In economics and philosophy, there’s a term called the “tragedy of the commons” that I have long maintained applies to the new world of cheap e-books.
Layman’s version of the idea of tragedy of the commons: When there is a shared resource that everyone has access to, it’s in everyone’s rational self-interest to deplete that resource even when no one will benefit when it’s gone.
Layman’s layman’s version. A group of monkeys live near a banana tree. If they just let some of the bananas survive there would be more bananas for everyone. But to an individual hungry monkey, he just wants to eat a banana while he can. By the time everyone has finished acting in their individual interest all the bananas are gone.
You may know this more colloquially as “gettin’ while the gettin’s good.”
I think a case could be made that this is happening in the world of cheap e-books. Only it’s not physical or virtual copies that are being depleted.
The Early Mover Advantage
The prominent (mainly self-published) authors who have moved aggressively to discount their e-books have derived a significant benefit from getting there first.
In effect, what they’re partly benefiting from is contrast — e-books by traditional publishers cost anywhere from $9.99 and up. Self-published authors like J.A. Konrath, John Locke, and Amanda Hocking have experimented with $2.99 all the way down to $0.99 and even free.
Buy a book by a traditionally published known author for $10+ or take a chance on an unknown for $1? A lot of people are choosing the latter, better yet still when the author isn’t even an unknown.
As documented previously, these authors are able to undercut on pricing in part because they’re more efficient than publishers. Konrath, Locke, Hocking and others don’t have armies of employees they’re paying and a publishing ecosystem to support. They write their books, do a lot of the legwork themselves, and contract out what they can’t handle on their own. They can afford to undercut the competition.
Here’s where I think the tragedy of the commons kicks in.
Tragedy of the $0.99s
Thought experiment. Let’s say that everyone sold their books at $0.99. Stephenie Meyer, J.K. Rowling, James Patterson, J.A. Konrath, Amanda Hocking… everyone.
What would that publishing world look like?
Well, for one, more books would probably be sold overall. But not an exponentially greater number. There’s an important constraint that limits the number of books that can be sold: readers’ attention.
At the end of the day, there are only so many people in the world who read books and only so much time in the day they spend reading them and so much money they’re willing to spend for them. People do buy a few more books than they end up reading, but not that many more.
So basically in this hypothetical you end up with a situation where no one makes much money per copy sold and a good bulk of the readership that would probably have paid more if they had been required to. Unknown authors would no longer derive a benefit from the discounting.
If you think of discounts as resources, those discounts could end up depleted when the early movers drive down prices, and no one is able to derive benefit from them anymore.
And when book prices are $0.99, there would be still more pressure to give books away for free to try and build an audience. It’s not that hard to envision a price race all the way down to free for debut authors.
The bananas, in effect, would be gone.
Efficiency Wins
Still, despite the “tragedy” in the title of this post, I didn’t make up that term and I’m not so certain this is truly a tragedy.
As I have written in a previous post, human progress is a steady march toward greater efficiency. Economics is all about finding ways to improve productivity and find efficiencies in order to undercut the competition. When resources are freed up and we’re no longer fetching our own water and growing our own food and killing our own animals and sewing our own clothing, it frees us up to do things like invent spaceships and post updates on Facebook.
It used to take a monk years to transcribe a single copy of a book. Years! One single copy! Think about what that person’s time would cost today in America. We’re talking several hundred thousand dollars of labor for one copy of one book.
Now someone can create a copy of a book with a couple of clicks, and that book can be downloaded by millions of people for $0.99 or less. Efficiency allows us all to do more. It’s the foundation of the modern life.
Lower prices allow people to spend more money on other things and that’s what makes the economic world go ’round.
Price Discovery
And the last concept I’d leave you with is price discovery. As a recent episode of the podcast Planet Money illustrated, one of the new innovations of the recession is the Groupon, which is really a new version of the coupon, which itself was created for purposes of price discovery.
Price discovery works like this: everyone has a price they would pay for something they want. It benefits the seller to charge as much as the buyer is willing to pay, and it benefits the buyer to pay as little as the seller is willing to charge. In the old days, or in other cultures, people used to haggle and negotiate over everything in order to find that optimal price. That’s price discovery.
In the modern American world we replaced haggling with retail prices in the name of efficiency, but what is lost there is the ability to try to charge someone what they’d actually be willing to pay.
For instance, I would probably be willing to pay $100 for J.K. Rowling’s next book sight unseen, but the publisher probably won’t find a way to charge me that. Instead I’ll pay the retail price, something between $20-30, and all that money that I was willing to pay will stay with me. That’s potential lost profit for the publisher.
