With the resolute decision to put an end to the silliness of paying for full distribution of paper books, many things are now able to be changed. (If you haven’t read my last two posts, on the costs of distribution and my schedule for canceling it, you should.) One of the key things is book pricing. I’ve tried a few eBook pricing experiments in the past, but I’m giving up on the wild guessing method of pricing in favor of an explainable (if not immediately obvious) algorithm for determining prices. But first, some discussion on eBook pricing:
This conversation goes around and around and around, and as various players in the publishing industry take one tenuous step after another, the details may change, but one of the core responses coming from readers about the price of eBooks is this: “eBooks cost nothing to produce, so why should I pay more than $x?” (Where $x varies by reader, usually being one of $9.99, $5, $3, or $0.99 – and there are various reasons why they picked those numbers, some of which I’ll cover.) The biggest problem with that response is its inaccuracy. Really, the marginal cost of producing one more copy of an eBook is only pennies. The book itself cost quite a bit to produce, especially if you expect the author to be paid, but also because traditionally published books also have the cost of (often) three editors, a graphic designer, an illustrator, at least one marketing professional, and someone (whether internal or external) to create the various eBook formats, and all that even when they’re only going to produce an eBook; there are more people and expensive processes involved if the book also has a paper edition. Even among the new wave of indie publishers (some people prefer to think of them as self publishers, but whatever) there is a growing consensus that they need to hire a professional editor, pay for copy editing, and hire a cover artist, at the least – all of which, for quality results, costs thousands of dollars. So if you want to pretend eBooks cost nothing to produce, you have to remember that the first copy cost hundreds or thousands of dollars to produce, and it’s all the copies after that where the marginal cost of pennies may begin to have some meaning.
When this is brought up, sometimes an intelligent person will respond with something like “once the book has earned out, there’s no reason for the price to be so high!” – Usually they want to buy a back-list title and are shocked to discover it costs almost as much for the eBook as the paperback! There’s no getting through to such people that books have value (apart from how much it costs to produce the copy you’ll read, how much is that story/information worth?), and rarely are they interested in a conversation containing the words “what the market will bear” because their dollar vote says “no, I won’t pay more than $x for an eBook!” …often, in protest, they’ll go buy the more-expensive paper book. (Or a used book. I would estimate that 90% or more of all my book, music, and movie purchases, in my entire life, have been of used items. Publishers hate the idea of me. I hate the idea that the world would let people be so poor they can’t afford books. I also love that the world has libraries; support your local library!) Of course, for big publishers with hundreds of new books per year, and thousands or tens of thousands of back-list titles, trying to track which books have “earned out” and adjusting their prices accordingly is a massive task. (Or it would be, if they didn’t have to track all the expenses and revenues of all their titles, anyway. I mean, they pay royalties, don’t they? They keep track of exactly how much each title cost, how much it has earned, how many copies are out on shelves, who has them, et cetera… Hmm…)
Anyway, I’m a small publisher. I only publish a few books a year, and only have a few dozen titles to manage, so far. With agency pricing (You think you hate it because you think it means higher prices, but really what it means is “publishers set the retail price, and all retailers keep the same cut of that.” Watch what I’m about to do with it. This is a possible future for agency publishing, once publishers get up to speed. Give them a decade or so.) I can alter the prices of my eBooks any time I want, and all the eBook retailers have to sell it at the price I set, and I can know for certain how much I’ll be earning on each copy sold. So what I’m going to do is this: I’m going to adjust the prices of my books based on whether they’ve “earned out” yet, and I’m going to do it for both the eBook versions and the paper copies I sell directly.
For books I’ve already published, the starting price of the paperbacks will be the list price on the cover. For eBooks the starting price will be half of that, rounded up to the nearest $.99. The floor for eBook prices will be $2.99 for book-length works, $0.99 for short stories. (If a short story is in a collection, I’ll be combining expenses & revenue from all sources, and applying pricing based on that aggregate. More on that, below.)
