Pricing Ebooks: Art or Science?

This morning I read an interesting article by Richard Curtis about how much it costs to produce an ebook. Okay, I think his estimation of the costs of labor are a tad on the high side, but he made some excellent points and I am pretty much in agreement with his breakdown. Where I heartily disagree is in his closing line:

But hopefully, some consumers who complain about e-book prices will take a more benign view of the challenges confronting publishers.

Um, no. Not even a little bit. Mr. Curtis makes an elemental mistake. You see, producers care about costs. The only thing consumers care about is value.

Value is a perception.

Take Starbucks, for instance. I can make a cup of coffee at home for about .15 cents a cup. A cup of coffee at Starbucks costs around $2. Why? Is it better coffee? It costs Starbucks more to produce one cup of coffee than it costs me. They have stores and supplies and advertising and employees to pay for. So it’s no surprise they charge two bucks. The surprising part is that people pay it.


Answer that and you’ll know how to price your ebooks.

When it comes to ebooks, as with anything sold in the free market, value is in the eye of the beholder. It only makes sense to me that to establish the optimum price of YOUR ebook is to know what YOUR readers value.

That means knowing who your readers are.

When you figure that out you can determine your ebook’s value and the highest price your market will bear.





17 thoughts on “Pricing Ebooks: Art or Science?

  1. But but…what if I have no readers? (Joke!)

    Well, not really. I think that’s the hard part for newbies. Knowing who your readers might be. For me, I figure my best bet is to price it somewhere near whatever similar ebooks are selling. I guess. Definitely ‘art’ at this point for me.

    • A lot of it is by gosh and by golly when pricing. This is where indies have a huge advantage over the big publishers. We can keep our costs down and that gives us more room to experiment.
      Bottom line is–if you give readers what they value, plus a little bit more, you can charge at the top of the pricing pyramid BUT if you fail to deliver value, any price, even free is too high.

      • That’s true. How many times have I seen negative reviews saying they wanted their money back – and they hadn’t paid anything?!

      • The bit more includes the value of your TIME to read the book. How much would you charge someone for an hour of your time? To ask myself if I can afford the time to do something, I value my time at $1000.00 per hour. That is how much it costs me to set everything aside and do what YOU want.

        So the cost of a book – even a traditionally published hardcover – is almost irrelevant. A writer is asking for part of my life – and I can’t get it back. So I want something in return for it. The time it takes to vet a book also comes into the equation. Now we read cover copy, the sample, reviews – spend 10 or 20 minutes to avoid losing hours reading.

        I for one am quite annoyed when something seems like a good read, sucks me in for a while, and then doesn’t deliver. The plot goes nowhere. The characters never develop. The theme, well hidden, turns out to be something that, had I known, would have never led to me buying/downloading a free copy.

        Free isn’t free. That is why people complain about free books – because the book sucked them into investing a precious resource. They want their TIME back.

        For most people, this isn’t that big a deal (I can see some of them scratching their head out there). For those of us whose energy is severely constrained, the deal is huge.

        A writer who give me something extra – entertainment and a feeling of time well spent, validation of my values or new values to add to them, something I can share with friends or get by sharing with friends – that’s a writer whose future books I will look for, buy, and recommend.

    • Quality, quality, quality, ABE. That’s my mantra. You’re absolutely right. Wasting a reader’s time with a poorly crafted book (in any format) is never a good thing.

  2. I am seriously interested in value when I buy an ebook. I’m not buying an object. It’s all about content. It would never occur to me to consider what it cost someone to produce it.

    • Way I see it, the market for ebooks is too young for anybody to know anything concrete. The free market, however, has principles at work. The market will find its own level and producers will either meet it, or not.

  3. Yesterday, I read a sample of an ebook and enjoyed it very much. But I did not buy it. It cost 10.99 and it was a YA novel, which means it was short. Instead, I’m getting it from the library. My ereader is hooked to the internet which means the bookstore website AND the library website are both a click away.

    This isn’t the first time that’s happened.

    This is not to say I never pay 10.99 for an ebook. If it’s a personal friend’s book, or if I’ve read other things by this author and want to read more, I might pay more. But for a debut novel, 10.99 was outside my preferred price to pay, and I’d rather borrow the paper version from the library.

    As a writer, it’s really hard to know how to price my books. But I just go by what I’d want to pay if I were a reader. That means all my books are under $5.

    • If you were Ken Follett, though, Margaret, you’d be perfectly comfortable charging $19.99 for your ebook (one of his ebooks, at $19.99, is in the top ten on Amazon when I checked this morning).

