Why $9.99 Won't Always Be an eBook Pricing Ceiling

Have you stumbled across any of those Kindle owners who get angry anytime they see an ebook price over $9.99?  How about publishers who insist on maintaining their print list price for the e-version?  Btw, for the record, where I work we typically fall somewhere in between; our "digital list price" is generally less than the print list price and, of course, Amazon is free to discount to an even lower price.  As a consumer, when I see a Kindle price over $9.99 I'm highly likely to skip it.

Whether we want to admit it or not, Amazon is carefully training us to think of $9.99 as the "right price" for a Kindle book.  We can jump up and down and scream at the top of our lungs that "the intellectual property is worth far more than $9.99" but that doesn't change the perception that $9.99 is a ceiling for a lot of people.  So should we all just hunker down and figure out how to make money in a $9.99 (or less) ebook world?  No!

Here's the problem: In 2009 Kindle editions are nothing more than quick ports from the print edition.  As a consumer, I see no value added and I rarely (if ever!) see how the publisher is taking advantage of the medium to offer me something that's better than the print edition.  In fact, the DRM that's wrapped around most Kindle editions means I can't pass the book along to someone else, so that makes the product worth even less to me. (Also for the record, at O'Reilly we're proud to say that we sell all our ebooks DRM-free.)

So what's the solution?  Figure out how you can add value to the ebook.  Leverage the medium!  As long as you keep looking at ebooks as incremental to the print business you're much less likely to make the investments there that are required.  Quick p- to e- ports will cast off revenue that's nothing more than a rounding error to your print business.  If you're OK with that, well, that's your problem!

I'm convinced that one day we'll look back at this $9.99 ceiling and the limitations of the early e-reader devices (current generations of Kindles, Sony Readers, etc.) and chuckle.  Rich products that fully leverage the platform they're delivered on could be priced much higher than $9.99 and potentially even higher than the current print pricing levels.  The future belongs to the publishers who are willing to invest in products that aren't just quick-and-dirty p- to e- conversions.

P.S. -- Amazon hasn't exactly developed an "insanely great" platform for us to make excitingly rich Kindle editions for, have they?  And although that platform has been around for about 18 months now I can't say I've seen much progress on this front.  That's yet another reason why I wish they'd open things up like Apple has done with the iPhone.  Sure, Apple still controls the platform but look at the awesome lineup of third-party apps that have resulted from their approach.  And I'll bet the iPhone OS 3.0 update due later this summer will live up to all the advance hype.  How come we never see sexy platform updates like that from Amazon?

Comments

[Chris]

I'd like to comment on your suggestion that:

"Amazon is carefully training us to think of $9.99 as the 'right price' for a Kindle book."

In my opinion, Amazon doesn't have such powers. If they did, why stop at $9.99? Why not "train" people to think that $19.99 or $29.99 is the "right price"? Think of all the money they're leaving on the table.

Fortunately, the relationship between producer and consumer is not like a Pavlovian experiment.

It is consumers who decide whether an asking price is either too high or too low. Consumers hold the trump card because they don't have to buy...they can abstain.

If Amazon offers a price of $9.99 and no one buys, they would be forced to lower it. On the other hand, if everyone and their mother decided to buy a kindle because $9.99 is so cheap, then Amazon would hear cries from publishers that the $9.99 is way too low and prices must be raised.

So I wouldn't hand any special "training" powers to Amazon (or any company for that matter)...Consumers are the other side of the coin that sets prices, and hold more power since they can abstain from making an exchange altogether.

[Joe Wikert]

With all due respect, Chris, your assumptions are heading in the wrong direction. Amazon is subsidizing the publisher to bring many of these prices *down* to $9.99. If they wanted to go *up* in price they could have just offered the products at their normal discount off list. Instead, they're subsidizing the transaction so that the publisher still gets their typical price off list, even though that means Amazon takes far less, and in some cases, loses money on the transaction.

Why would *anyone* sell a product in this model if they're not trying to prove a point? My sense is Amazon will gather all their data together and present it to publishers in a case to get everyone to lower their digital list prices so that they (Amazon) can sell most products at $9.99 without losing money.

[Andy Rathbone]

> Figure out how you can add value to the ebook.

So true. I've written dozens of computer books, and I usually end up making last minute cuts to fit the print constraints of the publisher's page limit. Why not stick my extra chapters/paragraphs in the ebook? Then slap on a marketing blurb, "Contains bonus material not found in the printed version."

I'm sure I'm not the only author who feels this way.

[Mac Slocum]

Regarding extra value: there's a lesson from the journalism/media side that applies here. Early Web content efforts relied on the novelty of the medium for attention, but it was still just shovelware (which is exactly what most book publishers are relying upon now with their e efforts). Eventually, smart organizations seized the interactive tools: comments, RSS, email to a friend, sharing, aggregating, forums, etc. Content became the catalyst for an entire ecosystem of community. Granted, it's still not perfect, but the online content experience of today is infinitely more interesting than what we witnessed in '97-'01. I believe (and hope) the same will prove true for digital books.

[Martin Kochanski]

Until the platforms are programmable, there's not much that can be done. But programmability is expensive; or at least, programmability combined with appliance-like reliability: look how much Apple had to invest in the whole application review process. I've just written a blog post explaining why programmability is essential for my own project, Universalis: http://universalis.wordpress.com/2009/05/18/e-books-what-is-the-missing-ingredient/.

