Should Publishers Set Their Own Prices for E-Books?

Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.

Publishers should set their own prices for e-books, according to a panel at this year’s SXSW conference in Austin.

By forcing prices upon books and publishers, Amazon has been setting the terms by which e-books are sold and thereby determining the income they bring in, said Brian Altounian, CEO and president of digital distribution platform WOWIO, Inc. The company seeks to give publishers the tools to account for what e-books cost them to produce and to determine how to cover those costs.

“We are trying to position ourselves at the forefront of that,” said Altounian, speaking Sunday morning at SXSW on a panel called Publishing Models Transforming the Book.

The higher prices suggested by Big Six publishers (compared to the prices charged by Amazon, for example), reflect that the greatest cost to publishers is still talent, not material, said Penguin global digital director Molly Barton on the panel. Supporting authors remains the most important consideration, she said.

Ads were brought up as one way to support the cost of talent and production for e-books. Although suggesting integration of advertisements into books might sound ugly at first, if ads help subsidize costs and can be integrated into an e-book in a way that does not disrupt the reading process they will become more and more attractive, Altounian said.

But it’s not just pricing that’s changing. The entire payout model has shifted for independent digital publisher The Atavist, said the company’s creative director and chief technology officer Jefferson Rabb. Authors at the company receive “lump sum payments” in lieu of advances, from which they take writing expenses.

For The Atavist, royalties in the traditional sense are eschewed in favor of splitting sales, “usually right down the middle.” The same goes for film rights—the publisher has its own Hollywood representation. What the author might give up in accepting a lower sum up front would come back to him in high returns on sales, said Rabb.

The panel also featured the fabulous Swanna MacNair, founding partner of transmedia content firm Creative Conduit, LLC, who pointed out that we should take a bigger picture into account when we talk about issues of remuneration in digital formats and distribution—one that encourages careful cross-platform management of intellectual property.

The conversation was moderated by Publishers Weekly’s Rachel Deahl.

Related: Agency Model an Advantage for Smaller Publishers? (Video)

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Barbara Galletly

About Barbara Galletly

Barbara Galletly is pursuing a master’s degree in information studies at the University of Texas at Austin's School of Information. She is studying archives, libraries, and other forms of collections. Previously, she was an associate agent and associate director of foreign rights at New York literary agency Georges Borchardt, Inc., until she left New York to explore the wider world of books. She also writes, usually about books, for This Recording. Follow her at her website and on Twitter.

10 thoughts on “Should Publishers Set Their Own Prices for E-Books?

  1. matt harrison

    Publishing is ripe for disruption. My books are two of the three self pubbed books in Amazon top 20 for my genre. I imagine my book that sells for less than $5 is producing more income than those selling for $40. When other authors begin to realize this something is gonna give….

    Reply
  2. Richard Finn

    Wait, what? Talent is the “greatest cost to publishers”? Is that why they pay like 20-10% royalties to authors on ebook sales? That’s total BS. There may be solid reasons to back the agency model, but paying for “talent” isn’t one of them.

    In the wholesale model publishers control what they are paid. It’s harder to run price promotions, however – though not much harder. Although, wholesale is still how they sell printed books so they’re not really set up to market with the kinds of promotions a publisher can do with price control. Self-published authors have the ability to set prices, so I can see allowing large publishers that ability as well. What they do with that power, however, is almost exactly the opposite of the self-published authors.

    Either way, if controlling costs and getting paid are what they care about then they should favor the wholesale model. Let Amazon eat the losses and nevermind that those wholesale costs are unsustainable. Agency model for ebooks doesn’t save the little guy. It saves the likes of Apple and Barnes & Noble from being forced to compete on price and eating losses themselves. It forces customers to pay higher prices than they should.

    Bring on the disruption. No business model should be sheltered from the effects of the free market. No business model should be incentivized to avoid increasing efficiency. People adapt, new opportunities arise – this what keeps our economy growing.