An aside: Why $2.99, and not $0.99? Blame Amazon; they pay me 70% on eBooks priced from $2.99 to $9.99 and only 35% on all other-priced eBooks. (On the high end, this means that even when my formula says an eBook should be more than $9.99, it won’t be, so you win on that end.) Well, plus this: In my calculations, which I’ll detail in a moment, I don’t assign a value to my time. As the author (& everything else) I only get paid after the book “earns out” anyway. Oh, and this: If you want the book for free, it’s still available for free on modernevil.com. So, that $2.99 price is for people who want to support the creator, but can’t afford the premium options.
Oh, and the floor for the paper versions will be based on (cost to print 1 copy + $2), rounded up to the nearest $.99. The $2 is what I earn from Amazon on those $2.99 eBooks when they actually pay the 70% (they don’t, always), so the amount I pocket from “earned out” books is roughly the same, regardless of format.
I have the prices I’ll be using for the updates I’ll be putting through over the next few days, and I plan to update prices once a month during 2012. (We’ll see where we are, after a year of this.) Probably in the first week of each month, based on the prior month’s sales. Or, if/when a premium item sells, immediately for the relevant title. Premium items will include: signed paperbacks, original artwork, and my original poetry journals, for now. I plan to leave most of my signed paperbacks at $25, and the prices of the cover art & journals have always been based roughly on covering the full expense of producing the published books. I still believe in the pay what you can model, also known as “Freemium” since it lets some people get the content for free, while others pay, and at the high end there are premium goods. I’m just modifying the way the cheaper of the for-pay versions of my content will be priced.
Here is how I’m calculating prices: Calculate what percentage of the total cost of publishing the book still needs to be earned, multiply it by the difference between the starting price and the floor price, and add that to the floor price. So, for example, my first novel, Lost and Not Found, has a paperback list price of $13.99 and a price floor of $6.99 (the eBook price starting point would be $6.99 and the eBook price floor $2.99). So far, it has earned 65% of what it cost to publish (not including my time) and has 35% left to earn. The difference between the list and floor is $7 and 35% of that is $2.45 (the difference is $4 for the eBook, 35% of which is $1.40), which gives us the (rounded up, remember) new direct paperback price I’ll be offering of $9.99 (the eBook will be $4.99).
If you didn’t follow that, don’t worry, you don’t have to figure anything out or update the spreadsheet. You just get to buy the books at a discount. Here are all the new prices (title: paperback / ebook / % left to “earn out”):
- Lost and Not Found: $9.99 / $4.99 / 35%
- Lost and Not Found – Director’s Cut: $6.99 / $3.99 / 33%
- Forget What You Can’t Remember: $8.99 / $4.99 / 26%
- More Lost Memories: $8.99 / $4.99 / 41%
- Cheating, Death: $4.99 / $2.99 / N/A
- The First Untrue Trilogy: $9.99 / $4.99 / 12%
- The Second Untrue Trilogy: $19.99 / $8.99 / 65%
- Dragons’ Truth: $7.99 / $3.99 / 28%
- Time, emiT, and Time Again: $5.99 / $2.99 / N/A
- Unspecified: $4.99 / $2.99 / N/A
- Worth 1k — Volume 1: $9.99 / $4.99 / 87%
- Worth 1k — Volume 2: $9.99 / $4.99 / 83%
Where it says “N/A” it means the title has already “earned out”. I should note that for the purposes of this calculation, I am considering all expenses and revenue from the individual sales of Untrue Tales… Books 1-3 as part of those for The First Untrue Trilogy, and the same for 4-6 for the second. Since I originally published Book One back in 2004 but didn’t put out Book Four until last Fall, the first trilogy has had some time to get closer to “earning out”. Also, for reference, the percent of total expenses for the entire series combined remaining to earn out is only 35%, and if that ever crosses the line I may just drop the price of all editions of all books in the series to their floor prices. Also of note: Time, emiT, and Time Again has “earned out”, so all its individual short stories will drop from $1.99 to $0.99, whereas More Lost Memories is far from earning out, so most of its individually-available short stories will be increasing from $0.99 to $1.99.
For most of my books, selling just another 10 or 15 paperback copies (or twice that many eBooks) will allow them to “earn out” and both: reach their price floor, and start earning me money. A small handful of collectors could create the same impact.