But as the Planet Money episode discussed, Groupon is the harbinger of a new interest in price discovery. Very smart people are hard at work at this very moment trying to figure out how to get you to pay what you’re actually willing to pay.
Where the Money Will Be Made
And this is where I think the tragedy of the commons will be circumvented. Yes, I do think that for new authors there will be tremendous pressure to give their work away or charge very little for it, just as there is pressure on journalists to work for very little or for free until they’ve built their career.
But I also think new technology is going to step up to the plate of profit maximization. Once an author has a commodity in high demand, there will be people willing to pay for it and new methods of price discovery to charge accordingly.
Who knows, by the time J.K. Rowling finishes her next book they may well have figured out how to get me to pay $100.
Um. And hopefully not because I told the Internet.
What do you think? Are we headed to free for e-book prices or will we find a way to charge as much as people are willing to pay?
Economics is concerned with money and making more of it. Efficiency and economics are based in business principles, and businesses very seldom will cut their own profits to benefit society as a whole, or in part. Individuals are a different matter.
Most people don't care about what resources are available, and aren't interested in sharing those if they can acquire more for themselves.
There are exceptions, but isn't that what the current state of publishing is pushing us to do? That's the message I see in publishers who are changing their tune when they see that perhaps that debut author who self-pubbed isn't as bad as previously thought. (i.e., her writing record doesn't matter). It's what sells and how many that matter in most business transactions. So like the truckers who priced themselves out of making a living, the writers and authors are losing sight of what's important.
All writers should be able to expect recompense for what they do. 'Gettin' while the gettin's good' is a common philosophy today and is considered by many to be a justifiable endeavor.
We must always remember what is lost in the cause for efficiency — generally it's the personal aspect, or the quality. Marketing drives efficiency (more product sold equals more revenue).
In most instances where efficiency is introduced into the equation, jobs and functions are lost for the sake of unit price. Loss leaders (free or 99 cent books) are a hook. We as debut authors, are the fish that could get eaten. More culling of the herd of writers that exist today?
Meanwhile back at my study . . . I keep on writing. Never say die is my creed.
The music industry is doing it.
And, there are artists who want to sell their songs for $0.99 but, the Apples of the world won't let them go for a lower rate.
Kid Rock is one of those outspoken, give the masses what they want, and give it to them at a lower cost, and add on a few more songs for free.
Cheers!
You get an 'A' on your analysis…you missed the A+ by missing out on the 'price elasticity of demand'. I quote (Wikipedia):
"Price elasticity of demand…is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price.
In general, the demand for a good is said to be…relatively inelastic when changes in price have a relatively small effect on the quantity of the good demanded."
Simply put, the price elasticity of demand for form-based 'excellence' (in this particular example, an 'excellent' book) is relatively inelastic: To wit: People will (and always have) demanded excellence at a reasonable price for a great many reasons (reasons that are generally outside the simplicity of this post).
But that's the answer to your question: "Are we headed to free for e-book prices…?" (No).
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Self-published e-books are attracting readers who used to troll used bookstores and remainder sales. They may be biting into mass market genre sales a little bit, but readers who buy hardcover fiction seem to be sticking with those sorts of books even when they adopt e-readers. Despite the inefficiencies of commercial publishing, it is still the only way to reach 80% of the audience. And the rock bottom pricing only entices a small and, frankly, undesirable segment of the readership pie.
Precisely because reader attention is a scarce commodity, quality content can command a price premium. Authors who can distinguish themselves on quality don't have to race to the bottom on price. This is the reason most people who can publish commercially will continue to do so.
Not sure if I'm understanding all of this but I think it'll weed itself out like anything else. These well known writers dipping their toe into self publishing are charging less because they're nervous, maybe. and freebies pull people in. Once the authors see what they can get they'll charge that. Supply and demand I suppose. Rowling might even give her book away at some point beause she doesn't need the money, and she's knows the real money is in merchendising (for her) anyway.
Self published, unknown guys like myself, charge little for the ebook to build a readership, I hope that people will still want a print copy, screenwriters will still want to adapt, producers will still want…well, ya get the idea.
It is a little scary to think of it terms of de-valueing the work (thats the real tragedy.) But on the other hand, I think its a trend right now, these 99 centers. I think the cream will rise as it always does, price will find it's sweet spot based on readership.
Marketing company's really need to be paying better attention to whats going on here. They're still thinking inside the box along with pricing and traditional publishing. Amazon and google are already looking in the right direction with that too. So I think there needs to be some Independent media company's poking their heads in here soon and re-thinking what they do and how they do it.
There's alot going on, and a lot coming up in self publishing and no one seems to have a handle on it; a view of the full, big picture, cept maybe Amazon, and I know there are still a lot of amazon haters out there, but there pretty good at raising monkeys and growing banana trees, and there getting better and better at selling them too.
