with the impossible choice to divulge the secret that threatens to destroy him, or become the next victim in an out of control religious crusade that might just be too powerful to stop.

  6. The Shot to Die For by M. H. Sargent doesn’t have a sales rank but it’s rated 4.5 stars on 11 reviews and is just 99 cents. 

    The body of Marine Corporal Jason Briggs, missing for eight days, has been found in a Baghdad, Iraq field. Investigating the death is an elite 4-man CIA team first seen in M.H. Sargent’s thriller, Seven Days From Sunday. Even though the team, including an attractive female doctor, has seen their fair share of bodies before, this one is different – they discover a computer flash drive embedded in the body.

    Meanwhile, a photographer with The Iraq National Journal newspaper has been kidnapped. He unwittingly took a picture of someone in a compromising situation and the kidnappers want the digital memory card.

  7. Finding the Dream by Nora Roberts. It’s just $3.99 and rated 4.5 stars on 38 reviews.

    The third book in the Dream trilogy concludes the saga of three best friends raised together in a wealthy California home.

    Laura Templeton is the daughter of a well-to-do hotelier. At 18 she believes her dreams are simple and easily fulfilled: she wants a good marriage and a healthy family. When Peter proposes, she believes her life will be perfect. But her dreams are short-lived.

    Peter doesn’t prove to be the kind of husband or father material Laura has dreamed of, and when she finds that he is a lying, philandering thief she divorces him. Like her two best friends, Laura discovers that she must look beyond her obvious talents to discover who she is–before she will find success and happiness

Hopefully there’s something you like on the list.

The Battle between sub $5 books, $9.99 books, and Agency Model Books

There’s an uneasy struggle between kindle book bargains that are $5 or less and the Agency Model books that are $12.99 and $14.99. Both are trying to muscle into the territory occupied by the $9.99 bestsellers.

Here’s how things stand at the moment –

  1. Books under $5 –  5 in the Top 25, 10 in the Top 50, 18 in the Top 100.
  2. Books between $5 and $10 –  11 in the Top 25, 24 in the Top 50, 49 in the Top 100.
  3. Books at $12.99 –  8 in the Top 25, 14 in the Top 50, 28 in the Top 100.
  4. Books over $12.99 – 1 in the Top 25, 2 in the Top 50,  4 in the Top 100.

Note: The third category includes a couple of books at $10.99. Also, the presence of 1 newspaper means the total adds up to 99 and not 100.

It’s pretty clear that $14.99 has failed miserably – There are just 4 books at $14.99 in the Top 100. It’s also clear that $12.99 is working very well – There are 28 books at $12.99 or so (including 2 at $10.99, 1 at $11.99). Countering that effect is the presence of 18 books at or below $4.99.

Basically we’re seeing the Top 100 segment into – Less than $4.99, Around $9.99, and Around $12.99.

The good news is that there is no segment for $14.99 – that’s failed completely. The bad news is that the $12.99 segment looks like it’ll survive – readers aren’t willing to wait to read the books they want so a lot of new releases priced at $12.99 are making it to the Top 100.