    Reply
  3. Tyler

    Not only SHOULD publishers set their own prices, but I’m convinced more and more publishers WILL be setting their own prices. Amazon’s pricing policy has been a big turn-off for many self-publishers, and I can see more self-publishing authors abandoning Amazon in the near future.

    The question of how quickly this happens comes down to what authors gain from sticking with Amazon (and similar platforms) versus jumping ship.

    Reply
    1. Richard Finn

      I’m not sure I follow. Currently self-publishers and the Big 6 set their own prices. Why is that a turn-off for self-publishers? Amazon lets them set prices and, along with Apple, pays the most generous royalty rate in the $2.99 to $9.99 price range (Apple is currently the only ebook retailer giving 70% on all prices below $200).

      Indies will go where ever they see their interests best looked after. From the numbers Amazon’s attraction of self-published authors only seems to be accelerating. However, I feel that if B&N started courting those authors they’d certainly look over there too and consider being exclusive to B&N. That depends on a lot, though. Some authors, like Amanda Hocking, were able to get up to 40% of their sales on B&N, but the vast majority get almost all their sales through Amazon. As long as that continues Amazon is not in danger of losing self-published authors. In fact, unless Amazon starts to actually damage their business the authors will sell there anyway. More channels = more sales. The cost of leaving Amazon will just be too high given current royalty rates and sales figures.

      What I would like to see is B&N actually trying to attract these authors rather than treat them like second class citizens.

      Reply
  4. brendan stallard

    “if ads help subsidize costs and can be integrated into an e-book in a way that does not disrupt the reading process they will become more and more attractive, Altounian said.”

    Mr Altounian,

    Not on your nelly, bro.

    Ads in a book?

    Gerrawaywivyou! On Yer Bike!

    brendan

    Reply
  5. Amber Lea Starfire

    I’m for publishers setting the prices of their books (i.e. the agency model), however I think they need to be subject to competition. Ebooks should cost less than paperbacks, because they cost less to make. It’s simple. But lately, I’ve noticed a trend to price ebooks at or even, in some cases, higher than the paperback price. I’ve seen ebook pricing of $13.95 from big publishers. What’s up with that? I’m looking forward to the results of the anti-trust investigation.

    Self-publishers, on the other hand, because of competition to be seen are constantly pushed to lower prices. 99 cents has become the new “norm” for self-pubbed fiction. Ridiculously low. Self-publishers need to encourage one another to value their work and price it accordingly. $4.99 for a 300 page ebook is a steal.

    Reply
    1. Barbara GalletlyBarbara Galletly Post author

      I thought this was a really interesting comment. I also wanted to add that Molly Barton also suggested that material costs were only 10% of total costs to traditional publishers.

      I think you’re right to point to the idea that this seems to suggest a more complex relationship to prices exists out there. Pricing is just one aspect of e-books that will continue to evolve. But most important here was bringing not just publishers but also more (non-Amazon) distributors and e-book retailers to the fore of the conversation about pricing.

      Reply
  6. Richard Finn

    Like Barbara says, the material costs of the book aren’t much. But neither is the chief cost the \talent\ – more like the publishers’ various stakeholders. It’s about capturing what economists call \willingness to pay\. It’s why airplane tickets cost more for weekend departure or if you’re buying for a flight in a couple of days rather than a couple of weeks. It’s why Canon produces a professional camera and then disables part of it to sell to consumers at a lower price. Likewise hardbacks might only cost the publisher 10-20% more to produce than a paperback, but they charge 100% more.

    The problem is, in this new digital world, there are too many ways around that particular problem. The traditional publishers risk losing sales or losing fans because they’ve prices themselves too high. Charging more for an ebook than a paperback may seem to make business sense, but it drives people to try less expensive indie authors or even pirate books. This is particularly true if there’s no ebook available or if they’re still charging a premium price on an older book.

