Ebook pricing: A reflection of the market or a race to the bottom?

[Tara Woods Turner]

One glance at the going rates for ebooks and you'll quickly learn that pricing is crucial to staying in the game, but how does this affect indie authors? Do we have to slash prices to even compete or are low prices a fair exchange for keeping more of our earnings? Is half of something better than 70% of nothing and will readers pay higher prices for books that haven't been vetted by a publisher? Is indie book pricing a reflection of the market or a catalyst for it?

[Alex]

the average price of an ebook is much less than a mass market paperback:

A Wizard of Earthsea for $6.99 (ebook) vs. $6.00 (mass market paperback). (in this case, the publisher is inflating the ebook price.)

self-published ebooks are primarily in the $2.00-$4.99 range w/a big chunk in the $0 - $0.99 range.

the big 5 start to ramp up at $7.00 and peak at $9.00 - $9.99.

authorearnings May 2016 Book Price Points

according to smashwords, their website's price point with the best earnings yield is $3.00 - $3.99, but up to $4.99 and even %5.99 is still good.

Smashwords 2016 Survey Book Price Points

now having pointed out these surveys, remember that these are all averages; in other words, YMMV. furthermore, this grouping is also caused by people thinking where the best price point is. interestingly, amazon imprints sells a lot at $5.00-$5.99. indie books pricing is spread out more. the big 5 price their books higher but also remember that they're mostly depending on fewer books, their best sellers. so, in that way the big 5's numbers (both in terms of pricing and earnings) are skewed higher.

having said all that, you should look at what other books in your niche are being priced at. this is crucial. for example, the smashwords survey said that the $9.00-$9..99 range was due to non-fiction generally selling well at a higher price than non-fiction.

if you look a this slide, you can see how the size of the niche (in this case, simply a large genre) can differ so widely. in fact, one might see a correlation b/w higher price points and the predominance of the big 5 in a genre. in effect, the big 5's higher pricing can pull up the price point for the other indie and small/med publishers. one might, in fact, make argue for such a causal relationship in the non-fiction genre.

authorearnings 2016 May Pricing by Genre

also, the writer is getting a much better deal with amazon and smashwords's higher royalties compared to other publishers. also, i wouldn't price my book lower than the 70% amazon royalty ($2.99, right?)--except for a sale--which is sustainable when looking at the gross earnings at that price.

paying a higher price for a big 5 or even a small or mid-size publisher's book is more a reflection of superior marketing and connections and their selection of the cream of the crop rather than content.

[Tara Woods Turner]

Do you not feel people are willing to pay more for big 5 ebooks because the books are current and there will be no guesswork about quality, objectively speaking? This is why KU works for avid readers. For one low price they can afford to take a chance on newbies and indies while gorging on the bestsellers' back catalog. This is why the first in a series is usually priced so low. Also, Amazon is smart: they incentivize membership in KDP Select for authors in order to protect their interests with KU.

[T. K. Elliott (Tiffany)]

Interestingly, when one looks at trend, Big 5 market share in ebooks is actually falling - possibly because customers are not willing to pay inflated prices.

Customers are willing enough to pay £5-10 for a paper book, as it's recognised that this involves printing, storage, etc. However, the customer is bright enough to realise that this doesn't apply to ebooks, so charging a similar price for an item that requires less resources to make and ship represents artificial price-hiking by the publisher.

This is, I think, one reason why Five 5 ebook market share has dropped over the last two years: http://authorearnings.com/report/may-...

While unit sales of Big 5 ebooks have levelled off in recent months (halting the downward slide), their actual income is still dropping.

I think quality/indieness is something that, as authors, we think about more than non-authors. Goodreads ran one of those little polls a while ago - maybe a year - about how people chose books. I forget what the top reason was, but "by publisher" came just about at the bottom. Cover art ranked higher.

So I don't think that most readers are all that bothered by whether a book is indie, small press, or Big 5 - what they care about is, does it have a nice cover (and overall professional presentation), and does it look like it fits into their reading genre of choice - and can they afford it. Basically, Do I like the look of it? rather than Who published it?

Kim Harrison recently started a new series (Big 5 published, I think), and sales were dire - partially, reading the comments, because the publisher put it out in hardback. Her fans were saying "I really want this, but I can't justify paying $20. I'll get it when it comes out in paperback." (They'd priced the ebook just as high, I think.)

So... quality matters, but a perceived lack of quality isn't the reason why indie books are priced lower. The problem for (Big 5 authors) is that Big 5 books now appear to be priced higher than the market will bear.

It's worth noting that a Big 5 author is only likely to see 15-20% royalties on their books, as opposed to the 70% an indie author can get. As several successful authors have pointed out, anybody who can do arithmetic can work out the point at which it's better to have 70% royalties on a cheap book than 20% royalties on an expensive one - especially if the cheap book will sell more.

But in the final analysis, the data appears to indicate that we should certainly not be attempting to emulate Big 5 prices - it doesn't seem to be working out too well for them!

