Pricing Your eReader eBook

by Nancy Humphreys on December 7, 2010

Right now I find myself mulling over publisher’s peculiar pricing of ebooks. What in the universe are the big online bookstores thinking when they put a maximum price of $9.99 or $12.99 on their bestselling ebooks?

The agency model for ebooks

Corporations such as Apple and Sony and the major online bookstores that design and sell e-Readers have negotiated with publishers, and in at least one case a literary agent who holds the copyrights to several client’s books, to set a maximum price on ebooks. They call this price-fixing agreement the “agency model.”

The fact is ebooks take the same amount of labor to produce as print books. And labor is the chief cost of a book. Before a book can be put into ebook form, it must be “set” in PDF format. That means that most of the expenses of printed book production are all right there in ebooks too.

Just like a print book, an ebook has to have a front cover design. Someone has to to write up at least a little marketing copy for it. And there is the additional formatting cost to convert the PDF pages and images into particular digital formats that various eReaders use.

The only major expenses saved on ebooks that I can see are for the binding (pretty negligible on large runs of a print book) and the cost of storage of the books until they are sold. Not having to pay for a binding and buy warehouse space does save money, but it doesn’t justify a retail price cap for ebooks that’s two to three times lower than a new hardback book!

So why are publishers accepting the agency model?

Unlike authors, publishers are looking at the aggregate amount of sales on all of their ebooks. Some publishers own a lot of ebook titles. Harper Collins for example, has a total of 14,000 ebooks titles. Publishers are digging up out-of-copyright and out-of-print in-copyright books by the droves to convert into ebook gold right now.

The agency-model-maximum-price on eReader ebooks illustrates again how competition among a few large corporations in a market results in their use of “loss leaders.” Having piles of cash on hand right now, companies like Apple, Sony and Amazon can afford to subsidize the ebook market for a long time.

Why? Because these companies are not in business to sell books; they are in business to sell their eReaders. More ebooks means more people will want their eReaders.

Publishers, however, are still counting on print books to bring in the big money. For them, ebooks are the icing on the cake. In fact some publishers will put out a bestselling book in a bewildering variety of formats, hoping to maximize every last marginal dollar of sales.

Google is is also jumping on this bandwagon soon with Google Editions. Google Editions is a strategy for competing with the big online bookstores. Google intends to be the portal for locating and buying ebooks on authors’ individual web sites or anywhere books are sold on the web.

This idea might raise hopes that authors can set their own ebook prices, but according to the Wall Street Journal, a Google rep has said Google’s prices “will be similar to those at Amazon and Barnes &  Noble Inc.” Like the prices for print books, prices for ebooks will be set by the new oligarchy in control of the publishing industry.

The wave of the future: enhanced ebooks and book apps

If you read my three-part series on the State of the Publishing Industry in the 21st Century, you’ll gain a better understanding about this battle of the booksellers now exploding online.

To summarize my report, most American publishing house imprints are now owned by six media conglomerates, the majority of which are based abroad. These media giants, along with smaller publishers and e-Reader vendors are now experimenting with “enhanced ebooks” and “book apps.”

Enhanced ebooks include the entire text of a print book plus audio, video, and other additional content called “augmented reality.” Book apps, like print book digests of yore, just contain a small part of the book.

The enhanced ebook offers publishers a deal they can’t refuse because they can charge significantly higher price than the agency model’s limit for text-based e-books by adding only a few features.

An example is The Last Boy: Mickey Mantle and the End of America’s Childhood from HarperCollins, a division of Rupert Murdoch’s News Corporation. This advanced ebook biography of the baseball giant includes video images of the mechanics behind Mantle’s swing. It sells for $16.99.

App books are cheaper than ebooks and thus can sell for less than a full ebook, for example $6.99. They are a way to increase total revenue and entice some readers to buy the more expensive version(s) of the book. Right now publishers are experimenting not only with prices and apps for ebooks, but also with the right timing of releases for all three kinds of ebooks.

If you are a self-publishing author, you may or may not run into the agency model limit on pricing your ebook. Most likely, that model will break down once ebooks become the dominant mode of book publishing in the US. For now, ebook pricing is a whole new world, and future pricing is hard to predict!

But one thing is sure, if you are an author wanting to maximize exposure to your ideas and maximize sales, you should begin thinking right now about integrating audio, video, and/or apps into your ebooks!

Sources:

(1) “Testing Enhanced E-Books” by Jeffrey A Trachtenberg, Wall Street Journal, November 16, 2010 B5 (http://wsj.com)

(2) ” Google Set to Launch E-Book VentureWall Street Journal December 1, 2010 p B2 (http://wsj.com)

(3) “Google Editions: Divide and Conquer” TECHCRUNCH, December 1, 2010 (http://pulsene.ws/qSgv)

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Marketing Your Book to Libraries Marketing Your Books to Libraries: An Insider's Guide for Authors by former librarian Nancy K. Humphreys includes: 
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  • Types of librarians and books they order
  • Strategies to get past the "gatekeepers" who influence librarians
  • Right ways to approach librarians most likely to order your book

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