Maybe it's because of all the talk recently about the roles of agents and editors in the future and how they will serve as gatekeepers, but when I was browsing through new books for my Kindle last night, I found myself really distrusting the very cheap e-books unless I recognized the author's name already. I feared I would be purchasing low-quality work; the stigma against self-publishing was at work. I still don't want to pay $15 for an e-book, but I didn't find myself too tempted to get a lot of cheap ones instead, even as impulse buys.
Also, you're right. People only have so much time to read, so even if all e-books were that cheap, people probably wouldn't buy that much more since it would still take a lot of time to read them.
You sure are smart, Nathan. Being a long time blog read, I already knew that but damn…
This is a really interesting observation and I think, ties publishing more definitely, to the game theory of economics as well as the tragedy of commons. Nice.
Dan, are you calling used book buyers undesirable? I thought we were just savvy shoppers. Why pay $35 for Rowling when it will be $4 at the thrift store if I wait a month. It would take six months for me to get a turn to read a library copy.
This is a market iTunes has successfully tapped. Why comb through piles of used CDs at the thrift store when I can download that song I've been looking for at $1. The CDs pile up higher than records now at my local thrift and the artists gets part of my dollar. Why would I sift through piles of disorganized books if I can find the one I'm looking for cheaply and quickly online? And the writer would get part of my buck and the 20 other people's bucks who would have bought that book used over its lifetime. I wouldn't have to buy furniture to store my library or put them away when they pile up in the kids room. When I couldn't find the physical copy of the book I wanted to read to my daughters class I downloaded a free copy, but would have willingly paid another dollar to not have to search the stacks. That's where the volume of sales will come from.
I think that debut writers and those looking for a temporary boost in sales will place their books at 99 cents.
But, there are a lot of people who are paying $2.99 and $3.99 without batting an eye for indie authors who have at least one other book out there. Their sales are not hurting. Dropping the price per book reduces the percentage they get, which in turn mean they'll have to sell roughly six times the number of books to make up for a single $2.99 sale.
The big publishers will always get $9.99 or more for their big name authors whom they've marketed well. And people will buy the 99 cent and the $1.99-$3.99 indie authors books, too. Like you said though – they'll choose what they want to read and how many books they are willing to buy. Price, to a certain point, won't deter reader from buying from an author they like – indie or traditional.
Great post, Nathan!
In my opinion, we are going to reach a happy medium. Prices will lower to more affordable prices. Beginning writers may need to be "discovered" by readers before they can charge for their work. Once they build a following they will be able to increase those prices to a certain point. I personally welcome this system even though I am currently unpublished. Musicians have to play their music to an audience for free, build a following, and then they are able to sell music/get picked up by a producer. Why should it be any different for writers? At the end of the day this will benefit the publishing houses and writers. Publishing houses will have lower marketing expenses and the writers they pick up will be better able to market themselves. It will be more of a partnership, the publishing house taking over the part of the business that writers don't want to have to handle (editing, printing, etc.) Also, how much nicer (if we get there) to have publishers going after writers who are building large followings instead of the other way around…Dare I say, publishers might query writers? 😮 One can dream 🙂
Awesome post 🙂
This is fascinating to me. I have recently been toying with a service that I'd like to charge $110. for, an hour, but that I'd be willing to take (rather than lose) a client for as low as $30.
Sort of like Priceline.com only different.
I don't want to lose any prospective client. But I want them to value and afford my service. And, politically, it feels like, too often, needed services/products are only accessible to the richer amongst us, when the less financially secure may need (and benefit society from having access to) our product/service even more.
i.e., not everything is a luxury item nor should it be.
A friend of mine has been working with "pay what you think it's worth and what you can afford" for some time now. And, myself, once, in a rough patch, someone gave me their service for 10% of its typical value. I voluntarily upped that amount over time as I got back on my feet to what I was comfortable paying: 40% (over which I wouldn't be able to afford it).
There's always a balance between the two: that's marketing.
The low cost introduction of E-Books was a necessary step in helping the technology grow, think napster. In time, the industry will adjust to the market and steadily step up pricing to sustainable levels. The consumer will either pay more, for a perceived improvement in quality and or service, or the industry will adapt to meet the consumers expectations. Either way, cheap E-Books will probably still be available, somewhere, somehow.
All of this discussion of ebooks has been madly interesting.
First, while I adore J.K. Rowling, I would try to borrow the book before paying 100.00 (I would content myself with a re-read of her others while I waited.
As to the 99 cent…. Well…Pen and Ink is following The Wooden Men.
https://thepenandinkblog.blogspot.com/2011/04/pen-and-ink-blog-travels-amazon.html
The results aren't in one this one.
