Given that Baen is frequently used as a counter-example whenever the matter of printing costs making up a small fraction a a hardcover’s total cost comes up, I thought it would be a good idea to hear from Baen about how it is able to keep its prices so low. Consequently, I arranged this e-mail interview with Toni Weisskopf, Baen’s publisher.
Weisskopf has many interesting things to say about Baen’s overall strategy, pricing, and the question of e-books “cannibalizing” printed books. The interview begins below the jump. (Links added by me.)
Many voices in the publishing industry are proclaiming that, since printing costs are only a couple of dollars out of a hardcover’s total price, selling e-books at a price point of $9.99 is "unsustainable." But Baen has been selling e-books for less than that for over ten years, even of books released in hardcover, and has become the counterexample that everybody holds up in response to other publishers’ claims about printing costs.
TW: Well, part of the “secret” there is that we don’t pay for expensive DRM (“digital rights management”) schemes. I’ve never understood why we should add to our costs with the sole outcome that it’s harder for readers to buy and read the books we want to sell. On the contrary, I want to make it as easy as possible for my readers to find, purchase and read my books. That goal influences every publishing decision I make from our marketing to what typefaces we use.
How is Baen able to sustain selling e-books at such low prices? Is it simply that Baen considers them mainly another form of promotion for the print books (as suggested here), and so does not assign the same share of manuscript production fixed costs (editing, typesetting, etc.) to e-books that other publishers do?
TW: Certainly when we started we viewed the ebooks as an experiment. In some ways mass market paperbacks are also a “form of promotion” for future hardcovers. Indeed, many pbs from the big publishers will run excerpts of the next hc from the author. The ebook just extends that idea. So yes, it’s a form of promotion. Is it also a source of income & profit? Absolutely.
Are you able to discuss the royalty rates Baen pays on e-books, in terms of percentage of "cover price"? How do they compare to print royalty figures?
TW: We pay approximately double hardcover royalties [in terms of percentage of cover price] for the ebooks.
Is it likely that inexpensive e-books will "cannibalize" print book sales—either now, or at some time in the future?
TW: I don’t think any sales “cannibalize” any other sales. Does a used book sale cannibalize a new book sale? Not at all. In general, people buy the nicest version of a book they can at the time. Can a used book sale or a library loan introduce my author, my series, my brand to a new reader, who may then be enthralled, entranced, ensorcelled into buying the next new hardcover in the series (and the eARC, and the final ebook, and maybe the pb too, so she can lend it out)—heck, yes. My goal is to make more readers for my brand. ANY sale has the potential to do that.
Specifically, I think ebooks will extend the market for books, not reduce it. But then what I am selling is good stories; I don’t care what medium I sell those stories in. If my readers tell me they want it chipped on stone, I will find some way to do that. If they want me to beam the story directly to a chip in the brain, I will do that.
Baen has pioneered a number of interesting techniques for using e-books promotionally: the free library, the webscription bundles, the pack-in CDs. Are any new promotional ideas on the horizon?
TW: We are printing codes in some hardcovers for free ebooks earlier in the same series. But for the time being, nothing radical planned. We’ll wait for the technology for flash drives to get even cheaper and flatter and who knows. Maybe we’ll be able to print drives directly into the books. You tell me! This is the sort of thing I rely on my cutting-edge techie Barflies to tell me about. Maybe your readers have suggestions for me? What would they like to see?
Some people have complained that Baen’s habit of treating e-books mainly as promotional material for selling printed books hurts the perception of e-books as having value in and of themselves, and encourages other publishers to misunderstand and perhaps misuse e-books in that way. (They might point to Tor.com’s free e-book promotion which left a number of e-book readers more disgruntled than pleased as an example of this sort of misunderstanding.) Is this a likely scenario?
TW: I can’t control what other publishers do and how they experiment! It’s not like what we do is a secret formula. Though perhaps we should call it that and sell the secret slowly over the course of a year in seminars…. We can only do what we do. But there are plenty of people over at Tor who value ebooks and want to see it done right.
In the last couple of years, since the introduction of the Kindle, we have seen the first signs that the nascent e-book market is actually starting to take off. At the moment, e-books make up a fairly small percentage of the overall book market—less than 5%. What will happen when and if e-books become a significantly larger fraction of the market? Will Baen have to revise its e-book pricing structure?
