Ebook pricing power is undermined by perceived value

Wide ranging ebook pricing and deep print book discounts leave consumers scratching their heads.

Much discussion (and some dismay) surrounds the current upheaval in the ebook pricing model. As $0.99 ebooks sit “shelved” next to $19.99 ebooks (whose print counterparts might be discounted to $11.99), one of the larger issues surrounding the pricing problem is the perception of value from customers.

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Jane Litte at Dear Author argued in a recent post that value is based on the reader’s “willingness and ability to pay”:

Every reader has a different price they are willing and able to pay for a book. I believe that price represents the value a reader places on a book at the time of purchase. However, value can vary over the course of time from when the reader first becomes aware of the book to after the book is read, increasing and decreasing based on different variables. When readers speak about price, they are talking about the amount that they are willing and able to pay at the particular time that they are expressing the opinion about price. Willingness includes the measurement of time.

I asked Todd Sattersten, author and owner of BizBookLab, to chime in on the pricing issue. In an email interview, he argued that print book pricing actually is the larger contributing problem to the perceived value of ebooks (mainly, ala Amazon) and suggested that serialization might be the right model for ebooks.

How are customer perceptions of ebook value influenced?

Todd Sattersten: There is only one factor that matters right now — what print books cost. Customers compare ebooks to their paper-based ancestors, and they long ago concluded they should be cheaper because everything else in their digital lives is cheaper than their physical lives.

Publishers don’t want this to be true and, with the power to control ebook pricing through the agency arrangements, are pricing the vast majority of ebooks like they are print books. I co-wrote a book two years ago called “The 100 Best Business Books of All Time.” The hardcover retail price is $25.95. On Amazon, you can buy that version for $16.61 or a remaindered edition for $10.38, while the Kindle edition is $18.99. That creates a short circuit in customers’ brains. You don’t pay more for things that are more convenient. You pay less.

What’s interesting is that Amazon is actively discounting books in the 40% to 50% range, and in many cases putting the price of the print book very close to the price of the ebook. There can’t be any margin left at those prices. Amazon, having lost the ability to control ebook pricing, is saying to customers “ebooks and print books are the same.” This drives more people to ebooks (who doesn’t want to download their book now?), sells more Kindles, and further cements their place in publishing’s future — both provider of new and destroyer of old (what bookstore can compete with 49% off?). Also, notice how Amazon is redefining short writings with their Singles program. Fewer words, lower prices and, most importantly, a new (not very good) term to attach to the new value proposition.

Is there a disconnect between publishers and readers that’s influencing the developing price model?

Todd Sattersten: The biggest disconnect is that mainstream publishing’s $9.99 to $19.99 ebooks are now sitting next to Amanda Hocking and J.A. Konraths’ $0.99 ebooks. There was never that risk in the bookstore channel because of the cost of scaling atoms. The wide range of pricing destroys pricing power.

Are ebooks destined to be priced at $0.99?

Todd Sattersten: Yes, they already are. Is everything going to be $0.99? No.

What do publishers need to do to take control of the perceived value of ebooks?

Todd Sattersten: I am not sure we’ve figured out what the reader should get for $0.99.

The biggest play for publishers in digital is to shorten book length. Everyone will admit that books both in fiction and non-fiction are driven by a page count rather than what is the appropriate length for material. I would like to see more experiments with serialization on the fiction side and an “album” of chapters on the non-fiction.

Here is an example of what I mean from the app space: 1337 Game Design released a game app for the App Store called Dark Nebula. It was $0.99 and had a light narrative that pushed you into Episode 2. So, rather than putting a bazillion levels in a single $0.99 game, ala Angry Birds or Cut The Rope, they divided 35 levels across two $0.99 apps.

Adapt the product to match what pricing will support. Every other industry does it. Why not publishing?

Our biggest problem is that we keep hanging onto the idea of a book. The word itself is laden with 500 years of meaning. In my world, a book is made of paper, bound on one side and it does an awesome job of delivering words and images. We need some new terminology for electronic products so we can get more creative about what publishing creates and what we can offer readers.

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