      I kind of see the ebook market (in general, very much in general) as akin to the pulp fiction publishers back in the 30s and 40s. Cheap books, cheaply produced, cheaply priced and LOTS OF THEM. Literary publishers (and probably librarians) were horrified by their popularity. The literati refused to acknowledge them as “real books.” Yet from the pulp presses rose some of our best writers and favorite genres.

      Taking our cues from the pulphouses isn’t such a bad thing. It takes time and seasoning to produce a wonderful body of fiction and to build the type of brand that can command top tier prices from adoring fans.

      • What made me buggy was the fact that the book is almost 1000 pages long! Long live Ken Follett (who probably hopes his readers live long enough to get through one of his novels. Heh)

  4. I sometimes think that no one in the book business understands anything about pricing. Jaye is partly correct about value and perception, but there is more to pricing than that. The first thing you have to decide is what is the goal for this book right now? Are you looking to gain readers? Maximize your current income on this book? Maximize its long-term potential? Once you’ve figured out what your goal is, then you can start to decide on the positioning of the book in the marketplace.

    Pricing is one aspect of positioning a book. Where does this book fit in your overall portfolio of work? Where does the book fit in the marketplace? How are comparable ebooks priced (genre, length, etc.)? What are the price barriers in your market?

    Price barriers exist in every market, but they can be hard to find sometimes. They may be psychological. The first time gas started pushing $4 a gallon in my neighborhood, buying patterns changed. They are closing in again, but I’m not seeing the same thing happen. We pushed past that barrier. If you are selling to corporate software development organizations (to use an example I know well), there is “the suit barrier” at $5000. In many organizations, any single purchase higher than $5000 will have to be approved by someone who wears a suit to work. Which means it will have to be sold by someone who wears a suit and makes personal sales calls. Which means it will cost a lot more than $5000 because you don’t waste that kind of time and money on a $6000 sale.

    Price barriers in ebooks won’t be as stark, but they are there. The most problematic barrier is the risk factor. How much will a reader risk to find out if they like your book(s)? You can get fans to pay almost anything, but acquiring new readers if you charge $20 for your literary novel will be difficult, unless your name is Rowling, J.K. Don’t forget that for many readers, the time investment matters as much as the dollar investment. Expecting readers to buy a 500,000 word fantasy epic from an unknown is probably a bit much, no matter how it is priced.

    Once you have a community of fans (and I define a fan as someone who would pre-order your next book), you have to figure out how to keep them happy by allowing them to pay more. That sounds strange, but it is very true. You have fans who like your stuff so much it is embarrassing. They would happily pay more than retail to get something special, especially the chance to “read it first”. Humans have a need to be part of a special group. One of the healthier ways to get that is to be a serious fan of a book series or writer. At least nobody ever started a war over a literary work…

    • I have only one little thing to add, William. It’s something publishers and writers should never forget. A reader, even a heavy reader, can have material on hand at all times–and never purchase a word of it. There are libraries, friends to borrow from, torrent sites for thieves. There is a contingent of readers for whom price is no object, but is a very small group. They are the brand loyalists who may only buy one to three books a year and only from their favorite authors.

      People who need gasoline can’t just stop buying gasoline altogether when the price goes up. They may change their driving habits, but gasoline is still essential. Once the price point tips past the comfort level for readers, however, they have alternatives. Pricing oneself out of the book biz is very easy to do.

      • What you say is true and the situation is even worse if you think about it. Imagine the situation when a person is making a decision to buy your book. There is always a book available for free that the person hasn’t read and is obviously better than your book. That’s true almost every time someone buys a book. And yet, millions of books are sold every year. You have to ask yourself why anyone ever buys a book. There are many different answers to that question. For tens of thousands of people, when they read a book is more important than what they pay. They don’t think about it that way, but it is obviously true. The hardback bestseller is absolute proof. Every hardback bestseller will come out later as a paperback (and will be available at the local library for free), but tens of thousands of people buy the hardback and almost none of them actually want the hardback copy. They just want the story while it is “fresh”. You might think that only applies to big name bestselling authors, but you would be wrong. Lindsay Buroker sold 250 copies of her latest novel as ARCs (advance reader copies) at $10 a copy. Every person who bought one knew that the book was coming out in a couple of weeks and would cost less than $10. 250 copies might not sound like much, but it is 250 more than zero.

