I like Joe Konrath, who writes as J.A. Konrath and Jack Kilborn. He’s done the publishing universe a huge favor by publicizing his great financial success with his independently released ebooks. Before Amazon’s new royalty rates came into effect, he sold his works at, I think, $1.99 and/or $1.59. Now he sells them at $2.99, and he’s on track to make a six-figure income this year selling many novels that NY Publishers didn’t want to publish.

I also like him personally. I believe he wants to help other authors earn a living, and his blog shows that he’s invested considerable effort over the years to help others learn various aspects of the craft and business of writing fiction. I’ve always liked him whenever I’ve talked to him, and I expect to be a big Joe Konrath fan for a long time.

Joe is also the main person who influenced me to dip my toes into the waters of indie ebook publishing (though Zoe Winters has also been a major influence on this path). I am very grateful to him for that, although I am still experimenting and deciding how I want to be published. For now, I’m among the ranks of indie authors.

I’ve been reading Joe’s blog since at least the beginning of 2010, and I nearly always agree with him. I think his rhetoric against traditional publishers is often too caustic and this weakens his arguments a bit, but it’s obvious he’s had experiences with publishers that have frustrated him, and I haven’t walked in his moccasins so he gets a pass from me on that. I agree with him on the bright future of ebooks; he feels that authors now have a tremendous opportunity to earn a living by publishing their own works. Many other authors, many who have little or no platform compared to Joe, are doing quite well as indies.

But for the first time that I can remember, I disagree with Joe on an important topic.

Should Ebook Novels Cost $2.99?

Joe argues that ebooks should be priced at $2.99 and says this is a sweet spot where authors sell a lot of ebooks, readers are happy, and authors can still make a lot of money. All of those points are true.

In order to get a 70% royalty on ebooks with Amazon, the author must price his work between $2.99 and $9.99. Amazon reserves the right to lower the retail price, but even if they lower your $2.99 listed ebook price to $2.39, you still make 70% of $2.39 (they recently changed the way this works). Your other option, which is the original option, is to make a guaranteed 35% of whatever price you list your ebook at, even if Amazon discounts the price further (which they will probably do, especially if you go with the 35% option).

Where did the magical $2.99 come from? Amazon themselves set this as a kind of floor with their new royalty policy. Did Amazon do their research and then determine that $2.99 to $9.99 is the best range for ebook prices? Yes, but remember that Amazon has their own agenda. Two of their big goals are to sell more Kindles and to dominate ebook sales, so their research was also for the purpose of furthering their own ambitions.

Amazon setting the floor at $2.99 doesn’t mean that a large majority of readers wouldn’t be willing (or wouldn’t have been willing) to pay $3.99, $4.99, or more for a novel. Amazon has always been hungry for market share, and they’ve always been willing to discount prices to gain it. And isn’t it wonderful marketing for Amazon and their Kindle device to have a flood of authors extolling their abundant online storehouse of $2.99 novels? I actually bought a Kindle (which I now love) earlier this year because I wanted to check out this exciting, new indie author scene.

I do wonder if Amazon is a bit surprised that authors like Joe have become proponents for $2.99 ebooks. After all, their 70% royalty range is between $2.99 and $9.99, and authors make the minimum possible out of that 70% royalty at $2.99.

$9.99 is also somewhat suspect as a ceiling, though I personally think it’s a good one. But consider again Amazon’s overall agenda. They want to sell ebooks, they want to sell Kindles, they want to dominate the marketplace, and they want publishing itself to move in the direction of ebooks over print so that they become the greatest powerhouse in the publishing industry (they want to take the throne away from the big publishing houses). By the way, I happen to like Amazon and I always have.

Michael Shatzkin has reported on his excellent blog that the big publishers with their unpopular “agency model” pricing are actually doing just fine, thank you. July showed by far the biggest jump in ebook revenues yet for publishers, and they continue to sell popular titles at prices such as $12.99.

Big publishers aren’t winning any popularity contests with those over ten dollar prices, but the big houses are still selling ebooks and making good money with agency model pricing. Ironically, they may have been making more money before at lower prices, but that’s mainly because Amazon paid them based on their list prices before agency model pricing–but that’s another story. Publishers are trying to keep the print book business alive. Change is scary.

Critters.org Fair Ebook Price Survey

Critters.org ran a great survey earlier this year, which is still ongoing, about ebook prices.

For example, they asked, “What’s a fair price for a novel or other full-length ebook?” Survey respondents then entered their own a price for a “New release” and for “Backlist.”

Here are the current results, after 175 responses (not an insignificant sample, though not a huge number either). As of the time of this post, the average response for a fair price of a new book is $7.85. The average response for a backlist book is $4.64.

