Historical romance novelist Courtney Milan has written an essay on her blog demolishing one of the economic arguments that tends to come up in discussions over e-book price. This argument suggests that the price of e-books should drop to nothing because “in a perfectly competitive marketplace, the price will tend towards the marginal cost of distribution, which for digital goods is zero.”
The problem with this argument, Milan points out, is that it only applies in situations where competing goods are perfect substitutes for each other. In e-books, that is not the case. Because each book is different and there are no exact substitutes for an exact book, sellers of those books can still charge premium prices even though a considerable number of books—such as the public domain titles on Project Gutenberg—are free.
For instance, I have a vast amount of empirical data demonstrating that at least some people would rather pay $7.99 to read my book than spend $0.00 to read Moby Dick for free. This is because Moby Dick is a really, really bad economic substitute for a historical romance. I like to think that even in historical romance, there is no perfect substitute for a book by Courtney. Heck, my books aren’t perfect substitutes for each other. Most people don’t read Unveiled a second time and say, “Well, now I feel just as good as if I’d read Unclaimed, so why bother?”
She notes that books are imperfect substitutes for each other, and that does result in some price competition, but the better the author the harder it is to find a substitute, and readers have a lot more time to read in than they do really good books to read in it. So there’s still room for writers to charge what the market will bear.
I do think there are some ramifications to the e-revolution. I do think that there’s unmet demand for more reasonably-priced works. And I do think that price-competition will force the price of many books down. But I don’t think that having 500,000 books on Amazon priced at $0.99 will so transform the book industry that everyone will have to drop their prices to $0.99 and will still only sell 100 copies. The book industry has managed to survive against a backdrop where every single excellent book from a century ago is available for free.
There has been a lot of discussion of e-book pricing lately, between the publishers’ agency grab and self-publishers’ 99-cent deals. We’re still in early days yet as far as pricing goes; it will probably take a little longer to settle down and be what it will finally be.
I find articles like this impossible to take seriously when they are based on argument against bogus and invented targets.
“This argument suggests that the price of e-books should drop to nothing”
I have never read such an argument being made on this or any other site or media, what utter nonsense. That it hasn’t appears in some shady corner of the web is not impossible, but it certainly hasn’t ‘tended to come up’.
I would not be willing to pay $7.99 for any books by this author since I have never heard of her and don’t read historical romance 🙂
I think her argument may be true for a ‘name author, but of course everyone has their own definition of who that is. For me, it is Stephen King and JD Robb. Everyone else, from this woman down to the lowliest newbie at Smashwords, is down in the maybe pile. And if I have a $7.99 maybe, or a $0.99 maybe, I am more likely to choose the cheaper one since, aside from the two ‘name’ authors I care about, it really is all the same to me.
Since the agency model was initiated last year, I have had no trouble replacing my former favorite authors with new favorite indie authors. The old favorites stay on my price drop list at ereaderiq.com. If the price ever becomes reasonable, I may consider purchasing the book, if not, I may get around to buying a used copy. If not, I have plenty of other books to read – over 1300 on my Kindle.
As most of us have learned in the business world, no one is irreplaceable.
““This argument suggests that the price of e-books should drop to nothing”
I have never read such an argument being made on this or any other site or media, what utter nonsense. ”
I don’t know what site *you’ve* been reading, because plenty of people here are saying that the price of e-books should be lower because they’re “e” and not “p”.
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“And if I have a $7.99 maybe, or a $0.99 maybe, I am more likely to choose the cheaper one since, aside from the two ‘name’ authors I care about, it really is all the same to me.”
Which is, as I said before, like saying that you wouldn’t pay more than a dollar for a steak dinner because McDonald’s hamburgers are a dollar.
Now, you could say that the author ought to offer low-price “intro” books, and then the rest of the list ought to be regular price. Because once you’ve established that the steak dinner is indeed better than a McDonald’s hamburger, then you ought to be willing to pay more for it.
But then you’ll run into people crying because “oh, those are backlist titles, they should cost less…”
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PS funny to see people using such contemptuous language about an author. I guess we see that, in the end, it really is “fuck the creator it’s all about MY MONEY”.
No, it’s NOT the same, because I know what a steak dinner is and would sometimes be willing to pay that (as I said, there are some ‘name’ authors I do buy). What’s it’s saying is ‘here is something you may or may not like that costs $7.99 and here is something else you may or may not like that costs $0.99. Which would you rather take a chance on?’ And the answer in such a case is always going to be the cheaper one.
DensityDuck I really don’t buy into some of your comments at all. Also I can’t figure out of some of your post is quoted or is part or all your own comments ..
Having been hereabouts for over a year now I can say I have rarely seen any derogatory comments made about anyone. Discussions are 99.9% about the opinion and the argument. The same applies to this thread, even though the article is one of the worst I have encountered.
As far as your comment ““fuck the creator it’s all about MY MONEY” goes … What exactly does that mean ? What are you trying to say ? That we should offer people more than they ask for their goods ? That readers should investigate the standard of living of a writer and send more money if they are homeless ? Are writers really the only ‘creators’ ? Do I send an extra few quid to Apple because their iPhone is worth much more than the price ? To the makers of “King’s Speech” because 10 dollars doesn’t really reflect the pleasure I got from it ?