There are some who will say I’m doing this backwards. That I should start prices as low as possible, to encourage “early adopters” and “build a critical mass” and gradually raise prices so that, when my book “hits it big” I’ll be “maximizing my revenue”. Actually, I read that exact plan on someone else’s blog a few weeks ago. It was by a guy who thought the book reaches full price point was after it had sold 15,000 copies. My highest-volume title has sold 62 copies (and well over 7k free downloads), so … not in the same ball park. On the other hand, with the system I’ve designed, my prices bottom out within about 25 paperback sales (or 50 eBook sales), so if ever I had such a popular book, most of the copies would sell at a low, low price – and earn me $2 apiece. Plus, as I keep saying, the for-pay versions of my books are all intended for people who want to support the creator, which is to say that “early adopters” are people who love my work and want to support it however they can; they’re willing to spend a little extra (and sometimes a lot extra). The free versions are for “building a critical mass” and if I ever had 15k sales of a title I’d know every one earned me at least $2/copy, or roughly a year’s pay if I got a “normal” day job (though likely I’d earn less at a day job, at my current theoretical earning potential).
I’ll begin updating eBook retailers soon, along with modernevil.com, so hopefully by the end of next week the new prices will be rolled out almost everywhere. Oh, and right now I’m thinking that, for future books, I’d start the eBook price at $9.99 and the paperback price at $25, to be sure they go down quickly… though that’s all in the air; with a successful fundraiser, they’d start at the price floor, and without one, the expenses are super-low. I don’t know. Cross that bridge, and all that…
Your feedback on this change is welcome. Comment, email, call, txt, whatever…
*Updated* I just updated the numbers (just after midnight, 1/1/2012) after doing a little more bookkeeping for the end of the year, and made a change for how I’ll be calculating expenses on Dragons’ Truth, so prices for both Untrue Trilogies and Dragons’ Truth have been updated in the chart above to reflect the most current numbers. For reference: selling one extra copy of each Untrue Trilogy (Thanks, John!) dropped the price of each book by another dollar. Sorry I hadn’t already taken that sale into account; I knew about it… Also: My latest calculations show that, for my first two poetry collections, I can’t afford to drop the price from $9.99/copy. I didn’t order enough copies to make the new model work, and I’ve already cancelled them at LSI so I can’t order more without paying setup fees again. So … for those two books, the paper editions are super-limited, and will be stuck at $9.99.
5 thoughts on “Variable book pricing”
I think this approach makes a lot of sense. The books that you can sell cheap you do sell cheap. The books you are not making money on you charge more for.
This approach maps cleanly to what the world does for most physical products. As the initial development/production costs are paid off the price is lowered.
The thing I really don’t understand about the person planning to do it in the reverse order is that, well, typically an author will have a series that both they and their core fan base really loves. In your case that maps to the “Untrue Tales” series… if you raise the price as a book becomes more popular, you’d be selling book #1 at $9.99 and book #6 at $0.99. That is, it totally ignores the fact that authors get more readers of an established series if more people read the first book in the series.
Well, the guy was more making a suggestion for other people to follow rather than announcing something he was going to do … and his own books are more … non-fiction, non-serial, often business books, and always tightly focused on a particular issue for a particular audience. Almost all his advice is good for people writing those sort of books and almost totally useless for anyone writing fiction.
Keep in mind, too, that most writers have just one thing. If they don’t find success with it, they either keep trying with the one or they give up. Sometimes that one thing is a series, more often it’s a single novel. His advice would probably work with a single novel, and would even work with a series which had new books coming out… if they sold in any significant volume. Think about it: You loved the first book and are waiting with bated breath for the next one – and if you get it when it’s brand new, you only pay $0.99! If you wait, you have to pay more. The idea is to create an incentive to get in early.
You’re right, though, that for a latecomer to the series, the unusual pricing may be confusing – with the plan I’m following now, if I were the sort of author motivated by money, I’d just not put out the next book in a series until the previous one had earned out. Then, at least, you wouldn’t end up with weirdness like I would (if I were offering the books individually, right now), where Book Two seems to be the most popular (if only by a little), and where 5 & 6 have earned more than 4.
Anyway, hopefully what I’m doing will help, some. It’s really just another big book-pricing-experiment. Of course, my sample sizes are usually too small for any meaningful data. *shrug*