Short Term Profit vs Long Term Reader Base – What should indie authors go for?

For authors in general, and indie authors in particular, the pricing issue is a very big deal.

  1. A book sold at $0.99 gets an author 35% i.e. just 35 cents.
  2. A book sold at $2.99 gets an author 70% i.e. $2.

So, if we forget everything else, it seems that each $2.99 ebook sale is worth nearly 6 $0.99 ebook sales.

However, we can’t forget everything else. There’s a lot more to it than $2 Versus 35 cents.

The Cycle of Ups and Downs

An author knows that there will be ups and downs. So it’s never really clear whether –

  1. The Author should cash in now. OR
  2. Build for the long-term.

Cashing in now is particularly enticing because it means that authors can –

  1. Focus on their core competency i.e. writing books.
  2. Get a nest egg or at least some amount of financial security.
  3. Get recognition and validation.
  4. Increase their distribution channels, reach physical book stores, and sell more.
  5. Get a shot at becoming the next very big author.

How does an Author ‘cash in now’?

Sign a book deal. Raise prices from $0.99 to $2.99. Introduce follow-on novels for $0.99 or perhaps even $2.99.

My argument would be that this is the best strategy if you are thinking short-term or medium-term. It is terrible strategy if you plan on long-term success – both in terms of finances and reach and recognition amongst readers.

How could an Author build for the long-term?

First, you have to evaluate customers and profits using more accurate metrics than simply ‘the first purchase’ a reader makes.

There are some very interesting things to consider –

  1. Lifetime Customer Revenue and Number of Books you have. A reader will, if your product is good enough, buy more than one book from you. So maximizing for the short-term makes no sense if you have more than one book. It makes even less sense when you consider that you can always writes more books (create more products).
  2. Direct Channel to Customers. Do you collect reader emails and/or have a blog where users can check for new releases and/or have other means to contact customers. If you are dependent on someone else to connect you with customers you are building your own grave. Emails are best – because for every 1 person who will check your blog, there are 100 who will check their email inbox.
  3. Customer Acquisition Costs. How much time, effort, and money does it take you to add a customer? What happens when you price your books lower – Does customer acquisition become easier?
  4. Cheap and Free Books as Marketing. Can you use a cheap and/or free book as marketing. Instead of spending a ton of money trying to get customers interested in buying a book – why not let them try it out cheaply (or even free).
  5. Lifetime Customer Revenue Part 2. How much profit does a user generate for you? If a typical user buys 3 of your books in the first year and a total of 6 over lifetime, then you need to consider that. It’s not just ‘value from first purchase’ – you have to consider what the reader will do over her/his lifetime.
  6. How do you find new readers?
  7. Importance of the Bestseller Charts. The bestseller charts are a self-fulfilling prophecy. You get on to the Top 100 and just that will generate huge sales for you. You drop out of all the charts and then it’s hard to get noticed.

Basically, there are a lot of good reasons you should avoid getting trapped in short-term thinking.

Survival of the Fittest Vs Survival of the Most Patient

The first few batches of indie authors who did well fell into the traps of thinking short term.

If someone says you have two options –

  1. Option A: You have a direct relationship with readers. You make it easy for readers to take a chance on your books. Then they buy more and more of your books. The profit you get and the number of readers you get keeps increasing. You control your destiny.
  2. Option B: You hand over control to someone else. You have no direct connection with your readers. It becomes tougher for readers to get your books. It becomes tougher for your most loyal readers to get your other books. The rate at which your readership grows slows down.

Then you probably would not choose Option B.

However, short-term thinking leads to lots of indie authors choosing Option B without realizing it.

Instead of thinking that they could connect with millions of readers and build up a stable readership and make tons of money consistently (i.e. every single year) from their reader base.

They fall into the trap of thinking – ‘How much money per book can I make from the reader’s first purchase of one of my books?’

Maximizing First Book Profit is Madness

Raising the price of your books does a few things –

  1. It reduces the number of people who will try out your book.
  2. It makes it harder for your loyal readership to get your books.
  3. You go down in the sales charts which creates a vicious negative cycle of less and less awareness amongst readers that you exist.
  4. It reduces the number of people who will join your readership and it reduces the rate at which your readership grows.
  5. It gives competing authors a competitive advantage.

Yes, it seems very compelling that instead of 35 cents per book sale you can make $2 per book sale.

However, the choice you are making is actually –

  1. Instead of 35 cents per book and 4 books per reader and millions of readers.
  2. You are picking $2 per book and 2 books per reader and tens of thousands of readers.

The difference really is a factor of 100 in some cases. Yes, you might become the next Stephen King and there is a 5% chance you can get away with $3 and $5 books. However, we are moving towards a book world where even the Stephen Kings will have to go with $3 and $4. How do you compete in such a world if you aren’t willing to go with $1?