One thing this price point argument fails to take into the consideration is not the willingness of the customer to pay, but the ability to pay. Economics don’t take place in a vacuum. You have to look at the bigger picture, which is that over the past ten years, the median household income has fallen to below $50,000 while inflation continues to soar. This means that Americans have less discretionary income to spend on books, CDs and other types of entertainment. For example, now with the cost of gas going up, I’m seeing a lot of people on my social networking site wondering how they’re going to get to work and feed their families. These are people who read copiously. If the price of fuel, food and goods continues to soar, I can see 99-cent eBooks becoming even more popular. So publishers can artificially inflate eBook prices so that the most Americans cannot buy them; or they can look at what book prices were ten years ago and lower the price to reflect what people actually have in their wallets.
I will say that when I see a book that's $0.99, I'm actually more suspicious about it. I ask myself why the author thinks their novel-length work is worth so little.
Oddly, I become more picky if the price point is so low.
I think Amanda Hocking is an excellent example of price discovery and why there's no real reason to worry about everyone pricing their books at 99 cents. She prices the first books in her trilogies at 99 cents, hooks you, and prices the additional books in the trilogy at $2.99. Very smart, very profitable. I think it's an excellent model to follow.
Authors aren't stupid. JK Rowling and Stephen King will never price their books at 99 cents. They don't have to. The 99 cent price point will always be the bastion of new authors hoping to be discovered.
"Let's say that everyone sold their books at $0.99. Stephenie Meyer, J.K. Rowling, James Patterson, J.A. Konrath, Amanda Hocking… everyone.
What would that publishing world look like?"
Nathan, checkout the Kindle UK charts.
Kindle UK has just been flooded with cheap backlist books by established writers with history, followers and celebrity.
The "indies" have been decimated overnight!
Only one indie book, ours – Sugar & Spice, Saffina Desforges – is still in the top five (by the time you read this that may have changed), and that only thanks to our having got to such a strong position (20,000 a month) when the going was good.
We are still, just, the number one thriller on Kindle UK, but that seems to be a because no big name thrillers have been dropped in price.
One of our closest indie rivals dropped from the top ten to the top forty in a matter of hours as the cheap "names" swamped us.
It's a bloodbath.
I don't buy $0.99 books. I also don't buy ebooks that cost more than the associated hardcover.
You're right about the economics, but there's a third solution that has worked reasonably well for both up-and-comers as well as established artists in the music industry: Pay what you will. Those who are broke or don't want to pay will pay next to nothing. Others with more disposable income or who place higher value on an item will pay more, and sometimes more than retail would have been.
What's broken (and probably has been for some time) is putting a retail pricing scheme on what is, ostensibly, art. The agency model breaks it even further, because when retailers aren't free to alter pricing to meet demand, sales are lost, either by people losing interest or piracy. I can say that's happened at least once to me, with Anna & the French Kiss. I don't want a dead tree version, and it's insulting to have to pay more for the convenience of an ebook.
As price pressure continues, I wonder if we will see a situation where books go to Free, but are Ad supported. Authors become like TV channels, and the more eyeballs you can deliver, the better and more high paying adds in your book.
After these messages…..we'll be right back.
"The 99 cent price point will always be the bastion of new authors hoping to be discovered." Why because we've had it for like a whole year, two years? It's clear that no one (other than John Locke) can make a living selling 99 cent books. Unless you live in an igloo.
If the point is develop a loyal fan base, and you're finding that fan base in the 99 cent bargain bin, you might also find they they aren't willing to follow you to $2.99 or $3.99.
The majority of Americans read 1-3 books a year. Let's say 3 books at trade paperback prices, around $15. That's $45 or so dollars a year.
Most people would be fine with that, give or take 10 bucks. Then there are the avid readers, but maybe they only read 12 to 20 books a year. They're still happy to pay anywhere from $7.99-$15 for the most part. Then you have the super readers. These people read at least a book a week. That's 52 or more a year.
The $0.99 and $2.99 books are designed not for the average or even the above-average consumer of books, but for the super-consumer.
I seem to recall the arguement against Ben Franklin and his idea for free public libraries as potentially dooming the publishing industry. Of course that didn't happen and perhaps we have the same thing here. Self-publishing ebooks is still experimental; we have yet to see the long term effects. Had public libraries wrecked publishers then the libraries would also have gone away. Then the publishers would have returned and no experiment like that would have been tried again. History is replete with civilizations that have decimated their resources and disappeared or moved on. But humanity as a whole survived. The same thing here?
"Are we headed to free for e-book prices or will we find a way to charge as much as people are willing to pay?"
I think people will always be willing to pay at least some amount for something like an e-book since there will always be demand for them.
