Saturday, October 29, 2011

Why The Value Of Content Won't Win A Price Debate

Discussions about ebook pricing are rampant across the Internet. Seems everyone's weighing in about the perceived race to the bottom or talking about the devaluation of content.

I've put off talking about the great price debate here because I don't like to simply rehash the same discussions that can be found elsewhere. Frankly, I believe several factors contribute to a successful price point: genre, author recognition, time of year, marketing buzz and Amazon's algorithms of the moment. Some novels see great success at 99 cents, others at $2.99 and others still at $4.99 or more. A lot of novels never see any kind of success at all.

Where I see a gap in the pricing debate is in one aspect I've yet to see exploited in any of the blog or forum discussions. That this aspect isn't mentioned more often puzzles me as it's objective, historical and empirical. You'll tell me if I'm missing something in the equation, won't you?

The outcry against the 99 cent price point is that it devalues the author's work. That the author should be paid more for a book they've created -- that content should be worth far more than the few cents royalty the author makes and that the book might as well be given away for free as to be sold for a buck.

On the surface, this seems a valid argument; 99c is pretty darn cheap and I'm not going to deny authors shouldn't be making less than what they historically ever have. But does the reasoning really hold up? Let's examine.

Deb the Debut Author has just landed a nice paperback deal. Her mass market book will sell for $6.99 and for the first 10,000 copies her royalty rate will be 6% of cover price. Deb is delighted because she's about to be a published author with a well-known house. Pop the champagne!

Deb will be earning just a scosh under 42 cents per copy. But wait. Her agent will be taking 15% of that 42c, leaving her with an income of 35.65c per book.

Meanwhile, Sue the Self-publisher puts her book on the market for 99 cents. At Amazon, she earns 35c per ebook, at BN 40c and at Smashwords 60c.

What's being devalued isn't the content, is it? The author of the content is earning the same amount, yet for some reason there was never a huge outcry about the author's share in the past.

So Deb sells through her first edition and her royalty rate escalates to 8% for the next 25,000 books. That's 56c per book before agent cut and 47.5c after.

Sue doesn't get an escalated royalty, but she can raise the price of her book. And once it's sold 10,000 copies, readers are likely to pay a little more for it. If she ups the price to $1.49, she still makes a 35% royalty at Amazon, but now her cut is 52c.

At 99c, Sue is making the same amount of money per copy the Debs of the publishing world have been making for the last 20 years. Has content not been worth more than that before now? In addition, the reader is getting content from Sue for 75-83% less than what they're paying for Deb's content.

Based on the content creator's cut, it seems 99c pricing strategies aren't a race to the bottom at all but an historical status quo.

I have the luxury of not having to rely on my book sales to provide a living so I can adjust my pricing to see what works best for my genres at a particular time of year. I recently re-priced my two novels to 99 cents -- not that I have any great market insight, but simply to see if a few more people will pick them up because they're more affordable.

I'm happy making a mass-market paperback author's wages for awhile.

Do I think authors should earn more? Sure. The thing is, I still have the luxury to adjust my price at any time to whatever point the market will bear -- or beyond.

And that's the best thing about the great price debate. You can argue either side, or even argue with yourself, and experiment to your heart's content to prove whatever point you want -- even when that point keeps changing.

1 comment:

Landra said...

This is an awesome post! Thank you for taking the time to break down the numbers.
I think what happens is that a lot of those out there in self-publishing, who haven't gone the agent route ever, don't understand the numbers.
There is some mythical belief in a percent. Like a raise or bonus, when a boss says you'll get a bonus of 5% of your salary it seems like a ton of money. When you actually calculate it, and take away taxes the amount you truly receive is less than you're original thought.
So many have this illusion, but you're example strips it away. Honesty can hurt, but I rather now the truth behind the numbers then be fooled by that mythical percent. :)