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.

Amazon selling iPad, Kindle for kids, more

Amazon selling iPad … that can’t be right

A few weeks after the Kindle 3 and Amazon came out with an ad slamming the iPad there’s news that Amazon has started selling the iPad directly from its website. Amazon seems out of stock now but lots of reliable sources like Fortune wrote about it so it must have had some stock.

All that can be found at the moment are iPads from 3rd party stores selling at a $50 to $100 premium. Perhaps Apple gave only a little bit of stock – It’s what they seem to have done with Best Buy. Anything that helps create scarcity.

Amazon selling iPads is remarkable – It’s Amazon having its cake and eating it too.

Let’s make fun of the iPad, let’s sell it and take a cut, … What’s next?

Free Kindle Book – Yet Again

Next, a free kindle book since it’s part of my blogger contract to mention one in every post (just kidding, seems more like the ‘free book’ albatross) -

  1. Remember Why You Play by David Thomas. Rated 5 stars on 3 reviews.

    If you enjoyed Friday Night Lights, this book is a must-read. Remember Why You Play documents the lives, struggles, and triumphs of the players and coaches of Faith Christian School in Grapevine, Texas.

    Sports columnist and author David Thomas followed the team for a full season, recording a story that will inspire readers to understand that relationships are more important than winning.

    One of the key events was a game that Faith Christian played against the Gainesville State Tornadoes, a school for convicted juvenile offenders. The story of this spectacular game is being made into a movie, titled One Heart, with an anticipated release in November 2010.

There’s so much in the write-up – Faith Christian taking on a school for convicted juvenile offenders, a Friday Night Lights reference, a movie to be released in a month. All we need is Aaron Sorkin to grant everyone the wit of Jeeves and Wooster and David Fincher to glam it up and mark it out as a social commentary on the post-Social Network generation.

Is Kindle 3 a good device for 9 to 11 year olds?

A very good question being asked at the official kindle forums. Let’s consider the Kindle WiFi’s suitability for children.

The pros -

  1.  It’s light and compact and even young kids’ hands won’t get tired from holding the Kindle WiFi
  2.  It’s cheap at $139 so even if they break it it’s not a big loss.
  3. Lots of free public domain books. All the classics for free and most of their assigned reading from school.
  4. Lots of free book offers.
  5. They’ll grow smarter. Instead of playing video games or farming in Farmville they’ll be reading books – hopefully good ones.
  6. With the Kindle App Store beginning to open up they have some basic games too.
  7. The built-in dictionary and the text to speech feature both add a lot of value.

These add on to all the other benefits – books in 60 seconds, carry all your books with you, a serviceable browser, no heavy back-pack. 

Something worth adding here is that the combination of a few factors makes the Kindle especially suited for kids who struggle with reading – ability to change the font size, option to change line spacing and words per line, text to speech, all the classics for free, a focus on reading. For kids who get distracted or who have reading problems the Kindle is a pretty good option.

Consider this comment from Joan -

My 12 year old daughter has my old Kindle 1, and because she has an eye sight problem, this is ideal for her.

She has it on the largest font size. She has been reading the Sisters Grimm books and loves them. She has never shown an interest in reading before this! This is such a good thing!

There are probably lots of kids who have ‘never shown an interest in reading’ because they had genuine reading struggles that weren’t being addressed.

The cons -

  1. They’ll probably be lost when their peers are talking about StarCraft and Farmville and Justin Beiber and Gossip Girl and other things young kids these days entertain themselves with.
  2. It is quite breakable and they might also lose it.
  3. No parental controls.
  4. The browser can also lead to bad sites.
  5. No password protection for purchases so you can’t exactly regulate buying unless you de-register the Kindle or remove your credit card information.
  6. The selection of children’s books is, to the best of my knowledge, a bit limited.
  7. Will the no-frills Kindle hold their attention as well as a mind-sapping flashy game console?
  8. Not many textbooks are available on the Kindle. English reading assignments – Yes. Textbooks – No.

Add on the other negatives – no library books so one source of free books is gone, eInk is still in its initial stages, new books are expensive.