Do any of the posters think that writers were decently paid prior to the ebook phenomenon? By how much have publishers advances changed in the last twenty-five years? the last fifty? Isn't it the publisher's ox that's being gored, not the writer's?
If authors tell people a book is worth 99 cents, then it's worth exactly 99 cents. Most of the top ten kindle books are over 7 bucks. Most of the top kindle 100 books are over 7 bucks. Self-pubbed authors use that to bolster the claim that people are only willing to pay .99-$2.99. However, since 98 percent have only tried that price-point and no other, it's a rather specious argument. Correlation does not equal causation.
There are some "indie" authors selling over $4 and doing quite well. Why? Because their audience is willing to pay that. If a literary fiction writer prices his new work at 99 cents, it's almost impossible for him to achieve the same level of sales as a thriller or paranormal writer at the same price-point. If you're going to sell 3200 copies no matter what, you might as well sell them at $4.95 and not $0.99.
'Human progress is a steady march towards greater efficiency.' Clearly, you are not acquainted with Irish bureaucracy.
Will Entrekin has a point about the $5 sweet spot, i. e. the price of a mass market paperback less the printing and binding and handling costs. But it is harder to find an e-book equivalent to the hardcover and trade paperback windowing system.
C. L. Phillips, Merry Old England's version of the tragedy of the commons was exaggerated by big landowners in support of the notorious 18th Century Enclosure Acts, which allowed them to basically steal common lands with the support of the state.
I second Mira and Josin re Amazon. Self-proclaimed 'independent' authors are a damn sight more dependent on Amazon than many of them care to admit.
And Mira's collective idea is interesting. As a matter of interest, I own a share of a commonage adjoining my farm in Ireland. I am what's called a tenant-in-common, and can graze the land (well my livestock could, I hate the taste of grass…) as can the other tenants-in-common, but not the general public. An ancient form of collective, in fact.
Anyway, I have now finalized my publishing game plan. I'm going for the 99 cent e-book approach, BUT I'm going to turn it around. I'm going to PAY the reader 99 cents! If 99 cents can't compete with free, how can free compete with getting 99 cents along with the e-book? I'll be the biggest bestseller of all time!
Oh, wait…
Sorry I'm so late to the table, but I do want to chime in. This eBook movement is, in my opinion, going to change the way our children read for the better.
I was one of those kids in school that played football and wrestled, but was really a closet geek. I would read every Fantasy book that came out from JRR Tolkien to Robert Jordan. But, the one thing I remember is that the cost limited my ability to get more books.
The library in town was slow to fill the shelves with new books and when you are reading a series, you have to read the next one.
My point is, if I could have shown my father that the books I was reading only cost .99 to $3.00 a piece instead of $8 or more, he would have been more open to me getting new books.
It isn't going to be a tragedy, I think it will make the millennium literature accessible in a way that it has never been before.
Whether it is advertising in the books or some other scheme that hasn't been thought up, publishers will find a way to get a cut.
Great post Nathan, especially being one of those unknown authors trying to make their s-pub mark on the world. It is going to work out, I have faith.
Why wouldn't we see prices decrease and settle in at the $0.99 – $2.99 level? There's going to be a lot more ebooks uploaded for sale in the next couple of years, and the current ones won't go away. Publishers will get up backlist, authors will get up backlist of books with reverted rights, people with a novel in a trunk will dust it off, and everyone will put their books up for sale.
What happens when there are five million ebook titles for sale instead of the 800,000 or so that Amazon has now? Prices will be driven down.
Great post!
"At the end of the day, there are only so many people in the world who read books and only so much time in the day they spend reading them and so much money they're willing to spend for them. People do buy a few more books than they end up reading, but not that many more."
This is EXACTLY what I said in response to an earlier post by you on the advent of e-books when I first started following your blog a year and a half or so ago.
I think we're heading for a saturation point in e-books, and I think that when that happens, people will start to look at price as a mark of quality in books. This could be one way to explore with "price discovery".
I think a book is a form of entertainment like iPhone apps, mp3s, and the rest of digital medium. The best stuff will rise to the top. But if I have to choose between paying for angry birds or downloading a book, the book had better be at a comparable price.
Right now, traditional publishers just don't get it. And agents are about to feel a lot of pain as their industry shrinks.
Great article, Nathan. Several excellent comments so far, too; but, what no one has mentioned (or maybe I missed it) are the ebook samples. Both Amazon and Smashwords require their authors to allow for sampling. Smashwords gives the writer a choice as to how much of the book can be sampled…up to 40%, I think. Just like browsing in a bookstore.
