Ebook pricing vs. revenue, by Dave Slusher

Ebook Pricing vs Revenue

Posted on January 12, 2011
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Konrath Data Ebook Sales Curve

It’s amazing how often I see some variant of the phrase “We can’t afford to price our ebooks lower because we have costs to recoup.” 10 minutes ago I saw that in the current Locus magazine interview with John Picacio. He in general seems like someone who gets it, both here and in the Sidebar podcast interview with him that coincidentally I listened to last week. This is not to single him out, he is maybe the 10,000th person I’ve seen say this, only the most recent before I type this up. In his interview he says:

If pricepoints for e-books are forced down, do publishers simply slash budgets to achieve their margins? Does that inevitably mean a dramatic slash in quality of experience for the reading audience in terms of things like cover art, copyediting, and other services that readers take for granted?

This reflects a point of view so common in the publishing world that is received wisdom. No one questions whether or not lowering the prices of ebooks will make them more money in the end. They all know it makes less money.

I’m attaching to this post some graphs I generated. I did this early in 2010, based on then recent data that J. A. Konrath had posted to his blog. He’s a decent test bed for these numbers, as he had a number of ebooks out, some self-published and some published by a major publisher. These were priced all over the board. At the time, he was pricing his self-published books at $1.99, and the major publisher books were as high as the $8 vicinity. The commonality here is that none of them were getting much of a promotional push. There was no book tour, no advertising campaign so these numbers should be a realistic look at how price affects unit sales. It must be noted that I dropped two data points. He had two self-published books at $1.99 that sold so anamolously well that they blew out the chart. I dropped data to make the curve fit but the data I dropped would have biased this even farther to the low end of the curve. At the time, even Joe had no real explanation for why those books sold so well. He has since raised his price to $2.99 which is the same conclusion my data would lead you to. He’s a savvy cat, I’m guessing that sometime between then and now he also ran these numbers and raised his prices accordingly. (Update: yes, he did raise prices based on his observation of data.)

Konrath Data Ebook Revenue Curve

Let me disclaim my analysis by saying I am not an MBA or a business guy. I am however a scientist, once a chemist and now a computer scientist. I know a little bit about numbers. If you think I have a flaw in my analysis, please tell me where you think I’m wrong in comments. Civilly. Don’t bother flaming for I have a hard heart and admin rights.

Every single time I’ve heard anyone defend higher ebook prices, they cite the fact that “just because the publication is electronic, that doesn’t eliminate costs.” This fact is what I like to call “true but useless.” Yes there are costs associated, but all costs in ebooks are fixed. The publisher does whatever they need to do editorially, formatting wise, etc. When that is done, they push a file to Amazon/B&N/Smashwords et al and that is that. Whether there is 1 sale or 1,000,000 unit sales, the costs are identical. I’m treating promotion as a fixed cost although I can be argued on that. Regardless, the costs of promotion do not rise as a function of sales. They may drive sales, but if you sell 10x what you estimate, your promotion costs don’t expand ten-fold.

Since all costs that go into creating the publication ready file are fixed and there are no variable costs associated with providing copies to the market (from the publisher – Amazon et al are paying them) by my understanding the only factor that should be important is total revenue. If you lower the price of the book, you run the risk of pricing lower than a purchaser might have been willing to pay. That is an opportunity cost but not a hard cost. It’s not like in the paper world when publishers sell the remaindered book at less than the hard costs associated with the manufacture and shipping costs of those copies. That’s not possible in the digital world. Instead what is important is pricing the books so that the total revenue is maximized.

I took the Konrath data and did a logarithmic regression. You’ll see that the R^2 = 0.96, which is a pretty darned good fit. Then I used that equation to plot out the line that predicts the sales at any price point interpolated or extrapolated across the range and a little higher. I then made a second graph of the price multiplied by the unit sales (aka gross revenue) against the price. What you’ll see from the graph is that just a little over $3 per copy is where revenue maximizes. When you get under that, the per unit sales rise exponentially, but the price is low enough that the revenue drops. Around $3 is the sweet spot, again which I stress is for the data set that I have.