    That being said, according to an interesting post by Dean Wesley Smith a few weeks ago (http://www.deanwesleysmith.com/?p=6391), the price point at which sales are actually occurring is rising. He makes the point that what we see on Amazon or one success story at $0.99 does not a trend make and suggests prices for self-published authors – but his suggestions seem high to me by about $2 or so.

    Also worth checking out is the Paupers Book Club (http://www.paupersbookclub.com/). It shows only books at $4.99 and under. You can filter on price points at under $5, under $3, under $1, and free. There are a ton of free and $0.99 books to be sure, but there are also a lot of really good ones in the $4 to $3 range (particularly series openers). I’ve found some good ones – and some not so good ones, but I haven’t been disappointed overall.

    Pricing a book at these levels isn’t about valuing the work. It’s about marketing an author. On the blogs there are tons of success stories, including Dean Wesley Smith, who win over new readers with low priced books. Those readers then go on to buy their other books, not priced so low (but still reasonable).

    Also, look at it this way, is the value dependent on what the author is paid for the work or what it costs the reader to get it? If the value of the work, to the author, is chiefly about how much that author is paid, then read another great post over at The Passive Voice comparing revenue with indie publishing vs. big publishing deals (http://www.thepassivevoice.com/02/2012/authors-havent-had-it-so-great-under-the-retailerpublisher-oligopoly/). Given prevailing royalty rates a $10 ebook sold on Amazon generates $7 in royalties for the indie author and $1.50 for the traditionally published author. If that same author just wanted about the same royalty from Amazon she’s getting from her traditional publisher, then she could set the price at $3 and make $2 per sale. If we assume that this is a midlist author with some recognition already – they had the choice of self-publish or traditionally publish, then they already have a following and would actually sell a ton more ebooks @ $3 than at $10. She could also go up to $4 or $5 and get $2.70 or $3.50, now more than double the royalty they got before. (It’s worth noting that the numbers for selling through B&N, Apple, and Smashwords are about the same at these prices, so it doesn’t have to be on Amazon) The reader gets a good book at a lower price and the author makes more money per book. In economics this is called both a consumer surplus and a producer surplus, which is almost impossible to achieve at the same time. Now the reader has more cash with which to buy more books.

    Of course, in this model the author (also the publisher in this case) has the ability to set the price. The same ability the big publishers are now using to price themselves out of the market. People responds to price changes. Some things take a long time to change habits, but others don’t. It remains to be seen which books are, but I have my suspicions.

    Reply
  7. Richard Finn

    Yes, and if their policy doesn’t suit an author that author can leave. However, Amazon states several times that they will match whatever price they find for your book so that nobody sells it for less than they do. Since you have the power to set the price, they don’t want to you set their price high and say, Barnes & Nobel’s price low. So, if your price is lower elsewhere, for whatever reason, they will lower their price for your book. If I drop a piece of food from the table by accident, be it a steak or a piece of lettuce, it’s gone before I can blink. That’s just a natural consequence of having a dog extremely motivated by food.

    From what I understand many authors have had a lot of trouble with price changes propigating from Smashwords to other sites like Kobo and Diesel. Price changes can take up to five weeks to show up on Kobo once you make the change on Smashwords. Is that Amazon’s problem or is that Smashword’s and Kobo’s problem? Is that a reason to drop Amazon or a reason to drop Kobo? How many books does Jim Hines sell on Kobo? I hope its a lot, to justify such a freaking headache.

    Intending to sell a book at $2.99 doesn’t matter if you’re selling it at $0.99. The fact of the matter is, the price is $0.99 at Kobo. Couple that with the fact that Amazon will match the lowest price it finds online and the consequence is that Amazon will sell the book at $0.99.

    The moral of the story to me is: if you want to have day (or week) precision is setting your price for sale and promotion purposes, then don’t ditribute your book through the Smashwords Premium Catalog (though selling on Smashwords itself is fine). If, on the other hand, you do not want to change the price very much then go ahead and sell it everywhere you can.

    Reply

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