I randomly bought ten .99 ebooks, after sampling. The samples were okay to really good. I didn't finish a single one. They went south really quickly. Probably not a good survey sample with the huge numbers of .99 books out there, but it was enough for me.
I recently published my first ebook and set the price at $2.99. I think the quality and storyline warrants that price, even for a "newbie" author. I'm hanging on to the hope that slow sales (after only about four weeks in) are due to less than adequate marketing and not the price. I might go down to .99 but I'll never give the book away.
As an avid reader, I'll pay big for my favorite authors; but, not for an unknown. Still, if the price is .99, and the author is unknown to me – I'll skip it…
Time is another factor. Most people, I think, simply don't have the time to browse all the .99 ebooks, looking for that one pearl. I start my search at the 2.99 level in a particular genre, then I look at the cover. If the cover is alluring, I'll give it a closer look. If the synopsis and reviews are good, I'll sample; and then, maybe, I'll buy the book.
Great article Nathan. Thanks for this. There is a lot to think about when pricing our books. One thing, I think people forget, is whether or not you're building an audience with these low prices or with places like Groupon.
Are people going to come back to you as the author or are all those sales simply because people will buy anything for $.99? I represent Bob Phibbs who has a lot of opinions on things like Groupon for that very reason.
https://www.retaildoc.com/blog/groupon-worst-marketing-business/
I haven't read all the comments, so if someone else already brought this up, I apologize.
You're mis-using the Tragedy of the Commons. The tragedy refers to the destruction of resources which have no owner, and that everyone can access freely. An example would be over-fishing that completely depopulates the fishery. If no one owns the resource, no one has incentive to maintain it. So everyone just takes from it until it's gone, unles they are restricted in how much they are allowed to use. At least that's the theory.
Elinor Ostrom, 2009 nobelaureate in economics, demonstrated in her reseach that the Tragedy of the Commons often won't happen, because people will set up their own rules of how to collectively manage the common resource, without requiring draconian controls.
Regardless, this concept cannot apply to literature, for a couple of reasons. First, intellectual property has a clear owner, who manages it and sells it or not, and who can have his/her rights enforced by law. Two, even if literature was available free to all, the act of everyone consuming that literature would not damage it. What, everyone reads Tolstoy, and suddenly Tolstoy's writing begins to disappear? That's not how it works.
I get what you're trying to say here, and for what it's worth I disagree heartily with those who say that ebooks should be $.99, or even free. But you're confusing your terminology.
Interesting and somewhat daunting post. I don't have anything novel to add to the conversation but I just found my way to you and your blog (and I'm already a fan) and so wanted to say hi.
Layton nailed it IMHO:
"I'll add something I learned on my first day of class in Contracts in law school: a fair price is what a willing buyer will pay a willing seller. Simple as that. Regardless of the moral or philosophic or literary arguments, that will win the day."
$100 for JK Rowling is perhaps a bit extreme, but I just shelled out $36 to have the collected works of Wolfgang Borchert shipped from Amazon.de. Given the lack of availability elsewhere (and that for some reason Amazon.de refuses to ship me used books) I judged that to be a fair price, especially with the euro-dollars exchange rate factored in.
I also pay to subscribe to The Financial Times, because I perceive value there that I don't in other news outlets.
So Nathan, based on personal experience I would say you are right on about price discovery.
I think people will gladly pay more than $0.99 for books, even e-books, provided there is a perception that value is being added beyond what they would obtain for the base rate.
Maybe it's because you love X Author and he/she refuses to "give" their content away (what I would call The FT Model), etc.
I think sometimes the media industry gets caught up in price and overhead numbers, and overlooks the fact that this perception of value is really the lynch-pin for its ability to generate revenue at the end of the day.
It's why piracy is such a problem for the film and music industries: piracy distorts the price discovery process.
But even still, the long-term solution for those industries is to enhance the value they add to the "products" they produce, in these cases the theater and concert-going experiences are probably ideal.
And you can take this right across the board to "content farms" such as Demand Media.
Great post, Nathan, but I don't think this is tragedy of the commons. I think this is supply and demand laws making their way.
Supply is going up extremely fast (authors die – their books don't, new authors show up, there is pressure to put out more books quicker, it is easier to get published).
Demand isn't catching up (readers die, argueably less readers overall in the digital age).
Spammers and scammers are filling up virtual shelves with trash.
E-books circumvent usual barriers to publishing, creating even more supply.
Money-wise, I think the situation's even worse than Nathan's post makes it seem.
Nevertheless, I think authors who want to write, will continue to write. And e-books don't need to be the author's only income. Cory Doctorow's books can be found free online, and he claims they help sell more physical books.