Closing Thought – Resist the Temptation of Short-Term thinking

Every generation of top indie authors before this current one has ignored what an author-reader relationship really is. It’s an exchange of value.

If you try to increase the value you get and decrease or keep stable the value readers get, then they will find someone else.

If you increase the value readers get and keep stable the value you get back, then you will find more and more readers.

Whether it’s a price hike from $1 to $3 to make more per book sold, or it’s a Publisher mandated increase to $5 to ‘protect’ physical book sales, raising ebook prices reduces the number of people who will buy your books. Depending on how many books you have available, it might even reduce the amount of money you make per reader.

35 cents per book is not bad at all when you consider that –

  1. Eventually the market will be 80% ebooks and the top authors will sell tens of millions of ebooks per month.
  2. One company or another will start offering 70% or 80% cuts even on $1 books. Most devices are WiFi now and mostly imaginary things like delivery costs will disappear.

We are going to reach such a world. In that world, it will be the authors who have built huge and loyal readerships who will really cash in. If you have the opportunity to build up a readership of millions of users, then passing on that for the lure of making $2 per book sold is a strange, self-sabotaging decision.

Readers will be loyal to authors who are focused on providing them the most value for money. That means the best writing at the most competitive prices. When millions of your ebooks are being bought by readers every month and 80% of the revenue is being paid to you – then you will be very glad that you focused on building a strong reader base.

Difference between a $1 book and a $15 book

Here are some reasons why selling $15 books is better business –

  1. You can make a lot more money.
  2. You make readers feel its worth their time. If it’s $15, then it must be good and readers’ time is worth $X per hour anyways – might as well spend $15 on something that is ‘vetted’.
  3. You get readers invested – If they paid $15 they must read it, they must like it a little more than if they paid less, they must buy future books.
  4. You can provide higher quality. Spend 20% of the price on quality and you get $3 per copy sold.
  5. You set the book apart as a book for discerning readers.
  6. You can position the book as a luxury – indulge yourself; because you deserve it; you get what you pay for.
  7. Some Authors feel a high-priced book is like Viagra for their self-esteem.
  8. Scarcity. Readers feel not everyone can get it.
  9. Readers have to ‘sacrifice’ for the book and they are more open to appreciating it.

The main benefits revolve around earning more profits, having more money to put back into the business, and getting your customers much more invested in your book.

Here are some reasons why selling $1 books is better business –

  1. There is very little friction. It becomes an impulse buy for nearly everyone.
  2. You minimize regret – If the user doesn’t like your book, she has only lost $1.
  3. Your book isn’t a budget buster. No calculations required. No wondering whether the budget will be exceeded. 
  4. You can convert people who are ‘somewhat interested’.
  5. You get much better sales volume, which translates into higher sales rank and better visibility.
  6. You can convert people who don’t normally read that particular genre.
  7. You are providing more value for money so reviews are better and ratings are a bit higher.
  8. You make it easy for users and they appreciate it. On the flip side, the anticipation is gone.
  9. There are entire countries (India, China, most of Africa, some of South America) where $1 is like $4 and $10 is like $40. By going with $1 you double or triple the size of your potential market.
  10. If you have multiple $1 books, often people will impulse buy all or most of them.
  11. You increase the pleasure per dollar spent.
  12. You have a chance of making greater total profit due to much higher sales volume. You also risk the possibility that you will make very little profit despite higher sales.
  13. You increase the number of people who have access to your book. The actual number who read it may or may not increase.

The main benefits revolve around – massively increasing the size of your potential market, greatly reducing friction, providing a lot more value for money (minimizing regret, maximizing pleasure).

There are significant disadvantages – people are less likely to actually read your book, you lose ‘prestige’ and ‘exclusivity’, you lose some readers who think a low price must mean low quality, you run the risk of ending up with far less profit.

It’s not an easy decision. The one really interesting thing is that the $1 book and the $15 book set off each other – they make each other’s strengths more obvious and each other’s weaknesses more apparent.

There might even come a time when $15 books (via ‘quality’) or $1 books (via ‘value for money’) destroy the prospects of the other. For the moment, it’s a very interesting juxtaposition – Publishers pricing ebooks at $12.99 and $14.99, indie authors going with $1 and $2.99. At some point of time, things will break in one direction or perhaps two separate classes of books will be created. The risk for Publishers is that if indie books can improve quality (or if Kindle owners and Nook owners can do effective ‘curation’ via reviews) their offerings will get slaughtered.

Return on Investment when you Buy and Read a Book

Courtesy TeleRead we stumble across a rather interesting article by bookseller and author Adrian White –

On why my work is worth more than two pints of Guinness

Bookseller and author – that means two times the pain courtesy the reading revolution.