Now, I acknowledge the limits of the data I used for this analysis. Even better would be if I could get all of Konrath’s data for his history but a publisher or e-retailer could do much much better. Let’s suppose the standard price for a given Kindle book is $9.99. Have Amazon show 55% of the users that look at that page the $9.99 price. Randomly assigned, 5% of users each would see a price from $0.99 to $8.99 in $1 increments. Analyze that data for the conversion rate to sales at each price and you could generate much better statistics than I have because all of those numbers will be for the same book at the same time. This is ultimately my larger point – in digital sales, this kind of experiment is possible. If the major publishers haven’t done this and don’t understand what this curve looks like for their books then they really have no excuse for stating definitively why they can’t lower prices.

The assumption under all those statements is that the demand for these books is inelastic. If you price it at $14.99 you’ll get about the same sales figures at $9.99 or $6.99 or $2.99 so pricing it high maximizes revenue. For certain well known marquee writers this might be true but my suspicion is that the market is far more elastic than any publisher would like to think. I think that’s the root of this mindset. Publishers and authors ultimately have a worldview that is the opposite of this analysis. They don’t want to believe that they have a commodity product that is price sensitive. No one sits down to spend a few months or years writing a novel thinking “wow, if this book is priced too high the Kindle readers will just move on to another book priced more reasonably with which they’ll be just as happy.” I feel for them as a person who has tried to write fiction and will do it again. That’s a hard fact to face but I think accepting it would make everyone more money.

Let me state this one more time: I don’t think lowering ebook prices costs anyone money unless and until they drop under that magic point. I think authors and publishers would make more money if they’d understand these principles, experiment to determine the revenue maximizing points and then price accordingly.

Here’s a real world example from my life on how this principle worked for me and how I hypothesize it works for more of my fellow Kindle and Nook readers. I am interested in Greg Graffin’s book Anarchy Evolution. I heard the interview on Skepticality and went to buy it for my Kindle. At the time I looked, it was priced at $14.99. I came, looked at that and said “Well, screw this. That’s more than the book is worth to me. Pass.” I closed the tab in my browser and never thought about it again until today. When I needed a book I had previously passed on for high price for this anecdote, I thought of this one. Until assembling this post, I hadn’t even realized the price has been lowered to $9.99 for the Kindle version. HarperCollins had my attention months ago, got me to the page to purchase it but an excessively high price kept me from buying it. Iif the average book is priced above my impulse buy threshold, the purchase ain’t happening. If it were not for writing this post right now, I wouldn’t have ever thought about the book again so the one and only chance to flip me to a paying customer would have passed without conversion.

Publishers seem to fail to understand the low friction digital marketplace for ebooks. This is an impulse-buy driven mode. I am a reader of books and a lover of books but my wife has threatened physical violence if I bring in any more paper books without getting rid of some of the thousands that fill every available bookshelf in a house too big for two people. You will not sell me paper books except for those very few novels by special writers I must have in paper. On the Kindle, though, it’s fair game. The sad truth is that for my whole life, in any given time period I have always purchased more books than I read. Even though my physical capacity is exhausted, I still want to buy them. Even though I have every single Anthony Trollope novel you can get from Project Gutenberg on my Kindle, I still want more books. I’m a hoarder. Publishers have a chance to get my money even though I have more paper books and ebooks than I can reasonably expect to read in this lifetime. They have one and only one way to blow this, when I come to look at the page and there is a price above my impulse buy threshold for that item.

Publishers and authors continue to try to make this a moral argument. “What, you cheap bastard ebook readers don’t think we should get paid for our work?” I think if they suppress the ego driven umbrage reaction and instead get down to the realities of the market they are in, everyone can make more money and be more happy. The artistic goodness of the work isn’t tied to the price point, so don’t be offended if you make more money at $2.99 than $9.99. Instead, shut up and cash the check, friend.

I listened back to the first few minutes of a panel I moderated at Balticon 2010, and in my introduction I used the phrase “I’m done begging people to get in the lifeboats. If they don’t want in, that’s on them.” I’m not beating my head trying to evangelize to publishers why they should price appropriately. Some are and some aren’t; some will and some won’t. I have enough faith in the marketplace that in the long term it will all shake out. The question is, how much money are you leaving on the table while you get your shit together?