We'll find a common ground before we hit rock bottom. Not many writers want to see all the hard work they (and others, such as editors, artists, etc.) put into a book they probably view as their child going away for free. No profit, even after all that? There'd even be a substantial risk of loss. The public might like that, but the writers sure wouldn't.
If the book is good enough that it becomes an instant phenomenon in the vein of Harry Potter or Twilight or [insert literary phenomenon here], then perhaps giving away the first book would be worth it in the long run. But it'd take a very clever mathematician to calculate luck into the equation. If there is no benefit, why try and market it at all? We'd just keep the stories in our heads to tell our grandchildren rather than selling them, and the world would see a drastic decrease in publicly marketed writers.
Books would still be written, but they would be privately owned rather than stocked in the local bookstore. It'd be a step backward, and that's the last thing publishers and writers looking to make a profit want to see.
Again, the number of writers might stay the same. We write because we love to write; we aren't just in it for the money (I hope). But we wouldn't bother marketing it if it would be seen as worthless. A lot more books would be left to gather dust in the drawers, until a friend or family member asks to read it. And maybe that will be how word of the next hot project gets around in the future. I guess all we can do is wait and see, our fingers crossed as we hope for the best.
Great post.I hadn't thought about the commons and 99 cent sales. I'd like to see a debate between you and Joe Konrath. on this one.
The only problem I have with most anti-99-cent arguments is that they often fail to take into account the principles of revenue management. A product is worth whatever people are willing to pay for it at a given time. If no one is buying it, it doesn't matter whether you personally value your book at 99 cents or $99, because in fact it is worth nothing. If you price at 99 cents and your book starts flying off the virtual shelf, then experiment with increased pricing until you find the breaking point as dictated by the buyers.
The demise of ebook pricing will not be determined by the pricing techniques of ebooks by thousands of unknown authors.
BTW, despite all this talk of 99 cents, e-book prices are going up, not down. The best-selling e-books often cost more than a trade paperback, not to mind a mass market paperback.
I read a lot of books.
Ebooks, print books, library books, borrowed books. My decision to buy an ebook over a print book is set by the price.
If I can buy an ebook for half the price of a print book, I prefer to read it that way. But often the price is the same (a buck less) for the ebook or the print book. Which stinks. If I spend fifteen bucks on a book, I want to be able to loan it out (not all ebooks are lendable).
It seems like there's a lot of cheap and free ebooks out there…I've read quite a few of them. I still want to read the *good* books that I want to read. I hope publishers can figure out a pricing system that is fair. I don't mind paying for books. But an ebook should be less than a print book.
I spend way more money on books than I ever have because of my kindle. Ebooks aren't going away, and I think publishers and authors need to figure out how to make money with this medium — without price gouging or giving books away free.
And please let us not forget those that are unable to purchase nice shiny new objects so that they can purchase words to go in 'em. Our libraries are still the point of entry into the world of books for them. Let's keep our fingers crossed.
I think the problem here is that if someone is giving away their book for free, being a new author or self-published, they will force others to meet the price demands in order to sell their books. Raising the price of your next book in the series would screw yourself, because the next up and coming author would have a book out that they are giving away. The same person who did not want to pay for your first book, would probably rather get another free book than pay for your second.
This method does not work for the betterment of all in the long run. Much of what is wrong with the world today is the fact that too many of us only seek what 'we' need, as opposed to looking at how our actions effect others. Personally, I don't care for ebooks, and have yet to buy one. But I can see how charging so little could effect others.
I do wonder though, is this so different from companies that sell used books? Once the book is sold, the origonal author doesn't get royalties if the book is resold by a used book store. So what is the answer? This is a tough discussion, and I don't think there are any clear answers. All I am sure of is we need to think of others, not just our own needs.
Hi. I'm really sorry, but I have objections to your article. Here are some of them:
1. The use of the term "tragedy of the commons" is not properly used, even metaphorically, regarding prices or discounts. Since the term is applied to and considers resources, there is no connection, either abstract or concrete. Thus, the use of this term in this case is not argumentative.
2. Discounts are NOT resources. They are decreases in prices or values of a good or service.
3. Books are NOT resources. They are products.
4. It is a free market, and prices can be set at will, as a result of healthy competition. Only in monopolistic markets, there are base prices set.
5. Even 0$ is a value in economics, in absolute terms, but nevertheless a value.
6. When someone performs some tasks regarding a project, do-it-yourself notion, the hours spent are calculated as a production cost. They might be charged at less value than outsourcing the particular task, but nonetheless they are costs. They are either charged to the client on per hourly basis or included in the production cost.
I don't agree with the 0,99$ price, but only in some cases, not all.
However, no matter my opinion or others', free market is what it is. Everyone is free to set a value to his/her product or service at his/her discretion, (even 0$ because the producer is a saint and wants to benefit others), for whatever reason.
