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Thoughts on eContent, Free Content and Pricing Model Options

Money2 I've been meaning to link to this Read-it-First article from Book Business but it didn't appear on their website till recently.  Now that's it's up I would encourage everyone in the publishing world to read it.  It's an interview Matt Steinmetz did with Matthew Baldacci of St. Martin's Press and it talks about an initiative to let readers "try before they buy."  The program reminds me a bit of DailyLit and it's interesting to see that they've quickly gone from zero subscribers to about 15,000 with a goal of reaching 100,000 soon.

This program stands out to me because St. Martin's is doing something every publisher should be involved with: finding new ways to reach their audience.  We're living in a rapidly changing marketplace and content sampling will only grown in importance as more and more devices take hold.  I'm not just talking about the Kindle and Sony Reader, btw.  Thanks to the iPhone's success, every cell phone maker is waking up to the App Store model opportunities.

If you're a publisher, what are you doing to build on-ramps to these new devices?  And are you thinking about more sampling options?  If you're an author, you should ask your publisher what their plans are for e-content, sampling, etc.  I'm proud of O'Reilly's efforts on this front.  You can follow the developments on our website as well as the O'Reilly Radar and TOC blogs.

One of the toughest issues to resolve hinges on pricing.  What's an eBook worth?  That's the question posed in this SF Signal blog post.  Even though the blog and the question are framed around SF, many of the comments apply to numerous genres.  Here are a few comment excerpts and my thoughts on each:

I will not pay hardcover prices for an eBook. It isn't the same. I buy books for the shelves, and will pay more for collectibles. I buy eBooks to read; they are not the same.

I'm amazed at how many publishers still think they need to charge the same for an eBook as they do for the print version.  The typical agrument goes something like this: "We don't want to cheapen our IP just because it's presented in a different format."  While this might, and I emphasize might, apply to a very small number of products, you've really got to think about the usability issues involved.  For example, a lot of complaints are made about how a customer can't pass an eBook along to a friend after they read it.  (Watch for that limitation to change at some point, btw.)  But I feel that as long as we're talking mostly about quickie ports from print to e-format, with no added value, you're probably looking at a lower price for the e-version.  The key here is to start thinking about how to add value to your content and take advantage of the e-platform.  That's where the new riches will be found.

And no stinking DRM, either, please!

Amen!

Take the cost of a paperback, subtract out the cost for printing and distribution and you are left with royalties for the author and some markup for the publisher.

Regardless of whether you agree with the previous statement, and I admit that I don't, you still have to acknowledge that this point of view is pretty common out there.  Perception is reality and this statement must be carefully considered.  I'd like to think that my team and I represent something more than "some markup" though.  There's a lot of work that goes into crafting most books.  A short list of important steps would include the development of the outline with the author, the massaging of the manuscript by a development editor, the copy edit and clean-up that makes it much more readable or the page design and layout efforts that also improve readability.  That's a lot to cover in a "markup for the publisher."  But again, until you can add more value to the e-version you'll probably be stuck fighting this uphill value proposition battle with your customers.

If printed books were to disappear outright, well, then some other method of covering the hidden costs of acquisition from authors, editing, promotion, etc., must be covered and unit prices for audio and e-books would naturally rise as a result.

Very insightful.  For the time being, most publishers treat eBook sales as a bit of an afterthought, mostly because they typically represent such a tiny percentage of the publisher's overall sales.  This allows the publisher to absorb many of the expensive editorial and production steps on the print side of the P&L.  But if print revenues decline, those expenses have to be recouped somewhere else.

If Amazon really wanted to get people onto the Kindle, they would offer backwards compatibility/customer incentive. By that I mean that the registered buyer of a book on Amazon.com would also get a Kindle copy that they could read on their Kindle device, iPhone, or desktop app. Books aren't like CDs where you can put all of your existing music on your iPod.

I've been lobbying for this since the dawn of the Kindle.  The problem is, I'm not sure many publishers or authors would buy into the idea.  But it sure would help drive more interest in the Kindle!  How about a compromise solution?  What if Amazon were to offer you the Kindle version of the book for $5, or about half the going rate, when you buy the print version first?  There have got to be some interesting bundling models here that have yet to be tested.

Btw, I'm a consumer who's also frustrated with this issue.  As I mentioned in a tweet the other day, it seems like most of the books I'm looking for on the Kindle aren't converted (yet?), and many of the ones that are now have prices over $9.99.  I've never bought a Kindle book for more than $9.99 and unless there are some interesting bells and whistles that come with it, I'm not sure I ever will.

Comments

Jesse Wiley

I think you nailed it with "The key here is to start thinking about how to add value to your content and take advantage of the e-platform." If publishers can created significant added value (not just electronic format "portability", etc.), pricing really won't be a big issue because customers will see that that value is worth paying for.

As far as markups for costs, I think there are and will be some significant ones or for e-content or products, and even plain old e-books which require xml conversion, tagging, e-content mangement and delivery, etc. When you start to add significant value to content, there are likely to be big costs associated with electronic platform licensing or development not to mention R&D if you are real serious. These platform costs may not be variable costs but they will still need to be recovered in some way.

All this to say, customers will pay for something of significant value, maybe even more than the list price of a hardback book! So I think we need to add some real value by focusing on our customers' wants and needs way beyond just having a collectible or something they can pass along to a friend.

