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?
Interesting observation. From a retailer's point of view, if you have the cheapest product, and people know it, they'll come to you.
But you've taken the concept to another level, and you're right, people have already pioneered that concept in e-publishing. Something to think about for sure…
I have to say that your usual book econ posts don't scare me. This one did.
I think the main problem with your argument, though, is that there's no actual "depletion." People can't download ebooks until the supply is exhausted.
Readers' attention may be finite, but to-be-read piles rarely are. Lots of people buy books and pile them with the intention of getting to them eventually.
I think that there's a sweet spot around the five dollar point. But I think it's not the only way to make money. In a situation where there's no such thing as depletion, the idea of scarcity actually becomes valuable.
So if you're selling something infinite, in other words, figure out a way to make it scarce.
I'd have to say the real tragedy is that people's wallets will dictate what kind of literature they read. Without the sorting, critiquing and reviewing that goes on with traditional publishing, the quality of the literature will decline.
Will-
In this case it's the discount that's the resource, not the actual copies of the book. A discount is "depleted" if everyone is only charging $0.99 in the hypothetical scenario.
One critical difference in the tragedy of the commons lies in the consumption of a limited resource.
In merry old England, the commons was the green field where farms collectively grazed their animals. Just like the bananas, eat too much, and ruin the commons.
What is the precious limited resource in the e-publishing world? I'm missing the point.
Help….
My usual thought on this is similar to buy expensive designer clothes versus cheap stuff at Target. There's always a market for both, and the more highly regarded your brand, the more you can charge.
Nope. Water is leaking in this argument. Discount is not precious.
Price is where desire meets action.
Discount is an artificial construct. Ask any old tech sales rep, there's a list price and a street price.
What you are seeing in the e-pub world is the street price for "unknown" product.
Such a great observation. It's also a good example of the more frustrating aspects of game theory.
The best scenario for everyone is no one discounting, and the worst scenario for everyone is everyone discounting. But since individual self-pubbed authors will be best off if they discount when no one else does, and worst off if someone else discounts when they don't, authors will always discount, despite the opposite conditions being best for the group overall.
It's pretty depressing–not looking forward to seeing where all this is going to end up.
I think it will balance back out. Books will be overall cheaper, like albums are now on itunes, but the volume increase you spoke of, while not exponential, can potentially even things out.
I agree that self publishers will still need to undercut the competition.
Well, there's something I don't have in common with you. I wouldn't pay 100 dollars for a Rowling book. I don't think I'd pay that much for any book.
Oh, wait a minute. I did pay 150 dollars for a comic book once.
I think once the market is flooded with discounted ebooks people will have to rely on quality (as they see it) and if an author picks up X amount of readers with his 99c debut, he can then charge 9.99 for the second in the series and many may have got hooked. 99c just gets you access, after that you have to earn your living (or carry on as a hobby).
regards,
mood
Moody Writing
It wouldn't surprise me if one of the big e-book retailers tries the Netflix model. Rather than a consumer paying per-unit, they pay a flat monthly subscription to access a limited or unlimited number of books per month. You don't 'own' the book, but as long as you're paying the monthly rate you can access it as many times as you want.
On the flip side, the retailer could either pay the author a flat rate to carry the material, or pay them a royalty based on how many unique users download the book in a given timeframe.
I've been downloading a lot of free ebooks. Publisher giveaways, author giveaways. I follow a blog that lists them multiple times a day. I could read nothing but free ebooks if I wanted.
So yes, I think your idea of the tragedy of the commons is spot on. At this point, the only reason to pay for a book is because you want that specific book–if you're trying a new genre or a new author or just browsing, there's plenty out there for free or ultra-cheap.
I haven't investigated Groupon, though, so I haven't thought at all about that sort of model. As an aspiring novelist I would really like novels to continue to sell for actual money.
Fascinating article, Nathan. Thank you for a well-balanced approach!
My take – I think there is a great deal of uncertainty about the future. For one thing, there is the question about whether Amazon, et al, will continue to allow authors to set their own prices. That may change. I hope it doesn't, but it may.
If things continue the way they are, I think your second option – tier pricing – will occur. People will pay more for an author they want to read – the value goes up if the desirabilty of the product goes up. If J.K. Rowling wrote another book, I'd take out a second job to pay for it.
