Pricing Digital Book Content: Where's the Sweet Spot?

A recent post from Adam Hodgkin over at the Exact Editions blog on book pricing kicked off a great thread on Peter Brantley’s Reading 2.0 list. (Pricing also popped up quite quickly in the comments thread around our recent ebook pilot.) Adam argues that deriving digital prices from print ones is the wrong way to go:

At this stage in the development of the ebook market, book publishers who think about digital pricing tend to work back from the print price, to find a satisfactory, ebook price at 50% or 60% or X% of the list price of the print work (think of £195 annual subscription as the mortgage payment on a book — I bet that is the way OUP fixed their subscription price). It will take a bit of time before publishers and marketers realise that the cost of production, in the sense of ‘unit cost’, has no conceivable bearing on the digital pricing, whether for outright sale or for an annual subscription. The chances are that in the medium term ebook prices will migrate to some more or less fixed pricing levels: $2.99, $4.99, $9.99, perhaps $19.99. Simplicity will be a virtue and digital books will be seen as having some natural price points (cf CDs or DVDs).

Mike Shatzkin followed up with his own insights:

This triggers a few thoughts about ebook pricing which are neither conclusive nor particularly consistent.

Ebook pricing for IP that is sold in single-title print book form (i.e.stand-alone trade and professional books) will inevitably refer to the unit cost of manufacturing the print book. Since that was a component of the print book price, it becomes a factor in the publisher’s formulation of the ebook price. Why?

Because the author and the retailers will expect it to be that way and anything that fails expectations results in friction, contentious conversation with important trading partners a publisher would prefer to avoid.

Amazon is doing their best to break this linkage by having seized control of Kindle book pricing in ways that only they can. (It is highly unlikely that Sony would see value in selling a book below cost in order to establish a $9.99 pricing standard, as Amazon has done.) So far, publishers have not been forced to alter their pricing to Amazon to make wholesale prices conform to that retail price.

There is a "Soapbox" piece in this week’s PW — not available online as far as I can tell — by superagent Andrew Wylie advocating (with flawed facts and flawed logic, in my opinion) that ebook retail prices should be the same as printed book retail prices and that the author’s royalty should go up to 22.5% on the ebook. That’s the author expectation I was referring to earlier, expressed by a powerful agent.

Wylie’s argument is that if ebooks are cheaper than the corresponding print book, printed books will be abandoned and publishers will then and therefore no longer be necessary.

There is actually an analogy between Kindle pricing and book club pricing. Publishers told retailers for generations not to worry about lower prices offered by book clubs, because club membership (the obligations…) created a hurdle that left most book readers out and the PR generated by the clubs were a catalyst to sales elsewhere. Similarly, Kindle pricing is only available (useful) to people who plunked down their $349 or $399 for the Kindle, which relatively few people have done. So the Kindle pricing shouldn’t affect the printed book pricing. In fact, with overall sales levels still having trouble cracking 1% of the total, NO ebook pricing should have much impact on printed book pricing. Yet. Despite the concerns of retailers and authors.

We are many experiments away from settling this question, which is a moving target. What makes sense when ebooks are 1% of the market may not when they are 10%, or 30% (and we’ll be working our way up to those levels for a VERY long time.)

Bill Janssen, who addressed this recently in a post of his own, then weighed in:

Excellent point.

But there are many facets to this. It’s interesting that many booksellers for the iPhone (well, eReader, Stanza) are essentially repeating what they did with the Palm, by distributing an app that is both a bookstore and a reader. The books are hidden behind the retailer’s icon. Is that the best idea? Would authors prefer their books to be "first-class" apps? That is, the book would have its own icon on the iPhone "desktop"? Perhaps the app would have links of some sort to other works by the same author? Author branding instead of publisher/distributor branding?

I still feel that there’s a powerful economic pressure for more disintermediation here…

But i2s’ Alain Pierrot isn’t quite ready for publishers to step aside:

I’d hate having the narrow space of any of my mobile devices clogged by a dozen or more ‘disintermediated’ author’s egoes…

Which doesn’t mean either that I’m not a faithful ‘fan’ of individual authors. (I used to buy anything Julio Cortázar would issue and wait for the next…) But I do appreciate branding from a publisher as the good mix between time saving, quality warranty (whatever this can mean for each individual) and serendipity: obviously, some readers used to make a safe and fast bet when they bought latin american litterature from Gallimard’s "La Croix du sud" collection without having been introduced to such or such an author.

Author branding might be a very short-sighted fantasm, nearer last century’s most silly situations such as Enver Hodja’s control of Albania’s publishing, than any realistic situation where a brand offers good value to save time and attention.

Pricing also popped up in the comments thread around our recent ebooks pilot, including this one:

It seems to me though that your attempts to price “at a discount” from print books are misguided at best and silly at worst.

You need to start thinking in terms of “at an increment” from ZERO. The web is a huge place and offers amazing content for free. You would be wise to consider how much EXTRA you want to make from your existing paper publishing business. If you were only publishing digitally then I do agree that you need to take the discount approach.

I’ll add that within our own Safari Books Online (our joint venture with Pearson), subscription pricing is not directly related to print prices, though the formula for paying out royalties to publishers does include the book’s MSRP.

A lot of people are trying to figure out where prices are headed for digital book content, and to date there’s not much consensus (among publishers or among customers). Add your own thoughts in the comments section — what do you think?

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