There are people who understand the dynamic of this marketplace, J.A. Konrath being one of many. He periodically posts about some of the other self-published authors who are following the same path, pricing reasonably and moving thousands of units per month. (Side note: the Nathan Lowell mentioned in that Konrath post was also on that Baltcon panel with me. He’s a talented, hard working guy.) That translates to thousands of dollars per month in the pockets of these writers, since they are keeping the full 70% of the retail price by self-publishing. These people are out there, they are filling niches in the marketplace. Established writers, you could be doing this. Existing publishers, you can be pricing to fulfill this demand and bringing in more money. There will be a day in the future where I will be one of those self-published authors. Will my book be as good and successful as Joe’s and Nate’s novels? I hope so. I’m willing to fill that niche at that end of the pricing scale. Are you?

Reprinted, with permission, from Dave Slusher’s Evil Genius Chronicles

 

24 Comments on Ebook pricing vs. revenue, by Dave Slusher

  1. E-book publishers must falsely assume that the total amount of books read is fixed. I don’t believe that to be the case. I would read more if I could get quality material at a lower price. Your second chart above confirms what I have thought: $3:50-$4:50 is the best price point to maximize income.

  2. As a general rule, I avoid self-published books even from the likes of Konrath. I’ve read one of his Killborn novels and it was highly mediocre – like a fast food lunch. OK at $1.99 or $2.99, but not good enough at anything higher. Sometimes I’ll eat fast food or read its equivalent, but more often than not I’d prefer something with more substance and will pay a little extra. However, price still does play a role.

    I wanted the non-fiction book Insectopedia, but the cost of $12.99 put me off. Now at my DINK income level I’d never even miss the $3.00, yet it still stopped me cold. If the price isn’t fair, I’m not buying even if I can afford it. I bought the book when the price dropped below $9.99 in December. There are a handful of titles I’ve paid more for, but it always feels like I’m being snookered. There are probably a dozen titles I’d have bought on impulse if the price were right. As is, I think it over four or five times before paying more than $9.99.

  3. A fascinating and extremely well constructed article that supports my own long held estimate of the magic price point.

    David wrote:
    “What, you cheap bastard ebook readers don’t think we should get paid for our work?” I think if they suppress the ego driven umbrage reaction and instead get down to the realities of the market they are in, everyone can make more money and be more happy. The artistic goodness of the work isn’t tied to the price point, so don’t be offended if you make more money at $2.99 than $9.99. Instead, shut up and cash the check, friend.”

    David THIS is at the heart of the lot of the pricing problem I am certain. Too many authors and too many agents and publishers are still hung up on their emotional connection to how they value their title. I fear that it will take a few more years of bitter experience for them to climb down off their perch.

  4. Greg wrote:
    “As a general rule, I avoid self-published books”

    I agree with you Greg. However … the publishing world is changing. What are we to do in the future when quite a healthy chunk of titles will be self published individually or through self publishing sites ?

    It seems to me that the distinction between being published through the mainstream publishing industry and being self published will need to be re assessed. What will self published really mean ? Will it be completely unfiltered and just any old tat uploaded onto a seemingly legit web site ? Will there be any editing ? review system ? rating system ?

  5. What an interesting article! It’s great to have concrete numbers to back up what I’ve been doing as a Kindle owner.

    To me, an ebook doesn’t provide the same value to me as a physical book and should be priced accordingly. You can’t sell it, borrow it (freely anyway), or give it away. Devices of the future may not be able to read the file.

    I also resent publishers trying to take advantage of my by pricing new ebooks at similar prices to the physical books and backlist ebooks at the same price as new paperbacks. Why in the world would I pay $7.99 for a book 10 years old that I already have moldering in my bookcase? Especially when I can get 3-4 indie books for that price.

    I would think as an author your goal would be to reach as many readers as possible. To do that with ebooks, you have to price accordingly. I have seen many indie authors be successful with giveaways, blog tours, and $.99 and free books.

    I love supporting indie authors and they have rewarded me with hours of good reading. Some books have issues, some are much more polished, but I’ve enjoyed every one of them. I have read many first books that were free or almost free, then immediately purchased the author’s other books, if available. I have at least 4 indie authors where I’m eagerly awaiting their next new book and will purchase them the day they’re published. I have also recommended them to everyone I know and many times in the Kindle forums.

    I think the ebook price point of $2.99 is a win-win for both authors and readers. Authors make as much or more than under a traditional publishing model and readers get more books to read for less money.

  6. Thanks for the interesting input. Despite the words in the reprinted article, I don’t “have admin rights” here so I’m pleased to see it civil.