Thank you for the thought-provoking article 🙂
Good grief! Like a lot of hypotheticals, this one overstates quite a bit.
Would you pay $100 for a Harry Potter book? Seriously? As for myself … I'd never. But that's me.
Just because I price my books reasonably, doesn't mean the content isn't worth reading. It only means I'm trying to encourage readers to buy a book from an author they're not familiar with.
So far, it seems to be working for me. I've even managed to sell enough ebooks to end up on this list: https://www.nytimes.com/best-sellers-books/2011-04-03/e-book-fiction/list.html
Any questions? 🙂
as loralie said, cheapest product, people will come to you.
i still see plenty of Dollar stores/family dollar stores around and it hasn't put Walmart out of business.
and from my hubby who is a PhD in engineering (he took plenty of statistics classes to get there), there is a missing component in your model. you're assuming ebooks will be depleted. and since that is an unproven statisic, the model is unreliable.
(Terri Reese Wang said:)
"The music industry is doing it.
And, there are artists who want to sell their songs for $0.99 but, the Apples of the world won't let them go for a lower rate.
Kid Rock is one of those outspoken, give the masses what they want, and give it to them at a lower cost, and add on a few more songs for free.
Cheers!
April 18, 2011 9:48 AM
I think it's important to try to keep things in perspective. I read some alleged quotes by Lady Gaga expressing that same sentiment about 99 cent albums!
I respect these artists and their accomplishments, however, they've made their millions so when they "allegedly" say music should be $.99 cents or albums should cost as much, it's from a different place than a struggling musician or artist who isn't as economically viable.
I'll use this name for example: Amanda Hocking ( a very talented artist). I've never heard her say this but if she said "all ebooks should cost $.99 cent", well, she's made her millions and is speaking from a different position than an unknown ebook author trying to break in and needs the money.
Do you understand what I'm saying? You've taken quotes from the top cream (Kid Rock in this case) and applied it to the herd who already can't make a living. His albums can be $.99 cents now because he's already made his money from the higher price point and he's well-off. Meanwhile new bands may look at $.99 and wonder how they're going to eat( let alone pay a sound engineer, studio time, music equipment, ect). Two different perspectives on one price point.
Not to rain [too much] on the economists and the pseudo-economists parade, but….
Quality. That is what is going to determine the future and longevity of the e-book, not free or under a buck pricing. Quality.
The analogy with the monkeys? If those bananas taste like shite, the monkeys won't eat them – or if they do, will sicken of it quickly. So will the reading public.
Cheapest can't sell forever. Contrary to popular wisdom, most people will NOT come to the cheapest product… unless it is also a quality product.
I wonder… how many of those free or cheap e-books will actually be read? Personally, I have already dumped three from my Kindle. Why? Because they sucked like a DYSON!
Unfortunately, sales figures aren't going to reflect [all] the shite out there. It's not like one can return the e-book; it is not going to go back into inventory and show on the publisher's bottom line at the end of a sales quarter.
This is where econ theories are just that… theories. Can you factor in shite in 'the tragedy of the commons'?
No… I didn't flunk Econ in college… only because I took my professor's suggestion and backed out of the class so my less than stellar grades didn't sink my GPA.
It all comes back to quality. Indies and self-publishers need some guidelines… if we don't police ourselves, someone else will and before you know it, the brick and mortar publishing houses are breaking out the champagne.
How do you price an e-book? How about something completely arbitrary, like length of the book? There was a time when paper books were priced like that. Different prices for hardback and paperback. Smaller books had lower prices. Of course (its only human nature), the publishers got greedy and you don't see that as much anymore. Which is asinine. There is no way I am paying 30$ for a 300 page hardback… I balk at paying that for a 800+ page hardback.
I don't know… maybe that's not the answer either, but I think some sort of tier pricing is a step in the right direction.
I enjoyed your thoughts on this — and many of the points raised in the discussion. I've wondered if selling eBooks at low prices will be useful — I suspect that there are many disappointed writers for every independent eBook author who makes enough 99-cent sales to make the venture worthwhile.
I used to sell used books on Amazon. Once Amazon became flooded with books priced at a penny, it wasn't fun anymore. Unless a business or independent author is moving books in volume, or only using the listings to amass a mailing list or gain exposure, the return on a book-selling venture will be too low to be worth the time.
"just as there is pressure on journalists to work for very little or for free until they've built their career."
People will pay more money for author's whose works they have read before and enjoyed. The discounted price is to incentivize potential new readers to make a purchase. Once the author's name becomes well known, price hikes will be expected. Not to mention the possibility of getting signed on by a publishing house who has noticed the author's success.