[Tara Woods Turner]

I say emulate big five quality, accept the burden of self promotion and marketing and reap the benefits of indie freedom and control. Still, the 70% model is not a perfect match for every book although I think it works well for most non-fiction titles.

[Nik]

Tara wrote: "One glance at the going rates for ebooks and you'll quickly learn that pricing is crucial to staying in the game, but how does this affect indie authors? Do we have to slash prices to even compete ..."

think Mercedes shouldn't be too worried about Hyundai prices, until Hyundai starts to be perceived offering the similar quality/luxury/prestige as Mercedes. It's a bit of a different market and the big 5 try to keep it that way. If they can sell Stephen King or anyone of his caliber for 20 bucks, why shouldn't they? It's the offer and demand. However their less known brands/debut authors is a different story, for they have to prove superiority to justify a higher price. On the other hand, those indies who gain traction and virality and charging much less than the trad authors represent a certain threat to them, as those who offer an alternative, supposedly verified by the public, entertainment cheaper than they do and as a result we see a constant decline in big 5 prices.
I think a person, who reads 10-12 books a year would be less likely to experiment with the names s/he doesn't know (maybe 1-2 books), because s/he has less room for mistake and would pick a title of someone he'd read previously or recommended by someone s/he trusts or would take a book that 'everyone read' like Harry Potter or 50 shades. On the other hand, voracious readers, reading let's say 40+ books a year, at some stage 'run out' of authors they like and tend to experiment more and grab debut/indie titles. And those voracious readers are sometimes an authority for those who read 10-12 titles. In my personal situ - my cousin was in constant search of new science fiction and fantasy titles and read them all, while I read only those that he vouched for their excellence -:). This is just common sense and my own observation and I don't know whether they correspond with the marketing studies. Basing on the above, I think the prices of less known indies should be reasonable enough as to not represent a "high" risk for a potential buyer to spend a considerable amount and not to enjoy. Besides, the consumers understand that for an ebook the costs are lower and expect the prices to reflect the lower cost. If to be more specific it looks to me that a price within the range of 3-5 USD for a book of 200-300 pages long should be reasonable.
My problem is with the abundance of the free and damping cost books. I think it devalues the entire industry and sends a bad message to the consumers. Not surprising, some research reports that a lot of titles downloaded for free, sit on the comp perpetually unread.
By the way, I'm not sure, the really big sellers of the trad industry sit on low royalties. Let's say my bestselling author's contract for 5 books expires, I, as a manager of a publishing house, would hate to lose my milk cow, so I would offer such terms that he/she can't refuse, including substantial increase in his/her share.

[Tara Woods Turner]

Nik
Absolutely 100% agree. I think you hit the proverbial nail on the head and this is exactly why Kindle unlimited is not a perfect fit for every writer. This is exactly why we should all endeavor to improve the quality of our writing. This is exactly why Indie writers should borrow the successful habits of the big five while staying true to what we feel is our own avocation. I have yet to offer my book for free on Amazon or with any of the promotion sites. I know that everyone says you have to at some point but $.99 is as low as I have been willing to go so far. Since I write nonfiction and my genre is narrow I just don't see the advantage of giving away my book. I do understand that it is completely different for fiction authors who are running a promotion and wanting to climb the ranks or create buzz for the second or third book in the series. But otherwise I do not see the advantage of going permafree - so many readers have come to realize that free means you get what you pay for. There are exceptions of course. Some of the most thrilling the Vallas I have come across were free but again, they were tie-ins to otherwise commercially successful endeavors.

[Ian]

Pricing is an awkward issue. If you price low, people might be more inclined to try it, but equally they also think that you don't think much of it either. Some people made an awful lot of money out of 99c books early on in the ebook market, but you have to recognise that then there was a real shortage of material, and once sales got going you would quickly rise to page 1 of the browser (there may have been no more than 4 pages for many genres). I personally think those days are over, and only those with a real reputation can get to the top of the sales, so the real problem is how to achieve that?

Alternatively, if you price high, you will lose sales because if someone does not know of you, they are more likely to try someone cheaper. The KDP price discounts are interesting. I originally tried some free copies, unloaded a lot, got no reviews on those and got no other perceivable benefit, so I stopped doing that. I do offer price discounts, and I am uncertain as to their value for the discounted book. I had done two discounts that sold NONE of the discounted book, but I got increased sales elsewhere. I don't understand that, but then again, I am not a great expert on selling.

[Tara Woods Turner]

I have come across authors on the KDP boards who insist that their $.99 books did not sell until they raised them to a dollar $.99 or even $2.99. The power of perception is also a factor.

[Alex]

Nik wrote: "On the other hand, voracious readers, reading let's say 40+ books a year, at some stage 'run out' of authors they like and tend to experiment more and grab debut/indie titles. And those voracious readers are sometimes an authority for those who read 10-12 titles.

that's who you need to market to: the voracious reader in your genre.