    I added the below as an addenda to my orginal post, and I’m bringing it back here to:

    It’s a failure of clarity in my original article, but I’m not advocated for $2.99 as the perfect One True Price for all ebooks forever. That was true for this data set, which is already a year old. This might well change over time, differ from author to author, genre to genre or publisher to publisher. What I do want injected into the thinking is that these numbers are calculable and measurable. No one needs to say – as did Lou Anders later in the Locus Magazine I reference above – “We can’t lower prices because we still have costs.” How do you know you don’t gross more money if you lower prices?

    The other big point is that unless your price is so low as to be left of the curve, you lower your total revenue by raising prices. J.A. Konrath was to the left of that curve at $1.99. I highly doubt HarperCollins is left of that curve with any $11.99 books.

  7. Greg, If I might be narcissistic enough to quote myself from another ebook post I made yesterday:

    “All ebook self-publication discussions eventually include the phrase “If it isn’t from a major publisher, how do I know it is any good?” It’s like the ebook version of Godwin’s Law. The people who say this are adorable, and have clearly read fewer shitty books from the Big Six publishers than I have. How do you know self-published books are any good? The same way you know those Anne Rice, Piers Anthony, Dan Brown and V.C. Andrews (TM) books on the best-seller lists are good.”

  8. Dave I do believe and agree that this is changing, fast. But is it not a fairly reasonable view, historically, that self published books were on balance … rubbish ? on balance …

  9. “Publishers seem to fail to understand the low friction digital marketplace for ebooks.”

    This. This exactly. This is the major contribution the Kindle made to the ebook marketplace, with its wireless connection: a very low friction buying experience. I hear about a book, I can immediately buy the book, if the price is low enough to be an impulse buy.

  10. Dave asked “If it isn’t from a major publisher, how do I know it is any good?”

    You don’t, not really. The most lackluster and insipid novel I’ve read in the last few years came from a major publisher and as, overall, been wildly successful. (The Hunger Games, FYI) So there is stuff I don’t like from reputable publishers. But out of the six or seven self-published original titles I’ve read, all have been lacking and only of marginal quality at best. None would ever make me want to read more by the author. There might be good quality out there, but I haven’t found any yet. The track record, for me, is unimpressive. So if comes down to picking an unknown author from a major publisher at $9.99 or an unknown self-published at $2.99, I’ll go with the book from a publisher most of the time because the odds favor it.

  11. This is an excellent analysis, but I think the cheaper-is-always-better viewpoint simply isn’t supported.

    Certainly, there is a revenue maximizing price for each e-book. And that is the price that should be charged. In this case, the data actually showed J.A. Konrath that he should RAISE his prices from where he originally set them to maximize revenue.

    The fact that Konrath’s ideal price point is $3 is meaningless for other books and authors. Like the article admits, for marquee writers this might not be the case.

    And it isn’t. A couple months ago, Mike Shatzkin posted an article about a large publisher that performed a similar (although less technical) sort of analysis.

    http://newteleread.com/wordpress/paul-biba/boy-do-i-disagree-with-this-mike-shatzkin-gets-it-100-wrong-about-the-agency-model/

    Only in that case, the publisher found $12.99 to be revenue-maximizing. And everyone hated it! Apparently demand-curve analysis is only a good idea if it supports the idea that books should be cheaper.

    As a consumer, you should buy books at whatever price you feel comfortable with. But don’t assume that what you want to pay is what the book should cost.

  12. The people who say this are adorable, and have clearly read fewer shitty books from the Big Six publishers than I have.

    If this place had a “Comment of the Month” award, this would have my vote.

  13. Logan Kennelly // January 13, 2011 at 3:49 pm //

    (This format is rubbish for longer discussions, but I’ll join in anyway.)

    I agree with Greg, I’d rather pay more for a good book than buy something I’ll like less at a lower cost. It was on this site that someone (I’m not sure who, but I don’t have a problem giving credit to Marilynn Byerly) pointed at that the true cost of a book is the time spent reading it. What’s $15 in comparison to the fifteen hours I’ll spend reading it?

    I also recognize that there is entirely different spectrum of readers that read for reading’s sake that drive hundreds of sales a year and can be very cost sensitive.

    However, I also fit into another group that will “toss a few bucks” toward an author that I want to support even if I suspect I’ll never get around to reading their work (something akin to an impulse buy). No time cost and low monetary costs can yield to increased sales, as well.

