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.

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.

2% of best Kindle books of 2010 under $9 or 35%?

Amazon has its Best Books of 2010 list and it’s included two interesting lists for the Kindle –

  1. Top 100 Editors’ Picks of 2010. 
  2. Top 100 Customers’ Favorites of 2010.

These lists are remarkable in how different they are from the Top Kindle Bestsellers List. In particular, we’re talking about the percentage of $10+ Agency Model books that make their way on to these lists.

Analyzing the differences between Best Books of 2010 lists and Bestseller lists

First, let’s look at the Editors’ picks –

  1. Books above $10 – 56. 56% – Really?
  2. Books at $10 (including books between $9 and $10) – 42. A healthy 42%.
  3. Books below $10 – 2. How could there be just 2 books priced below $9 that are good enough to make it to the Top 100?

The editors would have us believe that out of the best 100 books this year 56 were priced above $10 and still are (or are now suddenly priced above $10). They would also have us believe that only 2 out of the 100 best books of the year are now below $9.

Might as well call this the ‘We love the Agency Model’ list.

Next, let’s look at the Customers’ Favorite Kindle books list –

  1. Books above $10 –  47. Customers picked $10+ books 47% of the time? Guess the Ken Follett 1 star reviews were counted as up votes.
  2. Books at $10 –  38.
  3. Books below $10 – 15. Interesting that only 15% of customers’ favorites were books below $9. Apparently, Stieg Larsson and all the indie authors are getting ignored totally.

It’s really hard to believe that customers somehow picked 47 books priced above $10 as their favorites.

These two lists would indicate a colossal success for the Agency Model – Editors are picking 56 books priced over $10 as their favorites for the year and readers are picking 47. Publishers might as well try $25 Kindle Books next.

It’s so strange because there have been so many complaints and so many $9.99 boycotts – surely, all the protests must mean something.  

Are people just complaining and then buying books over $10? Have we bowed down to Publishers?

Well, that’s really, really, really hard to believe – that customers make the effort to give a 1 star rating and write on the kindle forums about an overpriced book and then turn around and buy the same book and vote for it as their favorite.

The second list (Customers’ Favorites) obviously isn’t using reviews because Ken Follett’s $19.99 opus is in there. A book with hundreds of 1 star reviews makes it to the Top 100 – That would only be possible if the list is based on raw sales and disregards reviews. That in turn would mean that all we have to do is look at raw sales and then we can confirm that the Agency Model has won out.

What books did Customers actually pay money for?

Surely, that’s the most reliable measure of ‘customer favorites’ – that all of us customers bought the book with our hard earned money.

Well, thanks to the Bestsellers Archive which has replaced the super useful Movers and Shakers section we get a picture of Kindle users voting with their pockets –

  1. Books above $10 – 31. What? Only 31% of the bestsellers were above $10. That seems rather different from the Editors’ 56%.
  2. Books at $10 – 32.
  3. Books below $10 – 35. This couldn’t be right. Didn’t the great editors tell us that only 2 books below $9 were worth reading? How dare we stupid readers challenge the authority of the Editors? How could we waste our money and time on 35 books priced below $9 when Ken Follett has decided we should spend $19.99 on his opus?

Please Note: 2 were not books so the total is 98.

This is a remarkably different list from the other two – Is it not?

Making sense of the discrepancy

Here are the results and a brief interpretation in italics –

  1. Editors’ Top 100 Books of 2010 – 56 are books above $10 and 42 are books between $9 and $10. The Agency Model has succeeded wildly and lower priced books have had no discernible impact (only two were below $9). It’s the dream world of Publishers. 
  2. Customers’ Top 100 Books of 2010 – 47 books above $10 and 38 books between $9 and $10 and a mere 15 book below $9. The Agency Model is doing very well and book prices are stable and lower priced books have a rather insignificant market share (15%) and are probably only a distant threat. Kindle users have complained but they’ve still paid higher prices.  
  3. Customers’ Actual Purchases aka The Reality List – 31 books above $10, 32 books between $9 and $10, and 35 books below $9.

So which would you trust more – Editors trying to save their fast disappearing jobs or Kindle owners like us who’re voting with our cold hard cash?

There are a few key things the Reality List tells us –

  1. The Reality is that customers are voting with their wallets and the Agency Model is failing miserably.
  2. There are now more books under $9 being sold than books over $10.
  3. There were more books under $9 sold than either books priced at $9.99 or books above $10. Not only is the Agency Model losing we are also losing the $9.99 price point.
  4. Ken Follet wasn’t just rewarded with a 2.5 stars review rating – his book is the 98th best-selling Kindle book of 2010. 90+ authors sold more than him – that’s got to hurt. 3 independent authors sold more than him. Don’t care how much he’s making from his $19.99 novels – that has really got to hurt.
  5. 3 independent authors made it into the Top 100 bestselling books of 2010 list. It’s the beginning of a very dangerous trend if you’re a Publisher.

Here’s the real icing on the cake – It’s getting even worse for the Agency Model.

A Harsher Reality – The Current Top 100 List 

This is how the Top 100 list looks right now –

  1. Books above $10 – 27. It’s a mere 27% – The market share of Agency Model books in the Top 100 is around half of what editors would have us believe.
  2. Books between $9 and $10 – 30.
  3. Books below $9 – 40. Dear Editors, books below $9 aren’t 2% of the Top 100 – They’re 40%. It’s a ridiculously huge difference and strong proof that the Agency Model and $9.99 are both toast.

Please Note: 3 non-books were on the list so the total is 97.

There are some remarkable things in here –

  1. The number of books below $9 in the Top 100 has actually gone up to 40 out of 97. That’s the reward Publishers get for messing with Kindle owners – 40% of the bestselling books are below $9.
  2. There is a bias towards new Agency Model releases – new books obviously sell more plus all the preorders add up and boost sales rank. Despite that there are only 27 books priced above $10 in the Top 100.
  3. In the mind of editors – 56% of the best books of 2010 are above $10 and 42% are between $9 and $10. Our reality list of actual sales in 2010 says that it’s only 31% for each with the majority of Kindle book bestsellers (35%) being priced below $9.
  4. The current reality list (our current top 100) says 40% of Kindle book bestsellers are below $9 and only 27% are above $10.

As things get worse for them Publishers and Editors get more and more detached from reality.

Kindle Owners are in the drivers’ seat – whether they realize it or not

There are two factoids that illustrate that all the power is in the hands of Kindle owners now –

Firstly, despite Publishers’ attempts to impose the Agency Model on us we made books below $9 the largest share of the Top 100. 35% of the Top 100 were priced below $9 while only 31% were priced above $10.

Secondly, we’re making things worse for Publishers. As of right now, 40% of the Top 100 are books below $9.

The Agency Model is failing miserably and it’s also led to the death of the $9.99 price point. Publishers can get editors to conjure up whatever lopsided lists they like – Kindle owners are the ones with the money and the power and they’ve destroyed Publishers’ attempts to con them.