With the advent of the Kindle, Nook, the Kindle Fire, and the iPad we’ve seen an explosion in ebooks. In 2012, eBooks accounted for 25% of Publishers’ revenues. 25% of revenues suggests actual unit sales for ebooks might have been 30% to 40% of book sales.
What’s interesting to me is the sheer number of people who want cheap kindle books and free kindle books. Strangely, there doesn’t seem to be any way of finding the opposite type of customers – those who don’t care about price and/or are willing to pay for a good book.
If we assume there are 5 major groups of readers -
- Readers who don’t care about book price.
- Readers who are OK with prices above $9.99.
- Readers who want book prices below $9.99 for newer titles, and below $7 for older titles.
- Readers who want books below $5.
- Readers who want free kindle books and all books below $3.
Well, there is ample evidence of the existence of the latter two groups. Go to any website or forum and you’ll find people looking for free kindle books, looking for and sharing deals, and generally focusing on finding the lowest book prices.
There is also a large group of readers who are OK with what they would consider ‘reasonably priced books’. $9.99 or less for new titles, and prices lower than $7 for older titles. They’d like ebooks to always be the same price or cheaper than the corresponding paperbacks.
The first two groups aren’t easy to locate. In fact, it’s downright hard to find more than a scattering of readers belonging to the first two groups.
The natural question that arises is - Do these two groups actually exist?
Is there a price-insensitive market in Books?
Yes, there obviously is. We wouldn’t have hardcovers if there weren’t. People were paying $15 to $25 for hardcovers, and still are. The market obviously exists.
It’s a fair assumption that there are a non-trivial number of readers who are well-off. It’s also safe to assume that there are lots of readers for whom reading isn’t measured in terms of money. Another reasonable assumption is that there is a group of readers who simply can’t wait and must get a book instantly. Yet another safe assumption is that there is a group of readers who value their time a lot more than money and don’t mind paying a high price for a very good book that’s worth their time.
If we consider these readers and other ‘not sensitive to the price of the book’ readers, there should, in theory, be a large group of readers that are price-insensitive. Perhaps even 5 to 10 million such readers in America.
Well, these price-insensitive readers exist with physical books. Where are all these readers when it comes to eBooks?
What happened to the price-insensitive readers when we shifted from Books to eBooks?
We have two groups of readers that comprise the ‘Price Insensitive’ Readers.
- Those who simply don’t care about price.
- Those who don’t mind paying higher prices (prices above $9.99, prices higher than paperback prices, $9.99 for older titles).
With physical books they were snapping up Hardcovers and spending freely.
What happened with eBooks? Where are the high-end customers?
Well, there are a few possibilities -
- They still exist. We just never hear from them. The latter seems incredible – that a large contingent of $13.99 ebook buying users exist but never participate on the Internet. However, if we look at the Bestsellers lists, there are enough $13.99 books in the Top 100 to suggest that price-insensitive readers exist and they are buying books.
- They shifted their attitudes as Books shifted to ebooks. A hardcover is a very physical thing – you hold it, you treasure it, you put it up on your shelf. An ebook is in the ether. It’s hard to spend $13.99 on something that doesn’t even really exist. Perhaps the price-insensitive customers in books are the ones that now want $9.99 ebooks.
- Most of them didn’t shift from Paper Books. Keep in mind that eBooks still have just 25% of revenues and perhaps 30% of book sales. Which means 70% of book sales are hardcovers and paperbacks. Perhaps most of the price-insensitive customers are buying physical books.
- Amazon and B&N are gathering them up and keeping them safe from the price-sensitive parts of the reading market. This also seems incredible. However, it might be the case that Amazon and B&N have simply gathered up most of the price-insensitive readers who’ve shifted to ebooks. They are showing these readers a completely different world. A world where lower priced books don’t play much of a role.
- They have started buying Hardcovers as their ‘don’t care about price’ books, and are supplementing them with very cheap ebooks as ‘binge buys’. This is a stretch – to assume that price-insensitive customers are turning into ‘Price-Insensitive with Physical Books, Price-Sensitive with eBooks’. However, it isn’t impossible.
- They are waiting to see what happens. Perhaps price-insensitive customers are waiting to see if an Easy Solution for price-insensitive readers materializes. One that makes it easy to find high-quality, well-formatted ebooks that will be worth their time. Think of it from their perspective – they might not want to wade through a sea of cheap and free to find quality and worth-your-time.
At this point, it’s worth looking at why certain readers don’t mind spending money on a high quality book.
Time vs Money
We’re swamped by authors offering free books as marketing. We are swamped by bargain hunters who want free kindle books and cheap kindle books.
This creates an environment where it’s easy to forget what a book means to people, and what the book reading experience is for people.
- A book can be a source of pleasure, entertainment, knowledge, learning, advancement, fun, sharing or something else entirely.
- Different readers have different amounts of time available for reading.
- Different readers have different reading budgets.
- Different readers have different thresholds for what will impact the enjoyment of their reading experience.
- Time can’t be bought.
Different people value Money and Time differently. Mostly because they have different amounts of them and different ways of viewing them and spending them.
Let’s consider some example readers with different personal circumstances -
- Alex has no money because she spends her pocket-money on movie tickets. She likes YA novels and wants to find good ones for free or for a few dollars. She reads every day and thus needs 3-4 books a week.
- Jonathan is a busy doctor. He gets to read just 1 or 2 books a week. Money is no object. However, since the reading is one of his few entertainment/mind-refreshing activities, the book absolutely has to be a very good book.
- Tina is studying to be a nurse. She’s looking for books that will supplement her school studies. For her, the most important criteria is acquiring knowledge that’ll help her become a better nurse. She doesn’t have much money – But for nursing-related books she’s willing to pay anything provided the book helps her.