On new novels, the price at which 93% think prices are too high is $11.16. The price at which 50% feel that a new book’s price is fair is $7.85, and here’s the key figure for me:

The price at which 93% feel that a new book’s price is fair is $4.54.

They also asked: “What’s a fair price for a short story, article, or other shorter-length ebook?” The price at which 93% feel that a short work’s price is fair is $0.85.

Selena Kitt of eXcessica

Selena Kitt has argued on her blog and on Konrath’s blog for ebook novels to be priced higher than $2.99. She says:

Personally, I think ebooks should be priced based on length. This model has been used by indie ebook publishers for over ten years. (Yes, it’s true, there were thriving ebook publishers and distributors before Kindle!)

Our own eXcessica pricing is based on length:

$0.99 Short Shorts: Under 3K
$1.99 Shorts: 3-7K
$2.99 Stories: 7-15K
$3.99 Novelettes: 15-35K
$4.99 Novellas: 35-50K
$5.99 Novels 50-70K
$6.99 Super Novels: 70-140K
$7.99 Super XL Novels: 140-250K
$8.99 Super XXL Novels: 250K +

But Where is the Sweet Spot?

The bottom line on this discussion comes down to where the real sweet spot is for authors. Presumably, as prices rise demand goes down (though that’s not always the case—sometimes people will buy more of something at a higher price than at a lower price).

The reason why this matters is because it’s not easy to make a living as an author, whether as a traditionally published one or a self-published one. So we have to look at whether or not we’re hurting ourselves and even the entire publishing industry (which gives us a lot of great stuff to read and employs many good people!) over the long term by setting the bar of expectations too low at a price such as $2.99.

Let’s compare. An author selling 1000 copies at $3.00 earns the same as an author selling 750 copies at $4.00, 600 copies at $5.00, 500 copies at $6.00, or 300 copies at $10.00. Leaving aside the benefits of (presumably) selling more books to more readers at lower prices, for authors or publishers interested in the bottom line, the sweet spot is what we’re all curious about.

Will an author lose at least 25% of his sales by moving from $2.99 to $3.99? If not, then $3.99 is sweeter than $2.99, at least in terms of writing income. If yes, then $2.99 is better.

Be careful with considering any one author’s results with different prices. I’ve read a lot of discussion about ebook prices at places like Kindleboards.com and the results vary dramatically. Some people find that they sell more at higher prices, and some find they sell less at higher prices. Many have reported, for example, that they sell more copies at $2.99 than they did at $0.99.

Here’s a comment from Paul Levine from the comments on Joe’s latest blog post.

I'm testing $2.99 vs. $3.99. Appears I lose sales at $3.99, but less than the 1/3 difference in royalties. So, my gut tells me the base price should be $3.99. (Less than a Starbucks grande Frappucino, and better for you). Those books are all out-of-print backlist. I plan to put up two original novels in January and February, and for those, I'm considering $4.99.

That’s just one person, but there’s someone who is trying to test $2.99 vs $3.99 and finding that $3.99 earns him more money, though with less sales.

Someone who really surprised me is M.R. Mathias, who sells his huge fantasy epic ebook for $8.88. Most indie writers are trying to decide between $0.99 and $2.99, and here’s Mathias coming in at an unusually high price. He says, “My $8.88 title sells at about 10 to 1 over all of my $1 titles put together.”

Would he sell more and still make more money at $2.99 or $3.99? Maybe, but I’ve talked to M.R. and he’s sold around 150 copies at that price in two months (and that’s without a professional-looking cover, frankly). 150 sales in your first two months as an indie fantasy author is good even with a 99 cent or $2.99 novel, but he’s doing it at $8.88 with a cover that screams “Self-published!” So my guess is that he wouldn’t be making more money at $2.99, because he’d have to sell three times as many ebooks at that lower price to earn the same amount. I should also point out that he is a very aggressive marketer, his novel is huge, and he also has short stories and a YA novel for sale (with sales of all items combined approaching 500 sales); these things also help his sales. And I could be wrong. It is almost certainly true that he would be reaching more readers at $2.99, and that has its own benefits, financially and otherwise. But what about at $3.99 or $4.99? We don’t know.

Back to Joe

Joe argues for $2.99, but from all I’ve read from him, he doesn’t seem to have properly tested $2.99 vs. $3.99 (or any other price) and he seemed to admit this recently. He does have ebooks at different prices, though. He has some at $6.99 because his ex-publisher still owns those rights and the publisher refuses to lower the price (I believe he has asked them to lower the price—please correct me if I’m wrong, Joe).

Joe has said that his lower-priced ebooks vastly outsell his higher-priced ebooks. But we should not draw any firm conclusions from this. My guess is that when people go to buy a Konrath or Kilborn book, they look at the prices and buy the less expensive ones. They buy more of his $2.99 ebooks than his $6.99 ebooks because for the most part, bargain hunting is human nature (human nature also respects higher-priced items more, but that’s another discussion). If you offer me pretty much the same thing for $3 or $7, I’m going to buy it for $3. No-brainer.