There are two points in your argument that I want to discuss further. The first is the idea that the demand for books is finite. Although that's undoubtedly true, it's also true that books are disposable items. Once someone reads one book, they are ready for the next. Also, the ease of access afforded by e-readers allows books to be instantly attainable. This is a very different world than before, where books were hard to get and the demand for books may be much greater than people imagine.
The second point is this persistent myth that a 99 cent price point will sell books.
Sorry, but people will not spend money for something they don't want. They won't even take something for free if they don't want it.
For example, if you go out to the parking lot and pick up a stick that is covered in mud, I'm not taking it, even if it's free.
99 cents may sell a few books, because some people are willing to pay 99 cents to see if the book is any good. But it's not going to sell alot of books. Just a few.
There is one thing, and one thing only that will sell oddles of books. People seem to think there is a short cut, but I'm sorry, there isn't. The only way to sell oodles of books is to write a book that oodles of people want to read.
And then they'll probably pay more than 99 cents for it.
I'm still not convinced the 2.99 / .99 "revolution" isn't history repeating itself.
The first step to monopoly is destroying a competitive market, and historically, the way that's been done is by undercutting prices to such an extent that no one can compete. (Railway and oil "barons" were made this way).
However, once the competition actually buckles, then the "cheap" price usually disappears because the last one standing is still going to be able to set their own price.
That doesn't necessarily mean that the price of an ebook would rise above .99, but there's no reason Amazon has to continue to pay out the same percentage in royalties they are at present.
The public – who couldn't care less, so long as they get what they want – would be relatively happy, but the writers are up the creek.
Great discussion, and 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.
You make great points at the end: free or .99 cents will be the proving ground, and then there will be much more leeway with price once an author is established. As a reader and an indie author, I have no problem with that. I love scouring for great new voices (and it takes me about a paragraph to figure out if the new voice is great) both in the bookstore and online, but I'm simply more willing to try a new author at.99 or 2.99 unless I think it is out of this world amazing. And as an indie author in an extremely difficult and competitive market (as always), I have confidence in my work, and want as many people as possible to find me. I don't like the .99 price point, but that is what the market dictates, then the other questions are a bit irrelevant. I think publishers, to survive, should think the same: if this ebook thing is happening (regardless of what anyone thinks about it), then they need to figure out how to stay relevant and profitable. Maybe charging 100 for the next book by the Rowling's and the Grisham's isn't a bad idea.
To the extent books become more like bananas – look the same, read the same – price can be a deciding factor. Do I want this 9.99 zombie apocalypse book or this .99 zombie apocalypse book?
But when the choice is this new 14.99 JK Rowling book or this new .99 LK Rigel book, until most people know who Rigel is, they're going to pick the Rowling.
My challenge isn't to find readers looking for a cheap read. My challenge is to get the attention of readers looking for a good read .
99 cents is a strategy. I use it, but it won't work long-term unless your book makes it into algorithm heaven or you have several books and the 99-center is an introduction to all the rest.
I have an e reader. I love it but find myself filling it with free or cheap books.
With a traditional book you can read it, pass it to friends, sell it at a used book store, sell it at a garage sale, or donate it.
With an ebook the reader can't do all these things.
I think publishers need to do more with price discovery. If people are flocking to 99 cent ebooks it is because paying more for an ebook than a traditional book doesn't make sense to the consumer.
A note to Mira– only self-published authors set their own prices for ebooks. For traditionally published books, the publisher sets it. I know authors who wish the publisher would make the ebook cheaper.
If you're not familiar with it Nathan, you might want to check out eReader IQ, a site that exists partly to allow readers to track Kindle books & find out when the price drops. I think ebook readers are definitely price-sensitive, but I think it's worth noting that bestsellers continue to be best sellers in ebook form, even when the price is $12.99 to $14.99. What has happened is that books that would not otherwise be best sellers get on the list by being priced at 99 cents. Probably they bump some higher priced books to get there, but they don't take over the list entirely. I consider it's too early to say the 99 cent phenomenon will have a profound impact; for one thing there are huge numbers of 99 cent books that go nowhere.
