Monday, July 4, 2011

TUESDAY TIPS AND TIDBITS - The Apples and Oranges of Ebook Pricing

Stepping Out of My Grave
There’s been a big debate among ‘newbie’ authors (those independents who have jumped feet-first into self-publishing), ‘renegade’ authors (those who used to be published by large publishing houses but now have ventured into the self-published route) and ‘traditional authors’ (those who are able and willing to continue publishing through traditional publishers). This debate storms over the issue of what is a reasonable amount to charge for an ebook.

Artificial Pricing. Some contend that ebooks should be priced similarly to print books because, after all, a book is a book, no matter how much it costs to produce.

This pricing standard assumes that books should be perceived by the reader to be worth a certain amount in comparison to other forms of entertainment, and in consideration of the several hours of reading pleasure offered by each book. Under that standard, ebooks should be priced to bear the market, and the market price should be set as high as the reader seems willing to pay.

The problem with this attitude is that all books from all sources must maintain an artificially set price. If the reader finds some titles cheaper, the more expensive books are liable to see fewer sales. The assumption is also that prices artificially inflated by the publisher ‘cheat’ the buyer because the author certainly doesn’t see a bit more of royalty from a $7.99 ebook sale than he does a $20.99 hardcover book sale, and so the bulk of profit goes to the publisher.

Threshold Pricing. Some think ebook pricing should not drop below a threshold amount – giving the reason that it undercuts all those ‘legitimate’ authors out there whose books are believed to be worth the higher prices. There’s been quite a bit of forum and blog chatter about this, with many authors complaining about price undercutting by ‘upstart’ or ‘novice’ authors who don’t realize they are skewing the market by offering their books at ridiculously low prices like 99-cents or even free.

Recently some books have attained top-100 seller status because they are priced ridiculously low. And supposedly Amazon is working on ways to ‘balance’ sales statistics so that unusual factors such as pricing will be weighted to modify the sales ranking of books in an attempt to give more realistic and fair statistics. This would essentially weed out the anomaly of free or 99-cent books being listed as bestsellers when clearly popularity of the book is the only ranking factor that matters to the proponents of the artificial pricing structure.

Amazon has taken into account threshold pricing by encouraging all authors and publishers to maintain a minimum price of at least $2.99 for their books. Books priced below $2.99 automatically fall into a royalty percentage that is half the royalty paid on books priced at $2.99 or above, up to $9.99. It is clear Amazon is trying to maintain a standardized pricing structure for all ebooks by rewarding those who keep their prices within what Amazon considers 'reasonable' price ranges.

Cost-based Pricing. The most trusted method to price any commodity, including books, is to figure out how much it costs to make it, add in a markup for the distributor and overhead costs of the producer, then set the price accordingly.

But with ebooks coming from different sources – publishers with high overhead costs like sales forces and editors and cover artists and production crews as opposed to do-it-yourself authors – ebook pricing can fluctuate wildly and confuse readers about the perceived overall value of books in general.

While it may seem reasonable to assume that an ebook costs literally nothing to make because it is all electrons, the fact remains that the same amount of prep time and effort that goes into a printed book also applies to an ebook. The actual book itself is the only real difference in cost – with the printed book having print costs attached along with shipping costs, while ebooks have simply delivery costs. But with the quality of books now varying all over the spectrum from professional to just plain amateurish, the playing field is further muddied, confusing readers even more.

Discount pricing. Amazon will often discount a title if it isn’t selling, but in doing so will reduce the profit margin of the source producer (the publisher) and even lose money on sales in hopes of spurring interest in the product. This loss is usually offset by the profits made from selling more popular titles. When the publisher or author discounts the price to encourage sales, Amazon does not have to swallow the discount.

File size pricing. Another argument is that ebooks should be priced according to the size of the file – or the actual ‘bang for your buck.’ In this pricing model, stories with a word count of say less than 50,000 words would be priced according to a stepped pricing plan in which words of 100,000 words would sell for more.

Pioneer ebook publishers (usually independent start-up publishers) have consistently used this pricing structure. 

Market pricing. The bottom line in book pricing is oftentimes set by the reader, especially for independent self-published authors. Given a choice between a popular ebook costing $7.99 and an ebook by an unknown author costing $0.99, the reader may likely buy the cheaper book, if all other factors are equal, such as reader interest in the story and so forth.

How should authors price their books? Independent authors often tinker with pricing to find a retail price for their book where the sales are brisk but the profit margin is reasonable. Sometimes authors will reduce pricing temporarily to spur sales, then raise the price back up. And oftentimes in the case of a series, the author will offer the lead-in book at a ridiculously low price just to get people to read it and get hooked on the series. This particular approach has worked well for several previously unknown authors.

The best approach is to study what other independent authors with books in your genre are doing with their pricing. But pricing isn’t the only factor in book sales. Sometimes a cover can encourage or hinder sales, depending on how the majority of readers perceive it. And sometimes the book summary itself can be a big turn-off that hurts sales rather than encourages them. The good news is, with ebooks you can always go back and upload a new version of the cover or change the summary so that you can find a combination that seems to work well.

Whatever you decide, don’t think you’re stuck with just one option. Ebooks by their very nature allow you to be flexible – so do some stretching and experiment to find a good selling platform for your book.

Patricia Morrison, Penumbra Publishing


Natasha Larry said...

I love that you posted this today because a few readers actually requested information on how to price e-books. I don't do numbers well so this was very helpful.

Penumbra Publishing said...

Thanks, glad it was helpful. There are more blogs that handle this subject in greater detail - hop on over to and see our 'Blog List' to find more helpful sources. J.A. Konrath is a big proponent of 'reasonable' pricing to give readers a break and still make some money selling books.