TW: When the ebook market takes off, we’ll sell more books. A lot of these questions seem to be leading to: is Baen going to raise ebook prices? We don’t have any plans to now, but I won’t rule it out for the future. Part of being small and nimble is the ability to change quickly as circumstances change. It may well be that Baen books sold through third parties will be more expensive than those we sell directly—that’s the function of paying the middleman and the price you pay to extend your reach. But we don’t dictate prices to other retailers, and we won’t to them. I’m certainly willing to try different things. If somebody finds a way to do it better, we’ll adjust.
Recently, Baen "rescued" two e-book series, Sharon Lee & Steve Miller’s Liaden stories and P.C. Hodgell’s Chronicles of the Kencyrath, after their prior publishers Meisha Merlin (for print) and Embiid (for e-books) went under. What led to the decision to take these books on? Was Lee & Miller’s successful "Storyteller’s Bowl" experiment with Fledgling and Saltation a factor?
TW: We had an editor who was a big Liaden fan, and a freelance editor who had recommended Hodgell to me, so I was aware of those authors in a general way. Also, there was a lot of call for the books from our on-line forum, Baen’s Bar. The Barflies thought the Liaden series would make a good fit for our line. I take that sort of input very seriously. And before they ceased operating we’d been in negotiations with Meisha Merlin to distribute their ebooks, so we were already prepared to take on the Hodgell and Lee and Miller anyway. Hodgell was getting ready to write a new book in the Kencyrath series right about then. It seemed like all the forces of the universe were conspiring to give us the opportunity.
Regarding the success of the “story bowl” early publication of Fledgling andSaltation: yes, it was another proof of principle. We knew the authors had their own strong on-line community, there was already support and good word-of-mouth report on the books, and that wasn’t going to hurt our efforts, but supplement them. The obvious follow-on question is “why not do it again?” And the answer is that it takes a lot of effort on the authors’ part to make that model work, and these authors would rather spend that time writing the next book. Most authors do—but not all. You’ll see this model of publishing more, I think, in the future. BUT—it’s very hard to build an audience if you don’t have the reach of a mass market publisher. Not impossible, but hard. It takes a particular kind of personality to enjoy doing that in addition to enjoying writing fiction that a mass market will want to read—and have the professional skills to do both well.
These series were first reprinted as e-book-only omnibus titles before being re-issued as print omnibuses (although it seems the existing Liaden books were reprinted through Ace rather than Baen) with new sequels commissioned. Were the e-book sales of those titles a factor in the decision to commission new books?
TW: Heck yes! It was invaluable marketing research. And we made money for the authors and ourselves doing it. Win all around.
TW: I’m not saying that what we do will work for everyone else. They want to try it, that’s their lookout, and the beauty of a free market. But some contributing factors: because we are an independent publishing house (distributed by publishing giant Simon & Schuster), our overhead costs are probably lower than the big guys. Another factor is that our business model is that of the midlist publisher. Yes, we have several New York Times bestsellers a year. But we don’t expect those books to finance all the rest. All our books are expected to pull their weight, and we rely a great deal on our backlist, the long chain of earlier books in series and so on, to act as a profit center. Put another way, we are betting smaller, so our potential losses are smaller, but the upside is smaller, too. But it is a sustainable way of betting. At least so far!
I refer people to Eric Flint’s “Prime Palaver” at the Baen Free Library for an exhaustive discussion of the issues. In a nutshell, the problem of the midlist author or publisher is not piracy, but lack of exposure. If you like alternate history but don’t know about the 1632 series you can’t buy the books from Baen. So I want to spread the word by any means possible, I want to reach as many readers as possible. So we post extensive partial samples of books, we post partial samples of series (i.e. entire novels) at the Baen Free Library, we distribute CDs with tons of free books in selected hardcovers a couple times a year, we send out review copies to reviewers and booksellers. I hand out free books at conventions.
I have faith in my product: if you read it, you will like it and want more. And if you find you don’t like what I do, I’ve still not alienated a reader who’s been forced to pay for something they don’t like. Plenty of people who like Mercedes Lackey won’t go for Tom Kratman and I publish them both (which means, btw, that I do enjoy them both). This way the reader is more likely to try something new from Baen again—and if I don’t get you with one author or title, maybe I’ll get you on the next one.
The other side of the coin is that Jim Baen didn’t believe our readers are thieves and neither do I. I believe they will buy the book when they have the money. And I don’t believe our readers are ignorant. The understand TANSTAAFL. Our readers understand that we can’t continue to find great books and the authors continue to write them if we don’t get paid. So we don’t treat our readers badly by trying to micromanage the use of the ebooks, and we have been amply rewarded for that trust.
Thanks to Toni Weisskopf for participating in this interview!