    Also, as others have pointed out, the publisher, or existence thereof, is generally meaningless in a purchase. Reviews and recommendations go much further, and I am simply waiting for the day when someone has the data and algorithms to shift reviews for books based on personal preferences. (Netflix does this for movies today, and I find that it is getting uncannily good.)

  14. Here’s another example of a major publisher losing a sale. I recently wanted to re-read Watership Down, a book I read years ago and remember enjoying. But, Simon and Shuster, in their infinite wisdom (greed?) have determined that the “fair” price for the Kindle edition of Watership Down is $12.99. Whoops, guess I won’t be re-reading it any time soon, because there’s no way I’m paying that much for a decades-old book that I have already read. Especially when I know, from personal experience, how easy it is to digitize printed copy.

    Its insulting, really, that the publishers think so little of the reading public’s intelligence that they feel free to try to get away with such price gouging.

  15. Alan Wallcraft // January 13, 2011 at 4:08 pm //

    Robin Sullivan recently wrote an interesting guest post on Konrath’s blog, and she found that $4.99 was the optimal price for her husband’s ebooks. The main point is that there was an optimal price, and it isn’t necessarily the lowest even for relatively unknown authors providing they have a backlist.

  16. More interesting input. I’m going answer in two different comments, separating out the two threads here, “quality of self-published work” and “optimal price points.”

    Howard,
    The book world has this pocket of contempt for self-publication. There may be some historical precedent for that belief but the underpinnings of it are eroding quickly. When you look at the page for a Kindle book and see a publisher you’ve never heard of can you tell the difference between it being a Harper Collins imprint vs a name used for self-publication?

    Greg,
    If it isn’t working for you, it isn’t working. I think social recommendation either by persons who know your taste or collaboratively filtered ala Goodreads is the way to go and probably a better predictor of your taste than the publication source. I have tastes that skew away from mainstream, your mileage may vary.

    A few other points:

    1) I personally think there is no “good” or “bad” in matters of taste. I found THE DA VINCI CODE unreadable and THE BIG BANG THEORY unwatchable. Clearly the tastes of the majority disagree. Are these works good or bad? Whether a book is to my taste and whether it is self-published are orthogonal.

    2) A few years ago I did an interview with Cory Doctorow where he suggested that our generation (Gen X, now late 30s or early 40s) might be the last with a stigma attached to self-publication. I come from multiple interest groups with a low stigma: zine culture, DIY punk, comic book and science fiction fandom, The Church of the Subgenius, podcasting. In all these groups, putting out your own work is considered to be a good thing.

    3) The webcomics world as a medium plays out this whole argument every day. I’d suggest the Webcomics Weekly podcast as a good one. All the episodes in November and December tackle this topic over and over.

    4) All 300 issues of Dave Sim’s CEREBUS and the whole run of Jeff Smith’s BONE were self-published. Does that make these comics worth less? They are what they are and I regard both quite highly. If a band scrapes together money to record and print their own CD do you automatically discount it as worthless? I don’t, and I have bought as much music like that as big label music in the last decade. Kelly Link and Gavin Grant own Small Beer Press so all her books published there are de facto self-published. Does this make them bad or are they considered some of the better in the genre?

  17. The big point about the revenue maximizing point is that it is the price of least conflict between buyer and seller. The publisher wants it high, the Kindle reader wants it low and this is where most people are willing to compromise. However unless you are willing to explore the range both above and below, you don’t really know what that is. There is no capital tied up in the copies of an ebook, so it really costs nothing to explore both sides of the pricing space.

    Maybe the big publishers’ dogged persistence at only looking at the high side is a good thing. It does create opportunity for those willing to explore the whole range. It used to make me want to change their minds, now it makes me want to go in business in competition with them.

    Peter,
    I’m not surprised that a best-seller type book is less elastic and price sensitive. I don’t believe “books should always be cheaper”, I believe “maximal is always maximal.” I don’t believe “what I’m willing to pay is what it should cost”, I believe “what it is worth to me is what I’m willing to pay.” It’s interesting that the 3 data points involved here started at the original $9.99 and only went up. No data cited for anything lower than that so that end of the curve is unexplored.

    Like the experiment I cited in the post, I think it makes sense to show a percentage of users prices higher and lower that the standard, measure conversion rates and slide the price to optimal. The problem about comparing one book over time is that the “sales didn’t drop when we raised prices” doesn’t include the ability to see if sales would have risen if the price held steady. The market of Kindle users is climbing all the time so that isn’t as meaningful as it could be.