What are parents saying about their kids’ experiences with the Kindle?

Mostly positive things and surprisingly positive things.

Lots of comments at this kindle forum thread on kindle for kids -

My nine year old daughter “inherited” my K2i and LOVES IT! She’s been extremely careful with it, and reads every night. ; ) HTH

I have a 10 year old boy who likes the K2. He likes it better than books. He likes to read and reads at about his grade level. We don’t find a lot of content at his level that is inexpensive, though. $9.99 a pop adds up. Some of the old classics are free or $0.99.

My 9 yr old daughter inherited my K1 and loves it. She has been an avid
reader since age 4. She is very responsible and we enjoy reading our Kindles together. My 7 yr old daughter is now asking for her own.

I got my then 12 yo daughter a kindle 1 2 christmas’s ago…and haven’t regretted for a second! She reads constantly, …

In some ways it’s a good way to teach kids to be responsible -

My K2 went to my son (almost 10) and daughter (7). My daughter uses it more than my son and she takes super good care of it.

I  have read other posts about children and Kindles and it seems that if the child is careful with it that it can work well.

It’s surprising to see so many replies (there are 56 comments). Hadn’t realized so many people are giving their kids Kindles and are seeing good results.

Follett’s Fall of Giants falls to a 2 star review rating

Regardless of whether you think it’s right or wrong you have to be impressed by this -

Check out the customer reviews for Follett’s latest “Fall of Giants.” Kindle pricing seems to have struck a collective nerve

2 star rating. 136 1 star reviews.

Plus you have to acknowledge that it is probably having an effect -

Were I to be browsing, looking for books, I would have passed this book by because it has a 2 star rating.

A few people are arguing that it’s still in the Kindle Store Top 10. Well, almost every big author release hits the Top 10 when it comes out and there are lots of die-hard fans that will buy it at $19.99. However, there are lots of people who will not buy it at $19.99 and lots of people who will not buy it because of the 2 star review rating.

Plus those reviews NEVER go away. 1 year from now people will just assume the book is terrible.

Do we really expect people to look at 1 star reviews and figure out the bad reviews are due to Kindle pricing?

Why all the 1 star reviews?

Because the ebook is priced at $19.99. Not $12.99 or $14.99 or even $17.99. It’s a gigantic $19.99.

The hardcover (all 1,000 pages of it) is at $19.39. 

Pricing the ebook at $19.99, higher than the giant hardcover version, is just pushing things too far. At some point it changes from making money to abusing your readers and rubbing salt into their wounds.

To make things worse the price is lower in other countries -

Yes, it’s only $9.99 plus $2 Whispernet charge for Australian customers too. I wonder why the US publisher priced it so high?

So Canada and Australia pay $9.99 but US readers are expected to pay $19.99.

What if Publishers are right about eBook prices?

In the last few days have run into a lot of books priced at $1 and $3 that are worth $10 in my eyes.

It’s quite puzzling as we seem to be diverging to two extremes in Publishing – The independent authors and self-publishing established authors who sell their books too cheap and Publishers who price their books too high.

Independent authors are giddy at the prospect of getting to readers and price their books at the lowest price possible i.e. $1. Established authors are happy to sell their back-list at $2.99 and earn $2 per book. Established authors are also willing to offer up one book for free to entice/hook readers.

At the other end we have Publishers trying to promote $12.99 and $14.99 for new releases and claiming $9.99 isn’t sustainable. It’s in fashion to mock Publishers and by doing things like wildly varying price and availability of a book across different countries they certainly earn themselves a lot of the mockery.

However, they do know far more about publishing books than anyone else – What if they are right about ebook prices?

What if $9.99 really isn’t sustainable?

As a reader it’s easy for me to empathize with the perspective that moving from physical books to ebooks creates a lot of savings and books should therefore be $9.99 instead of $14.99 and higher (the prices we see with hardcover books).

This perspective misses out on two things – the financing and risk taking aspect of Publishing, all the different experts (editors, copyeditors, illustrators, agents, etc.) that work together to polish a book.