- Trevor loves to read but having two young kids means he only gets to read a book a month. For him, it’s absolutely imperative that the book is really good. Trevor also has zero patience for grammatical and spelling errors.
- Nancy loves romance novels. She has a few favorite authors and she buys all their books. She’s also on the lookout for new authors. Since she already has a good set of authors she reads, she only has time to try out one or two new authors a month. Also, since she already spends most of her reading budget on her favorite authors, she’s looking for free and cheap books from new authors to try out. If they make the cut, then she doesn’t mind paying full price for other novels from the same author.
If you consider these readers, we can easily see why some of them would gravitate towards free and cheap kindle books, while others would focus on the ‘safest’ and ‘best reviewed’ books.
We can also see the price factor. Some readers simply don’t have much money for books. Some readers won’t spend money on untested authors. On the other hand, there are readers for whom either money isn’t a concern, or the time spent is far more important.
Jonathan might feel that $13.99 spent on a book he enjoys is worth 100 times more than getting a cheap $1 book that is a waste of his time. Worse, now he has to wait until next week to get his reading high.
Nancy, on the other hand, might think of her 1 new author a month as ‘experiment time’. Since she is already getting guaranteed good reading from her regular authors, and since she’s spending most of her reading budget on them, she doesn’t mind taking a gamble on a cheap or free book occasionally.
Jonathan and Nancy, when searching for a new book to read, will go in diagrammatically opposite directions. That’s OK. That’s the whole point of having books and ebooks and Publishers and Indie Authors. To provide readers whatever they want.
The Question becomes – Where do we find the Jonathans and Trevors and Tinas of the Reading World?
Where can we find the ‘Time is worth more than Money’ Price-Insensitive Readers?
This is the $25 billion a year Question.
The Books Industry in the US is approximately $25 billion a year in revenues. Replace it with whatever figure you prefer – it’s just meant to illustrate the point.
If the shift from Books to Books+EBooks leads to a mostly price-sensitive market, then we’ll fall to $10 billion to $15 billion a year in revenues. This will have repercussions and might lead to a decline in quality of ebooks (MIGHT).
If, however, we can find and retain the price-insensitive customers. Retain = Keep them as price-insensitive customers. Then we can ensure the market stays at or above $20 billion a year.
Finding these price-insensitive customers, and giving them a path to being price-insensitive ebook customers, is absolutely critical.
Because all the price-sensitive customers are getting addicted to free and cheap. They are going from bargain hunters to extreme bargain hunters.
Regardless of what your personal preference for book prices might be, it’s safe to say that -
- Free Books becoming the norm has a very high chance of hurting authors and therefore the quality of books authors produce and the number of high quality books they write each year.
- Very Cheap and Free Books becoming the norm has a good chance of hurting the entire infrastructure. The Publishers and Platforms would gradually die out, bookstores would die out, and we’d be left in a world where no one is providing all the ingredients for a thriving books market.
If Authors can’t make a decent living from books, and chances are they won’t be able to if we end up in a world of $0 and $1 books, then the amount of time they can devote to writing books, perfecting their craft, and polishing their books decreases. As a result both the number of great books they produce and the quality of such books diminishes.
This is an Assumption. It might happen that hunger drives authors to more beautiful work.
For now, let’s assume that we need some basic reasonable book prices (perhaps $3 to $7) to keep authors going strong - writing great books and writing lots of them.
Price-Insensitive Customers drive the behavior of Price-Sensitive Customers (and vice versa)
Imagine you’re a price-sensitive customer. That book you really want is for $13.99. Yet, thanks to price-insensitive customers, it’s at #2 in the Charts. You give in and buy it for $13.99 – because you can’t wait another 7 months.
That leads to a sale from a price-sensitive customer at a very high price.
Now imagine you’re a price-insensitive customer. You notice that price-sensitive customers have driven a $1 book all the way to #5. The reviews seem good. You take a gamble and are rewarded. That author has 7 more titles. You read them one by one. You decide to take a few more gambles on new indie authors.
Now the price-sensitive customers have turned you from spending $13.99 per book to $1 per book.
Please Note: This trend of price-sensitive customers influencing price-sensitive customers – This is perhaps the reason Amazon tries so hard to keep $1 Indie Authors out of the charts.
Finding Price-Insensitive Customers and catering to them might determine the long-term viability of the Publishing Industry and Platforms
At one end of the spectrum is a world where there’s no money left in books in 20 years. At the other end of the spectrum is a world where Publishing and Books are generating a lot of money in 20 years – even more than they generate now.
For the latter to happen, three key things need to happen -
- Platforms and Publishers need to find Price-Insensitive customers and create a great situation for them. So they feel their time and money is well-spent, and keep spending.
- Platforms and Publishers need to use Price-Insensitive customers to influence Price-Sensitive ones. They need to do this while avoiding the reverse as much as possible.
- Platforms and Publishers need to find a way to ensure books are worth paying for. They do this by using various levers – Convenience, Curation, Quality, Time Efficiency, Author Scarcity.
Currently, Platforms and Publishers are messing up the first, they are doing decently on the second, and they are messing up the third.
It’s simple. If Price-Insensitive customers get really high quality ebooks, get them conveniently, and get them perfectly tailored to their tastes, then they will spend their money freely. They will feel it’s worth their money and time to spend on ebooks and they will remain price-insensitive readers.
If not, then Price-Insensitive customers will either cut down on their reading or they will turn into price-sensitive readers looking for $3 and $1 books.
Filed under: books | Tagged: future of books, future of publishing, high-end readers, rich readers | 13 Comments »