    Logan,
    Interesting. Realistically, the difference of a few bucks doesn’t make a difference in my life but it can prevent me from purchasing a book. I cited an example in the post. I think it has less to do with the difference in purchase price and more to feeling like you are being taken. Also, as the price for a Kindle edition approaches that of the paper version I’m always less likely to purchase.

    The basic thrust of my whole piece is that failing to convert the customer at point of interest is a loss of revenue that could have been realized. Ebooks are a post-scarcity world, the long tail run amok. Failing to make the sale when a potential customer is interested by exceeding their impulse threshold loses money. Training customers to just buy when they are interested by pricing below the majority’s impulse threshold brings more money in as a whole.

    Kathleen,
    I’m with you. I have that experience quite frequently and that’s an example of the loss of goodwill at the flip side of all this. I don’t generally trust the big publishers to be looking out for me on this because my personal shopping experience is the same as yours.

    Alan,
    That too is quite interesting. I’m a scientist so I love as much data as can be obtained. I’d love to know how much this varies from author to author, over time, etc. It is possible there is a floor that makes buyers suspicious and below which there is no further boost to sales or that this is a function of the aggregate by having multiple books in the series. Good on them for having collected the data to make the best decision for them. That’s some serious money they are talking about!

  18. Logan wrote:
    “(This format is rubbish for longer discussions, but I’ll join in anyway.)”

    I agree Logan – we need Forums. I expected Teleread to move to a Forum format before Christmas but the whole development of the site seems to have gone into hibernation, unfortunately.

    David – it is really nice to have you take part in this discussion below the line.
    I have rarely had any involvement with the Publishing business except on a business and financial level, coming from a financial management career. My perceptions of self publishing has always been received ‘wisdom’ from society around me towards those who’s books were not good enough to get a publisher and who had to print their own copies in runs of a few hundred and hawk them around to book shops….. that is how my social circle has always thought of self publishing.
    With the option now for authors to skip publishers and just upload a finished book to an online eBook retailer things have clearly changed, an when many legit writers are doing it the whole perception changes.
    I still believe that a great many ordinary readers will always wonder about titles that look great but are self published. They will always be asking themselves are these now the titles that have, over the last 20 years, been rejected by 20 publishers and now popup on self publishing eBook sites ?
    I feel that the only way for the industry to respond to this is with pricing. A reader always takes a gamble, a risk, when buying a new book by a new author. They have no real idea if they will like it. Risking 14 dollars is one thing, risking 2.99 makes it bearable.

  19. On the pricing issue it is clear that all of the points you make, David, are absolutely spot on.
    Price is also tied up with ‘perceived value’ on the part of the buyer. This is why writers with track records will always be valued by readers as worth more than other writers; why best sellers will always be valued higher for a certain period after publication.
    People have strange instincts. They want things cheaper but they respect high prices. When they shop for goods that they perceive as quality products they often respond to higher prices because they ‘perceive’ that the seller is reflecting quality by charging more. So this factor, imho, also needs to be fed into the metric that this article lays out so well.
    This is why I myself believe that the 1.99 pricing level is a mistake. From my experience in commercial business I believe this price point is below the Public’s ‘perceived value’ point for a quality experience like reading a good book. This price point will label the product as being so cheap that the customer will perceive it as lowest quality. The only exception in my view is using it for special offers and introductory offers for First Titles by a writer.

    I view 5 or so as the sweet spot.
    8 or 9 dollars for leading writers.
    9.99 for best sellers.
    3 dollars for back lists of middle order writers
    1.99 for new writers first books and specials.

    The problem with the current pricing strategy by the big eRetailers of keeping so many prices so high is that it is comfortable for them coming from the old publishing model. They are also making super profits anyway because of the tiny costs they incur and money is pouring in for old rope. There is no pressure. They are also stuck with the ‘value of a book’ problem discussed above.

    I believe only the success of the new eRetailers and the new Indie sites, with a new pricing philosophy, will eventually force them to recognise that their prices are causing their sales to under perform against what their potential really is.

    We must also always remember we are still at the beginning of this huge transition to electronic reading. I believe it is a mistake to extrapolate every metric from the current kindle/nook buying public into the future. We are still firmly in the early adopter phase despite recent sales volumes.
    When the non technical minded masses of regular readers start to engage with eReaders, once all of the software limitations and eReader pricing issues have been overcome, I believe they will be less adventurous and the biggest BIGGEST barrier will be the discovery by readers of new titles to read. As covered in the many recent articles and discussions including last week’s one on finding a new “Hello’.