In pretty much any discipline the difference between 75/100 and 95/100 is not 20 extra units of effort and time and money. It usually takes double to triple the amount of work to go from decent to exceptional. So there’s one aspect that we definitely can’t get rid of – the endless polishing of a book to make it excellent.

What if the risk aspect can never be removed?

The risk aspect of Publishing includes two huge costs related to failed books - the physical cost of shipping and the cost of returns, the effort put into polishing a book and making sure it has a high chance of success (you have to do this because you never know which book is going to be the big one).

With ebooks there’s no guarantee the second aspect will go away. We might be able to find ways (crowd intelligence, algorithms, evolutionary algorithms, analyzing successful authors) to identify successes accurately or it might be a completely intractable problem.

eBooks eliminate the cost of returns and let us manufacture exactly as many copies as there is demand for. However, they don’t help us figure out which books will have demand and they definitely don’t help us identify the most promising authors. You could argue the latter is more of an art than a science and that it involves a huge amount of luck.

We also wouldn’t have any way of funding promising authors – We’d reduce every author to the same level where the author has to do everything by herself/himself. An author would have to first find success and only then would she/he be able to focus 100% on writing.

Perhaps after ebooks hit 40% of the market $9.99 ebooks just won’t work

Now that we’ve established that it’s not a given that the ‘identifying the successes’ part and the ‘funding the authors’ part is magically solved by ebooks we have to ask ourselves -

Could $9.99 ebooks cover the financial risk and the cost of funding authors?

It’s not a given. You have to make assumptions – that ebooks will sell more numbers than physical books, that authors will be able to get by on less money, that books will be able to succeed and sell with less polish. All of those sound like wishful thinking.

Whatever we might think of ebooks there’s little doubt that per book sold they bring in less money than hardcovers. Which means that if Publishers are right about there being certain minimum sustainable book prices then $9.99 ebooks might not be enough once ebooks are at 40% or more market share.

If $9.99 is a sustainable price we still aren’t home safe – $9.99 is not guaranteed to survive.

What if $9.99 is sustainable but unstable?

Look at the Kindle Store – Indie authors at $1, smaller Publishers and mid-list authors publishing at $3, smaller Publishers and back list books between $3 and $7, lots of free offers, lots of free public domain books.

There are far more books below $9.99 than there are at $9.99.

The minute we set $9.99 as the price for new books we do two things – We guarantee that the average book sale price goes down, we guarantee that $9.99 will become the new $12.99 and be universally reviled.

If Pat Conroy is coming in at $7.99 and Andrew Wylie’s treasure chest of books are at $9.99 each then how dare an author assume her first book is worth $9.99. For that matter how could any except the top 0.1% of authors try for $9.99. The remaining 99.9% of authors should sell for $4.99 and $5.99 since they aren’t as good (or as famous or as well recognized).

$9.99 won’t last for long if it’s established – There’s always downward pressure

The minute you establish $9.99 as the entry point readers figure out reasons it should be less.

The minute you establish $9.99 some authors find excuses to pander to readers’ perceptions. Other authors feel they can gain a competitive advantage by pricing below $9.99 – Theirs will be the only new book at $4.99 and they’ll get money and a spot in the bestsellers charts and more reviews and more favorable reviews.

It’s a very painful truth that it’s in the individual interest of every author to undermine established book prices – even if by doing so he/she destroys whatever sustainable ebook price we’ve reached.

The Tragedy of the Commons

Authors will find excuses and rationalizations to lower prices. When that happens other authors will find ways to justify even lower prices.

Yet other authors will start claiming books should be free. They’ll do this to curry favor with the masses and yet they’ll do it in a way that makes it seem the noble and right thing to do. Because what author in his right mind would say -

You’re a bunch of greedy pigs and you want something that takes money and blood and sweat and tears to make for free. At the same time you don’t want to feel guilty about it. So let me conjure up a justification that lets you steal and still feel good about it.

So the smartest (and simultaneously dumbest) authors will start claiming information wants to be free and that readers are bestowing the pleasure of being read upon authors. These authors will out-compete everyone else. They might even, for a while, profit since readers will be so glad to be freed of the guilt they feel deep inside.

