E-book pricing
Earlier this week, Mike posted a blog on the merits of selling an e-book at a $.99 price point. In essence, he argued that the downside of the low royalty outlined was offset by the benefit of expanding his fan base.
An article in last Friday's Wall Street Journal highlighted just how much one writer has been able to find a new fan base when pricing a book under a buck. The WSJ captured the pricing decision of John Locke, a 58 year old self-published thriller writer started selling e-books in March of last year, as follows:
"When I saw that highly successful authors were charging $9.99 for an e-book, I thought that if I can make a profit at 99 cents, I no longer have to prove I'm as good as them," says Mr. Locke. "Rather, they have to prove they are ten times better than me."
Things turned out pretty well for Mr. Locke. According to the article, he sold 1,300 e-books last November; his January sales sky-rocketed to 75,000 units. In March he sold an amazing 369,000 e-books earning him $126,000 for the month. That's right, $126K for one month.
The question of how this happened and how many authors can replicate these results is an interesting one. However, I'd like to give some attention, not to the sales and revenue, but to the $.99 price point.
Chris Anderson, the Editor in Chief of Wired magazine writes and speaks to what he calls "The Future of Free." His contention is that digital delivery of content drives prices down to zero, be it music, video games, or books.
Anderson points to examples of this in today's market, one being Google's practice of giving away access to its search engine, the business side of the bargain being that the company makes money on advertising.
Anderson states that support for drastically low, even free, e-book pricing comes from economic theory. Namely, in a highly competitive market, price falls to marginal cost – marginal cost being the cost of producing an additional unit. In the case of e-books, marginal cost is pretty damn close to zero; the argument is that e-book pricing will be, as well.
So you (and I) might ask: are you telling me that just when this e-book thing is starting to get good, the economics are heading us toward a zero-revenue business model?
Maybe, maybe not. I'm no economist (and my undergrad advisor would be ready to attest to this fact), but I know that many authors possess pricing power. If you want to read JK Rowling you are left with only one option, JK Rowling, regardless of the marginal cost of her e-book.
So what's the conclusion here? My own take away is that e-books are rocking the publishing world in a way that gives independent writers new opportunities, yet this new emerging world of distribution likely holds future surprises for all of us, e-book authors, included.
And in the meantime? Next week I will be putting Urban Shorts, a collection of four short stories, up on Amazon. The price? I think I'll give $.99 a try.
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