  20. Oh dang, I forgot my favorite self-publication bit: John Cassavetes effectively “self-published” HUSBANDS, FACES, A WOMAN UNDER THE INFLUENCE, etc. Are these considered crap films?

    Howard,
    I think we’ve crossed the line where publishers mean anything to consumers. I blogged today about the continuing saga of Kindle books I almost bought. The publisher was Pantheon Books, which I didn’t recognize off the top of my head. It wasn’t until I looked it up I found it was a venerable and important publisher. It had ZERO brand recognition to me and thus no contribution to perceived value. For most of these books we are talking about, whether or not it is self-published when I’m looking at the product page I CAN’T TELL. Hard to have a stigma for a group you can’t readily identify.

  21. Howard,

    re: your pricing thread I think you might be on to something there. It seems likely that different types of books in the marketplace might have different revenue maximizing prices. Frankly I think there is no reason to even group them, experiment with every single book and price it where it maximizes and slide it up and down as it needs it. If the curve rises to the right, raise the price. If it goes through the roof to the left, lower the price. Do it daily or hourly, or whatever. Just make the precious writers more money and I’m happy.

    This does imply functionality that would be easy for Amazon/B&N to put in and impossible for the publishers. This is one of the reasons that I think agency pricing for ebooks is bad – the publishers don’t actually understand customers and what makes them tick. They spent the 20th century isolated from them via multiple business layers but now think they have a handle on the market. I think they are wrong and are losing revenue while they figure it out.

  22. I suspect the functionality is there. However I have two issues with it.
    Firstly is the amount of bureaucracy behind the scenes required for constantly adjusting and remeasuring and monitoring an readjusting each title over and over. I don’t see it paying it’s way.
    Secondly I wonder if customers would suffer it. Each title constantly adjusting and shifting ? especially downward ? I think they will cop on pretty quick. The advantage to having classes of titles, mixed with offers is that the customer knows where s/he stands. S/He knows that there is a fair rationale behind the pricing and mixed with fair pricing overall I believe this strategy is the way to go to maximise sales.

  23. Howard,

    The customer experience is the more compelling argument, but this already happens on Amazon. I wanted the complete box set of DVDs for Farscape and the price fluctuated up and down for a long time before I actually bought it. You might be right it would better to be a slow fluctuation than a fast, otherwise consumers are trained to try to time the market rather than just purchase.

    As far as the ability for this to happen, these e-commerce sites are run by computers. I never considered this being an activity a person would do but something that would be built into the site. Set the list price, the high and low boundary for adjustment, a few other parameters and then let it go. Even if the data was taken back to the publisher and they reanalyzed it periodically, it’s all software and not that difficult.

    This line of thinking always makes me want to into this business – if a whole industry thinks things are too hard to try and they look easy to me, maybe that is a money making opportunity. I think that will be a big differentiation in the next few years – business entities that think this sort of pricing strategy is impossible or too expensive to implement, and those that try it and maximize revenues because of it. Or maybe I’m just dreaming.

  24. I take your points Dave. My response would be that in my view automation of this process (which you correctly say is easily enabled) would have a major weakness. (And please keep in mind that I am not in the Publishing business and only opine based on a few decades of commercial business and financial management. So I may always be exposed as talking BS … LOL … on the other hand if I start making sense maybe I should side step into the eBook business …)

    It assumes a constancy of the demand-trend for a title once it is ‘published’, that could be converted into a mathematical formula as it were.
    The truth is, as I perceive it, that each title by each writer goes through a separate and distinct life cycle reflecting the initial fame of the writer, the publicity, the exposure the book gets, the ongoing reputation of the author, local appearances, local promotions, unpredictable media coverage. I believe trying to apply a one fits all formula to all that would inevitably result in a mess and no net gain.
    A pricing strategy managed online by a personal ‘pricer’ with specialised market knowledge would imho be far far more effective in maximising revenue. But I also wonder that what would be gained on the roundabout would be lost on the swings of the overheads involved.
    In the end a broader category based pricing strategy would be cheaper, more connected with the customer and more effective in the end. (Other than occasional individual interventions for special deals and celebrity or big name exceptions.)

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