I agree with JL Bryan. This is a good deal like shopping for anything else. If you aren't sure about the quality of a product, you tend to buy the cheaper version — to see if you like it. If you want quality, you buy a more trusted brand name, which will be more expensive. This is not to say, of course, that you may not be pleasantly surprised with the quality of the inexpensive product. But a newbie cannot sell as much for as high a price as an established brand, whether that is clothing, electronics, or a book.
My guess is that Amanda Hocking's book prices will go way up soon. And that's okay. She started small with the unknowns, and now she's off to the big time.
Hmmm…. maybe I'd better go try one of her books, eh?
Oh, and I'd most certainly pay $100 for Rowling' next book. Anytime.
To me this post reads as a list of well thought out reasons that $.99 e-books may not be good for writers in the long run (because it'll become increasingly hard for most writers to get paid a worthwhile amount), and then a supposition that maybe some magical market force which hasn't yet made itself felt yet will rescue some big-name authors from the wreckage.
Yikes.
Honestly, just because a book is 99 cents does not make me more interested in buying it. I still read samples. I enjoyed Amanda's opening pages of the trylle trilogy which is why I purchased the first book. I would've paid more.
2 things:
1) @erin said "sorting, critiquing and reviewing that goes on with traditional publishing, the quality of the literature will decline"
The "sorting, critiquing and reviewing" that traditional publishers do does not guarantee "quality" literature, what it guarantees is marketable literature. Publishers don't care if it's good, only that it sells. It's also a mistake to assume that the same (or higher) level of sorting, critiquing and reviewing isn't going on amongst the self-published. I guarantee that just as you will find self published books of a "lower quality" than many traditionally published books, you will also find "higher quality" self published books than many traditionally published books.
2) If everybody is clamoring for cheap and free books to read how did libraries ever fall out of favor? Isn't the "Netflix" model just a library card?
@ Michael C
Her books can't go up in price if she wants to continue to make the royalty amount she's currently pulling in. (This is for the self-pubbed ebooks, not her upcoming commercial book)
The reason self-pubs have chosen the amounts they did isn't arbitrary.
Amazon set their royalty percentages with one ceiling at $.99 and another at $2.99. There's no incentive to raise, which is why I believe this is more manipulation on Amazon's part than progression of the market from buyers.
I've been lamenting this point for a while now, this dollar book phenom. Time will tell of course how it plays out, but the driving down of ebook prices, while good for readers, I think will end up hurting writers in the long run. If the name authors prices get down low enough, 99 cents will not longer feel like such the bargain, and the desire to risk on an unknown will go down. Name author you like for 2.99 or unknown for .99? As the difference goes away, so does the incentive.
Regardless, I still believe, and likely always will, that books are worth more than a buck. I honestly don't care about the economics in this case. It's just pig-headedness perhaps, but stories deserve a spot somewhere above the mass-produced junk from the local dollar store.
Josin – I agree with you about Amazon. Right now, they are definitely courting the author, which is a very good thing because it is changing the culture. But, whether that will change once the competition thins is a very good question.
On the other hand, if that happens, authors may feel more empowered at that point and may form collectives to strengthen their position. Or start handing out books on their website, and refuse to go through Amazon, etc.
Should be interesting to watch.
Carmen – good points.
Very interesting conversation. But I'm wondering: are people buying the .99 cent books because it's something they want to read, or because they're only .99 cents? As with Groupon, I signed up for it at first, but then realized none of the discounts were for services I wanted, so I didn't use any of them – kind of like grocery store coupons, why would I want to save $1 on Twinkies if I don't eat Twinkies?
I think some consumers jump on something because they think it's a deal, it's what's in front of them, so they grab it without even considering if it's something they WANT. Kind of like walking down the strip in Vegas and you grab the flyer the guys are shoving in your face, just because they're there… but do you really want what they are offering? I'm sure some do, but I have no need for HOT YOUNG GIRLS DIRECT TO MY ROOM NOW!!! I just wanna go see Carrot Top.
And… am I the only one out there who still hasn't gotten into ebooks?
I do so much reading on the computer that when I want to read a book I, well, want to read a BOOK.
I like your idea of applying price discovery to the e-publishing industry.