Joe Wikert

Hi Jesse. I couldn't agree more, and it reminds me of the used textbook market analogy I've been tossing around lately. Every semester students get hosed by campus bookstores when they buy back their used texts at a fraction of the original price. The general assumption is "used textbooks are worth less than new ones." That's true in the print world, but could the reverse be true in the e-world?

What if the student instead were to buy an e-textbook and over the course of the semester they capture their notes in that e-text? At the end of the semester, could they re-sell that "used" e-textbook to another student for *more* than the original price? It depends on a number of things, including how good the notes are, of course. And what if that student were to capture excerpts from the instructor's lectures in podcast format, also adding them to the e-textbook package? Now you start getting into more gray areas of IP ownership, but maybe the instructor could get a cut of the resale price as well.

My point is it's easy to envision a model where value added to existing e-content *can* indeed help increase the price of the original product.

Francis Hamit

There is a Kindle edition of my novel "The Shenandoah Spy". I do not control the retail price. Amazon.com does and they can set it anywhere they like as long as they pay me 35% of my stated retail price, which is less than the suggested retail of $18.95 for the print version. It's $12.95. The difference is slightly more than the prep and printing costs for the first print run. If you do a little math, you see that I actually get a larger dollar royalty on Kindle versions than print ones. So far, the more expensive print versions outsell the Kindle ones about 100 to one. So the time spent reformatting the files to the Kindle format has not been rewarded. With the print version I discount from the cover price by 40 to 55 percent. This gets it into the brick and mortar spaces where again, it outsells Amazon.com, even with their trying to grab market share by discounting as much as 32 percent from list price. I don't care about retailer discounts as long as I get my end, because I have a distributor to pay for shipping, warehousing,etc.

I've been selling various e-books of my own content since 2004. Five years, and I haven't seen any big sales bonanza yet. I was one of the 400 or so authors in the Amazon Shorts program and now am using Smashwords.com where most of the titles loaded are close to the same price as their print versions. Smashwords.com only takes 15% of the net and automatically puts the work into ten different formats and they urge people to keep prices low. To little avail. They leave the pricing to the author/publisher. This site is still in beta, so it will be interesting to see if they can change the paradigm. Their formats include the Kindle, for no charge whereas I have had offers from Amazon.com offering to convert files for the low, low price of $99.00 each.

Everybody keeps saying that e-books are the Next Big Thing, but so far, in my experience, there is no "there" there. Nothing beats the comfort level and convenience of a printed book. Say what you like about the comfortable and familiar, it sells!

We are currently looking into an audiobook edition for those too lazy to read. The retail price will be more than double of the printed book, in all formats. The prep costs are about the same. It occurs to me that if people will pay $30 or $40 of even $50 for an audio version, then charging them full price for the text is not that outrageous.

But I take these things slowly and one day at a time.

Cricket

Perhaps some more details about what the publisher does, to show that the difference between authors, editing, promotion, etc. includes some justified expenses? I don't doubt that the publisher's work has value. I've slogged through enough that skipped that step to appreciate a publisher's skill in selecting and editing and all the rest. I also understand that publishers take the risks, and any risky investment needs a reasonable return. I suggest publishers make these figures more visible.

FrancisT

The “Take the cost of a paperback, subtract out the cost for printing and distribution and you are left with royalties for the author and some markup for the publisher.” comment is not I think saying that the publisher’s added value should be paid for solely in the markup.

What it is saying is that you take the expenses (editing, proofing, marketing) add the royalties, add markup and set price. Obviously if the book is published in paper and electronically then the expenses need to be split pro-rata based on anticipated sales volumes.

Francis Hamit

The biggest cost of my book was the cover art and design. Typesetting we did in-house, but that we had to contract. So it's a fixed cost and I certainly use it for advertising and marketing as well. If you count in the printing the per copy price is one thing, but if you keep adding the distribution overhead, advertising, etc, then it's another. I won the cover art, so I don't have to buy that again, but costs keep getting added. I did this offset. If I had gone with POD then the numbers would be different. Less overhead one way and more another. Every book is slightly different. The goal is to set your suggested retail high enough to cover all of your costs and make some money.

Jonathan Clark

Great post Joe!

I like what Stephen Fry said about the topic "Books are no more threatened by the Kindle than stairs were by the elevator" in his recent talk at the Apple Store in London download the podcast from iTunes here)*

He was responding to a question on the Kindle text-to-speech issue but I think his point is valid for all e-versions of books. Both stairs and elevators take you up and down buildings. One is healthier, the other (usually) quicker. Each is valued for what it does.

There is not one future for the book, there are multiple alternative futures. I agree that what us publishers should do is to look at all the ways books are used and valued, now and into the future. Then figure out all sorts of formats and delivery mechanisms, reading and authoring tools to make all these alternative futures happen - alongside one another.

Put it another way, we need to wake up to the fact that the true value (IP?) of books is what the reader does with them.

Philip Davis

The issue we are grappling with is the DRM issue. Authors we work with like the idea of controlling the distribution rights, but in your post you quote "and no stinking DRM" which is the reader side of the equation. My opinion is to limit restrictions put on an ebook and use the ebook as a marketing tool. When you think about - especially for new authors building your platform - this approach makes a lot of sense. For established authors, maybe not so much as the content has more value. So maybe the DRM issue is resolved based on the strength of the author's platform, i.e. new authors should offer free access and established authors control their access more.

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