It won’t last though. If you train people your work is worthless they’ll reward you at first for your generosity and benevolence and then stop paying and wonder why the vastness of your ideals doesn’t fill your distended belly.

Surely, great Guru of Free, the happiness of being read is putting food on the table. Spiritual food that sustains your soul for the body is but a vessel and can do without nourishment.

Authors will outwit each other until we get the smartest authors who will outwit not only all the other authors but also themselves.

Training users to not value its product is how nearly every Internet company manages to kill its profitability - it convinces its users that they don’t have to pay in any way other than by using its product.

That’s exactly what authors are in the process of doing.

Is there anything that could stop the race to the bottom? 

We are in a pretty bad situation -

  1. We’re not sure $9.99 is a sustainable price for ebooks. Put aside your distaste for Publishers and your natural inclination (a very justified one) to think that they’re trying to steal from you - We really don’t know if $9.99 is a sustainable price.   
  2. It’s pretty evident that $9.99 isn’t going to last for long. If the best indie authors are pricing their ebooks at $1 and some of the best authors are placing their back list books at $2.99 then new books can’t keep coming out at $9.99.
  3. Not only is $9.99 not a floor for new book prices it’s quite likely there is no floor. Authors are always competing with other authors and now that price is fully flexible it will go to zero. We can pretend all we like that it’s a brotherhood and it still doesn’t change the fact that every author is competing for the same readers and will keep undercutting other authors.

We suddenly go from a pitched battle for fairness -

  • The Fight for $9.99 and fair prices and justice for all.

To the completely opposite concern -

  • Avoiding the race to the bottom and establishing some viable range of prices.

In typical Amazon fashion the Kindle Team is already trying out a solution.

Could Amazon’s ‘$2.99 to $9.99 prices for a 70% share’ gambit work?

Actually, it has zero chance of working.

We see it already with independent authors who refuse to budge from $1. Instead of creating ‘indie books at $2.99 and backlist books at $4.99 and new releases at $9.99′ all it’s done is set the stage for ‘Indie Books at $1, most other books at $2.99, some books struggling to maintain $9.99′.

Getting $2 per book is hugely appealing to mid-list authors and other established authors. It’s probably more than they get from paperbacks. However, these are authors who were successful. All the money spent to make them successful and all the money spent on failures is not accounted. The author seeing $2 per book doesn’t realize that this figure might be enough for him but is guaranteed to not be enough to finance taking risks on future authors.

Is there any way to stop the race to the bottom?

Unfortunately not.

It’s a free market and the brutal competition between authors in itself would have been enough to take prices to zero. We also get some other very interesting factors that accelerate the race to zero -

  1. Authors’ desire to have their books read is often far stronger than readers’ desire to read books. Which means lots and lots of authors will gladly share their books for free.
  2. eReader makers will eventually use free books as a ruse. If they can sell eReaders what do they care about the long term?
  3. A few companies adept at destroying profits are entering the market.
  4. Some of the players are in dire financial straits and are likely to encourage unsustainable scenarios.
  5. Readers are in control and readers are as capable of self-delusion as Publishers. Power definitely corrupts - you see it when readers who paid $15 for hardcovers are turning around and asking for $1 and $2 ebooks.

There is absolutely no solution that comes to mind for stopping the the race to the bottom. The question will keep changing -

Is $9.99 sustainable?

Is $5.99 sustainable? Can we stall prices at $5.99?

Is $2.99 sustainable? Can we stop here?

Is $0 sustainable? Can we sell t-shirts with authors’ faces on it? Can we have a bail-out? Can we use tax payer money to fund authors?

Users have shown with the Internet and with news and with piracy and in numerous ways that when they get total freedom and total power they abuse it just as much as Publishers and Movie Companies and Music Labels do. The real question everyone should be asking is -

Why would books be different?

When faced with a choice between paying $1 or looking to the future and paying a sustainable price like $9.99 what will readers choose? What will readers choose when ruthless companies and desperate companies are trying to gain an edge and selling readers on the idea that $1 really is a sustainable price?

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