There are some really interesting parts in the post. Before we jump into why the entire post is detached from reality, and explore the issue of ‘Return On Investment’ on books readers buy and read, let’s take a look –

1. this is my work and if I don’t value it correctly then who will?

2. I’ve worked extensively as a bookseller over the years and no other industry manages to devalue the potential of their bestselling product quite like the book industry.

3.  the sweet price for a novel published as an ebook is currently $2.99; sweet as in a decent return for the author, a cheap offer for the customer and not demeaning to the work.

4. when it comes to my third novel, Dancing to the End of Love, there’s just no way I can bring myself to give it away for a song. I value it too highly; it’s worth more to me than that.

This is an amazing post (in a good sense) – Because it’s very honest.

It’s also amazing because it’s an exemplary example of getting stuck in your own perspective. For example, point 4. where the author is so fixated on what the book is worth to him that he’s forgetting that it is readers (and not him) who will be buying the book.

You vs I; Author vs Reader

Here are 4 interesting figures –

  1. Number of times me-centric words (such as I and my) are used – 46 times.
  2. Number of times other-centric or us-centric words (such as you and we) are used – 17 times.
  3. Number of times authors’ interests are referred to, or there is a mention of value authors and booksellers can get – 21 times.
  4. Number of times readers’ interests are referred to, or there is a mention of value readers can get – 3 times.

That’s interesting isn’t it. What industry/company focuses 3 to 7 times more on what it wants than it does on what its customers want?

The article’s author fixates on a few things –

  1. He doesn’t want to demean the value of his book.
  2. He wants to sell books and make profits.
  3. He wants to use a strategy that works for him.

At no point does he consider the reality that readers are investing in his book when they buy it.


Readers put time and money into a book. Money to buy the book. Time to read it.

There’s also an opportunity-cost. If the book is not good – readers have lost out on the opportunity to do something else (which might have given them more pleasure/happiness/satisfaction).

Any author who fixates completely on how to make money (i.e. how to get value from readers) is missing the most critical part – It should be a win-win situation. Everyone involved should get good value for their money/time/opportunity-cost.

Authors that fixate on providing value will do much better than authors that fixate on getting value.

Return on Investment

Here’s what a $10 book actually costs –

  1. $10 to buy the book.
  2. 4 hours of our lives as we read it.
  3. Picking the book over watching a movie or doing something else.

It’s a sign of how stuck authors and publishers are in their MeMeMe world that they never even consider 2. and 3.

In that entire article the author never even considers that a reader is spending both money and time. The author never considers that the reader is picking his book over other forms of entertainment and over other ways of spending the time.

Maximizing ROI = New Authors better be at $1 to $3

If there’s a completely new author, there are 4 factors – the book price, the time we will spend reading, the opportunity-cost of choosing the book over other activities, the opportunity-cost of choosing the book over other books.

Readers who take a chance on a new author are taking a big risk.

Most readers understand it’s an exchange. Which is why it’s especially painful when authors talk about ‘not demeaning the value of their work’. Readers’ time has value too. As does their money. Are readers supposed to gamble on an unknown book just because the author thinks the book is worth $10? 

Your work has no value if it doesn’t get read. That’s what authors should worry about more – a book can only transfer value when it is read, your work only has value if people read it.

Publishers provided a few critical things – editing and polishing, printing, distribution, filtering for quality. With ebooks, creation and distribution isn’t an issue. With the intelligence of the crowds, we now have pretty decent filtering.

Everything on the supply side is becoming easier and cheaper. The cost of producing books, filtering them, and distributing them is going down. Readers are also benefitting as prices for some books are coming down. What hasn’t changed is the non-money cost to the user – user time, the opportunity-cost.

The last thing a new and unproven author should expect is for readers to buy his book for $10. That’s just being delusional.

Readers are perhaps doing new authors a favor by even reading their books

Every time a reader tries out an indie book, it’s a risk. If 3 out of 10 $1 indie books are good – that’s 12 good hours of reading out of 40 hours, it’s 3 good books bought after spending $10, it’s exchanging the possibility of hitting 5 good books out of 10 for 3 out of 10.

Yet, lots of authors are blind to this.

Every reader reading a new author’s book is a patron of the author’s art. That’s basically what it is.

Why make it tougher for these people to help you out? Why force them into the super risky situation of gambling $10 (in addition to time and opportunity cost) on an unknown author?

Lots of readers are going out of their way to support indie authors. Indie authors didn’t get into the Top 100 in all the major ebook stores because of Publishers or because of a royal decree from the King of Burma. It’s readers.

If the author of that article focused on how much value he could provide with his books, and on how much more value he could provide than readers paid for, he might end up with a few million people thinking his book is worth more than two pints of Guinness. Unfortunately, he’d rather fixate on his MeMeMe World – thereby limiting the value his books will provide and limiting the number of readers who will get value from his books.