Because people will naturally choose the lower-priced book, I don’t think we can deduce from Joe’s results that $2.99 is the sweet spot or best price. Also, in Joe’s case, remember that he was selling his ebooks for $1.99 before Amazon gave him a royalty incentive to raise the prices to $2.99, and before he was at $1.99 he also had books at prices like $1.59.

If Amazon had made $3.99 the floor, Joe would probably be arguing for that price now instead. And if Amazon hadn’t given an incentive for raising prices to $2.99, Joe would probably still be selling at $1.99. It seems that Joe settled quickly on $2.99 without properly testing other prices, such as $3.99 or $4.99. I don’t blame him and I’m not saying he did anything wrong. He’s obviously doing a hell of a lot of things right and he’s doing just fine without anyone else’s help. I’m just saying that we need to keep an open mind about pricing.

I’ve encouraged and even dared Joe to try an experiment where he raises the price of all of his ebooks to another price like $3.99 or $4.99 to see what would happen to his sales and revenue. Since he’s well-established now, that would be an interesting experiment, and I suspect he’d make more money at $3.99 despite less sales, partly because he’s already known. I could be wrong, though. And it might not be practical in his case if he’s already at $2.99 in other stores like B&N and Sony (I don’t know how long it would take the other stores to update their prices if he were to change the prices with them).

I plan to experiment with prices eventually with my own novel, but the problem is that as a new author who will be actively promoting (God willing), it would be normal (I hope so anyway) to expect increasingly more sales each month even at the same price. I won’t have a proper control to test for the ideal prices and it would be a long time before I felt I knew what my “normal” sales were.

Joe’s Argument that $2.09 is Fair

$2.09 is what an indie author makes on a $2.99 ebook through Amazon (assuming that Amazon actually keeps the retail price at $2.99, which they don’t always do). If they drop the price to $2.84, which I have seen them do, then the author earns less than $2 per ebook sold.

Joe argues that because ebooks cost less money to produce than physical books, authors shouldn’t be making more money on them than they already do with hardcover royalties. I respect the hell out of Joe, but I don’t get this argument at all if it means $2.99 versus $3.99 or $4.99.

For one, authors are likely to sell less copies independently than they would with a traditional publisher. Or at least, that’s the idea, right? For example, Joe has mentioned that he reached many more readers through traditional publishing, but that he now earns more money as an indie. Naturally, if you’re going to sell less copies as an indie then you need to make more money per copy to make the same living.

Also, indie writers have to pay for things like editing, copyediting, proofreading, cover design, layout, file conversions, advertising, travel, review copies and shipping, web design, and publicity. Plus they have to spend a lot more time working as a publisher wearing ten different hats, which gives them less time to write, work another job, or enjoy some free time (something they don’t have much of, I can already tell you after having a novel to finish rewriting and editing and an indie novella to promote).

And who is to say that $2.50-$3.75 for a hardcover is the “right” royalty payment for an author? That’s what the market has settled on, but that doesn’t make it a God-given standard. Despite the popular misconception about most published authors being filthy rich, most authors aren’t. Maybe more authors should be making a decent living (though I’m sure that depends on who you talk to).

Anyway $3.99 at Amazon pays the author $2.79, and $4.99 pays the author $3.49. Those figures are in line with hardcover royalties, while $2.99 pays less than hardcover royalties because it pays $2.09 per sale (likely a bit less because of Amazon discounting the price).

I don’t see why $3.99 or $4.99 is unfair, price gouging, or greedy. And I think those are awfully cheap prices for a good book.

End of Part 1

I’m going to end part 1 of this topic here. In part 2, I’d like to write about what some of the dangers might be in getting $2.99 entrenched in readers’ minds as “the” price for an ebook novel. That might take a while for me to lay out (but hey, you’re still reading this, so why not? It’s just you and me, friend).

Of course, this all comes down to the hard data. If writers make more money and sales at $2.99 than they do at $3.99, $4.99, $6.99, or $9.99, then that’s what writers should do if making money is their top concern–not that it should be. In my case, I just want to be able to make a living telling stories. Unfortunately, the evidence on these different price comparisons is still murky, so for now we have to talk about the topic on other levels. And there are some bigger questions and repercussions worth discussing.

Till next time … (I hate being so tired that I can’t come up with anything witty to end with, but for now I’m an indie author so I’m already overworked and underpaid and still somehow loving this journey ;-))
_____

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This entry was posted on Saturday, September 25th, 2010 at 2:43 am and is filed under Ebooks, Publishing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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