Is choosing to buy a cheaper product rather than amore expensive on, when one has no real preference, some kind of insult to a writer ?
This is one of those off the cuff cliches that mean nothing when analysed but may feel good when written.
Interesting article. will tweet to our followers.
All the best
Adam
iWriteReadRate.com
“in a perfectly competitive marketplace, the price will tend towards the marginal cost of distribution, which for digital goods is zero.”
Well, aside from the fact that most of us have never actually heard this argument- and that is should be the marginal cost of distribution and production, wouldn’t the biggest argument against it be the fact that the marginal cost of distribution for digital goods is NOT zero?
Putting aside the fact that cloud storage, bandwidth, and sometimes 3G all cost the deliverer money- the cost of advertising and promoting an individual e-book factors into the marginal cost. Each set of eyeballs had to be attracted somehow.
How much do these things cost? I don’t know, but I bet- like everything else on the internet- it’s much more than most people think.
“I know what a steak dinner is and would sometimes be willing to pay that (as I said, there are some ‘name’ authors I do buy). What’s it’s saying is ‘here is something you may or may not like that costs $7.99 and here is something else you may or may not like that costs $0.99. Which would you rather take a chance on?’ ”
…and so you agree with me that a steak dinner ought to cost more than a hamburger. But you are saying that you don’t want to pay more than hamburger price for a steak dinner you might not like.
Which is, y’know, not necessarily a wrong way to look at things. But “I’d like to see authors make introductory works available for a reduced price” is different from “all books should be ninety-nine cents except for the ones I already know I like”, or “any price more than ninety-nine cents is too much unless you’re Stephen King”.
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“I can’t figure out of some of your post is quoted or is part or all your own comments”
That’s what new paragraphs are for, as well as the “page up” button on your keyboard.
I’m saying that if I don’t know it’s a steak dinner, you aren’t going to convince me to pay a steak dinner price. It’s not that hard to understand.
DensityDuck, you seem to be speaking mostly in hyperbole. Let’s calm down and be more rational in our discussion. Just because people think the electronic copy of a text should be less than a printed representation of the same text does not mean they believe the cost should be zero.
As for the restaurant analogy, Joanna is correct, it is not hard to understand: you don’t know which books are going to be a “steak dinner” until after you’ve received the “meal”. Your argument somewhat implies that books that cost more are better, but that is obviously a false argument (especially when you take into account personal taste).
Also, I find it to be an amusing analogy because it ignores the fact that the revenue of McDonald’s is about eight times that of Outback Steakhouse. It turns out, people _do_ like the cheaper option.
Indeed Logan, and McDonald’s make more money. Which is an interesting conundrum when you consider how many in Old Publishing are obsessed with the emotional value of a high priced eBook, even though there is ample evidence that a cheaper price would produce higher overall earnings.
I read another daft blog today and the guy was waxing on about how everyone in big publishing houses “Are in love with books”. If that is indeed the case then it is no wonder they can’t run their businesses properly.
“…you don’t know which books are going to be a “steak dinner” until after you’ve received the “meal”.”
So, what, nobody should ever pay more than hamburger prices because the meal might not be as good as the price implies?
Who’d go to the effort of making a steak dinner, then? If the customers aren’t willing to pay more for a better product, then feed them crap. They’re happy to buy crap as long as it’s cheap crap. (And this is why Wal-Mart and, yes, McDonald’s are so successful.)
DensityDuck, I guess I don’t understand your point. Are some books worth more (recognizing this is a difficult point) than others? Definitely! Should great books cost more than average books? Of course!
The growth of e-books does mean that it is more feasible to offer a price in between free and hard cover retail (which is referenced in the article). If you are an unknown author and want to maximize your profit, maybe $2.99 is the price point for you. You might think you are a steak author and charge $14.99, and that is “fine”, but you shouldn’t be upset when people complain about the price and you aren’t making as much money as you could.
It is also very difficult to convince people that e-books, which are not a perfect substitute for paper books and are, in many ways, worse, should cost more than paper books. Most of us here understand why the idea of ebooks cutting into paper sales is scary for large, traditional publishers. That doesn’t mean we can’t get upset when it happens, especially when that is accomplished through anti-competitive practices.
The point that the author and most of the commentators seem to be missing is that most of us — with a few exceptions — read more than one book in a lifetime. This allows us to learn from our mistakes, make increasingly rational decisions about what books we want to read and what they are worth to us, and even exercise virtues like patience while we wait for the books we want to read to become available at what appears a reasonable price. It also means that securing a reliable source of supply becomes a valuable item in itself, which is worth paying for,
It has always astounded me that people will buy ANY new books when they haven’t yet read, say, Jane Austen for free. But once they have, the relative value of Jane Austen will drop for most of them and non-free books will begin to look more attractive in comparison. Simple price-for-price comparisons are meaningless; we need to take in to account a person’s whole reading history.