        When you write books, your product isn’t just the story. It is an experience. For some folks, it’s an escape from the humdrum reality of their lives (and honestly, I think that’s the most valuable thing you can sell most people). For others, it’s a feeling of community with other readers. If you are lucky, you are selling membership in an “in-crowd” of some sort. Whatever people are looking for, they want, more than anything else, a reliable way to get it again. Many years ago, in a former life, I was a professional beggar, er, I mean an expert in fundraising for non-profits. The most fundamental lesson I learned is that there are people out there who would give your charity money, but you have to ask. Once people have discovered that your charity gives them what they want, they are inclined to keep giving. So, you have to ask and ask and ask again.

        You might not think that these lessons mean anything for writers, but I think they do. If a writer wants people to give her money, she has to ask (and by ask, I mean she has to have stuff for them to buy). Forget about “discoverability” for your books. You don’t need people to discover your books, you need to discover your readers. Almost everyone in the U.S. has discovered the American Cancer Society (just to use one example). But not everyone gives to the American Cancer Society. But of the people they ask to give, a fairly high percentage give and give repeatedly. Guess who they ask the most? The people who’ve already given. Guess who their next target is? People who give to charities like the ACS. Before everyone regales me with stories of how much they hate [insert name of charity/politician/educational institution] asking them for money all the time, I know. The good news is people don’t feel that way about books. You probably can’t write fast enough to overwhelm your readers the way politicians are overwhelming their donors in the U.S. right now.

        My point in all of this is that, in addition to free, you can use any price point $0.99 and $20.99 for an ebook today and still be within the market. Picking the right price point is about more than pricing yourself out of the market. You have to decide what market you are in. You need to know whether you are in reader acquisition mode (price yourself below market) or loyalty fulfillment mode (price yourself above market). Lee Child (who writes the Jack Reacher series) is in loyalty fulfillment mode. Everyone who buys a Jack Reacher novel wants to be rewarded with the same experience they had with the first 20 or so. All of his Jack Reacher novels are priced at $9.99 (and the newest one is priced even higher) because he doesn’t need to acquire very many new readers. He (and his publisher) are making a trade-off by assuming he will get more money by charging higher prices to existing fans than lowering the price to acquire new readers. This makes perfect sense for a popular series with 20 or so books. And yet Lee Child is terrified of the idea of Jack Reacher ebooks being available in libraries. Just see the discussion I had with him in the comments section of Konrath’s last post… His position makes no sense. I don’t think he understands the dynamics of book buying. When you price high, you need libraries even more because that’s the way you will get a new generation of fans.

  5. I agree with you across the board, William. Selling books is JUST LIKE selling any other product. Writers and publishers tend to think there is something magical and holy about books, that there is something so special about them that the rules of commerce do not apply. Except they do. I don’t know why other readers buy, but I know why I do. I like books, I like owning them, I buy what I can afford. If I think I can’t afford them, I don’t buy. (I’m a huge Lee Child fan–I discovered his books at the library, I have many of his books in paperback, but will not buy his latest ebook because it’s too expensive.)

    My whole point is not about the perfect price point–there isn’t one. It’s that writers/publishers need to know what their readership values. Part of Lee Child’s value (to use him as a handy example) is his brand. That’s valuable enough that many readers will gladly pay $13.99 for one of his new releases. A debut author–who may or not write a crime thriller as good as Child’s–doesn’t offer brand value to Child’s readership, so if the debut author charges $13.99, he’ll probably have very low sales. But Child’s readership also values taut, action-filled thrillers. If the debut author has written a taut, action-filled thriller he might attract readers by pricing his ebook low enough to qualify for an impulse buy. He might even pick up a few readers who’ve decided to give Child a pass and haven’t yet gone to the library.

    Many of the conversations I see about ebook pricing focus on the price alone. They say, well, the average price of the top 100 books on Amazon is $2.99. That’s misleading. They fail to take into account the readers who have determined that average–namely romance readers. Last I looked, something like 80% of the top 100 were romance novels. Is it because those books are better than others? No, it’s because romance readers are voracious. The $2.99 price point is about what a used romance paperback goes for. Romance readers value quantity and price (NOT the only thing they value, so don’t eat me, folks, okay?). The “normally I buy used books” crowd is a massive market and smart writers have tapped into it. That does not mean $2.99 is the optimum price point for other genres. I suspect crime thriller readers might look askance at $2.99, thinking it is too cheap and not well written. $4.99 might be a better price. Or even better, a $6.99 list price and sale-priced at $3.99–what a bargain! That’s what I mean about knowing what your readers value.

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