Publishers can't invest in anything more than p-to-e conversions until there are platforms to read them on. The iPhone is the only game in town at the moment: it could do with some competition.

[Glenn Yeffeth]

Yes, we need to figure out how to add value to Kindle books, or better, add value to a non-proprietary ebook format that provided new value for the reader. But in the meantime we need to adjust to the simple reality of what ebooks do to the economics of publishing.

Amazon is subsidizing the kindle prices, but this is because they correctly anticipated that publishers would not be willing to price ebooks fairly (see yesterday's NYT article www.nytimes.com/2009/05/17/weekinreview/17rich.html?_r=2&scp=1&sq=book%20publishing&st=cse)

What "should" ebooks be priced at? The market will ultimately decide, but by my math (see www.benbellabooks.com/blog/?p=103) a price of $12-13 yields the same profit/book as a hardcover.

[Mark Bloomfield]

Isn't the 'value add' the instant availability of the content? I agree with the inclination toward adding media rich value to what is 'flat' content but lets not fail to fully leverage this important advance of ubiquitous availability and the opportunity it presents to authors for recruiting fans.

[Joe Wikert]

Mark, I'd be the first to acknowledge that the instant gratification the Kindle enables is a differentiating feature of the device. However, I don't consider that alone to be a reason to charge more for a Kindle edition e-book. As a consumer, I feel I've already paid for that privilege when I shelled out $360 for the device itself. There's no way I could convince myself to pay extra for each ebook just because I can get it wirelessly. Based on the boycotts and other chatter about this, I suspect I'm not alone.

[Francis Hamit]

Let me weigh in here as someone who actually has a book on Kindle. "The Shenandoah Spy" trade paperback edition is list priced at $18.95, but Amazon.com sells it for far less. Either way the discount is 55% of LIST. The Kindle version is $12.95 but Amazon.com has always, from day one, sold it at $9.99. They pay me a royalty of 35% of LIST or $4.53 per copy sold. I have no control over their price and like publishers everywhere, am a little tired of being beat up over a pricing policy over which I have absolutely no control.

Let me also add that Kindle sales are a fraction of one percent of the trade paperback version. From my standpoint, these sales have no impact on my bottom line.

I suspect that one reason sales are so low on the Kindle are the thousands of public domain titles that Amazon.com has put up at 99 cents each as a leader item. I'm competing with authors of classics with much bigger brand names and the money is pure profit for Amazon.com.

One begins to appreciate just how best-sellers are made. Heavy promotion, brute force distribution and limited choice at the retail outlets all enter in here. Airport bookstores and warehouse book sections have a very limited selection of titles, but by volume are over a third of total book sales. Little wonder that some books are treated like fungible commodities and marketed like groceries, complete with the payment of shelving allowances to get the best positions in brick and mortar stores. This approach devalues the content, especially with works of fiction and is actually antithical to the future of literature because everything is dumbed down to the lowest common denominator, written and edited for eighth graders.

No one is going to produce an e-book priced lower than the print book minus the cost of physical production. The costs of preparation and promotion do not change with the format, nor do the percentages extracted for distribution...and , oh yes, the authors royalty.

Let's not forget that.

[Barbara Gavin]

Joe - Another very thoughtful post. I join the other commenters in agreeing that adding value to the electronic version is the way of the future. Downloadable bits of code?

[bowerbird]

well, if you can add enough value to an e-book that people are
willing to pay the kind of price you are hoping for, good for you.

but you're probably dreaming... meanwhile...

somewhere, there is an author who has created something that
is just as good as what you have -- or maybe not quite as good
but very close, or even maybe just a smidgen better -- who will
be willing to charge _much_ less because (s)he was not burdened
by the "overhead" of a publishing company.

that author -- a competitor coming in at a much lower price --
is your nightmare, mr. wikert. yes sir, (s)he is your nightmare...

and the irony is that it might well be an author who used to be
in your stable, dropped because you couldn't move their work.

-bowerbird

[elizabeth]

Also for the record, at O'Reilly we're proud to say that we sell all our ebooks DRM-free.)

I'm just curious as to why you consider this a source of pride. I think that it is terribly short-sighted. Talk about a door that cannot be closed again. How long do you think it will be before those unsecure files start making their way all over the internet? At that point, you would be happy to get 99 cents for any one of those books. I am presuming that you would not package your hard copy version with a print-ready file for every customer? That is because they are only buying one copy of the book, not the publishing rights.

If these are not free ebooks, why would you essentially sell the rights to copy, transfer and print these files at will. That is what you are doing in this case. If you have made no attempt at security, you would not have a leg to stand on when the consumer turns around and uses that file extensively. That seems to be a much bigger potential problem than some perceived artificial ceiling - don't you think?

[Joe Wikert]

Hi Elizabeth. Terrific question! O'Reilly has been selling DRM-free content like this for quite awhile now and I can tell you that we don't see any more unauthorized copies floating around than we do of other publisher's works. You do realize that there's never been a DRM model that can't be hacked or broken into, right? When I was at Wiley we used to marvel at how many copies of our DRM'd books were making their way onto rogue sites. DRM provides publishers with a false sense of security and is a hassle for customers.

If you look at the music industry you'll also see that quite a few of the major players are drifting away from DRM. Even Apple, a company most people wouldn't have thought could ever abandon DRM has changed their tune (no pun intended) as you'll see in a large (and growing) number of products on iTunes.

You don't really believe the myth that DRM prevents content from being released into the wild do you?