I wrote my own rant a few weeks ago ("99-Cent Train Wreck" at https://wp.me/p1qrBV-2c), but I was thinking of commoditization as a downward pricing trend only. It didn't occur to me that it also implies pricing can increase based on demand. I guess I've been too accustomed to the retail model.
Thanks for an interesting new perspective.
I tend to agree with you, Nathan. As a self-published author, it irks me that I have to price at 99 cents, even for a short, to compete. For guys like Konrath, it's a way to turn up the profit spicket for the short term. If readers get use to paying 99 cents for novels, I think it will be more difficult to go back up to $2.99 or, heaven forbid, $3.99. or $4.99. Personally, I don't think $5 is too much to ask if you've produced a welld-one novel-length story. Arghhhh!
Thought-provoking post.
I have experimented with price points at $2.99, $1.99 and $0.99 and my experience is that there is a degree of price elasticity of demand (e.g., lower price = greater quantity).
I have to agree with JL Bryan's comment that there is a market for everything and all price points. In the world of self-publishing, the author decides how to brand him or herself and the pricing strategy that is appropriate for his or her works.
As an unknown author, my most pressing marketing concern is market penetration – getting my ebook onto as many ereaders as possible. The hope is that I can build a fan base that will be willing to pay more for future works. I've experimented with the $0.99 price point and it has worked. I moved my price up for April and have noticed a decline in sales.
Will I move my price back down to $0.99? I'll wait for April's full month results and then make a decision. One thing is for certain, I will never give away my work.
Other, more well known authors, may be able to charge a higher price, because their fan base is willing to pay more for a known experience. So, no need for Rowling to drop down to $0.99.
Here are some counter intuitive aspects:
– Ebook readership is still in its infancy. The vast majority of readers are still using "old" pbooks. As Kindle and other ereading devices increase their market penetration, then so will the number of readers and the amount of readership attention.
– The net impact of communications technology (Internet and cable TV) has been increased specialization. Which means there is now more choices than ever before and readers buying ebooks are far more likely today to discover authors that they like and are willing to support. Ebooks give more authors more opportunities to create a loyal fan base, which in turn gives more readers the ability to find more of what they like to read.
– Will Entrekin made a good post when he disputed the notion of constrained resources, that there is no depletion of readership attention. He is right, people's appetites for a good read are unlimited and they might be willing to ply through the first five chapters of 10 $0.99 ebooks just to find the next big thing.
In the self-published world, ebook pricing is under the control of the author, who can set price strategy to achieve his/her personal goals.
In the next several years, the number of ebook readers will dramatically increase. That means more bananas to pick for everyone. Also, since the technology provides for an improved ability to reach out to or create a market niche, there should be more room for mangoes, apples and kiwis, too!
The price of a book should be whatever the market will bear. If you won't pay $10 for a book then the market won't bear that price. Regardless of price discovery. The abstinence of purchasing a book has been going on for years. That's why students don't buy books that are required until they know they need them and they usually buy them when they need them and return them before they can't get full price for them anymore. Or they buy them used off of Amazon, even 2nd or 3rd editions instead of 5th editions.
For an unknown author such as myself, the odds are the same, getting an agent and a publisher, as making it through indie pub. The difference is, I don't have to depend on an agent and publisher and the readers, just the readers and myself. I am the master of my own destiny. Plus, the appeal for me is to get some money flowing now instead of holding my breath for something that may or may not happen.
Honesty, with the time and effort I put into writing my books, I wouldn't just give it away for free. I might do the first hundred copies and then sell for a minimum of 99cents and probably wouldn't even do that. I'd start at $2.99 and go from there.
Our community is a wonderful one and we could get at least our followers to read our works for free. We all help each other get the word out on new releases all the time. It's a start for a good readership.
Unfortunately, the creative process is left out of this equation. Will we demand that writers become more and more "efficient" in the way they write (or perhaps more accurately in this scenario, "produce") books? We've lost any sense of putting a value on the writer's time, thought, and courage in writing a novel that is worth reading. Books are not bananas- writers are not trees sprouting fruit.
Here's the thing – while *I* am willing to pay a lot for my books because I love books and I love books by certain authors, most readers probably aren't as passionate about it as I am.
Also, while I'd willingly (and HAPPILY) turn over $50 for Scott Westerfeld's next book Goliath in hardback, I am a lot less enthusiastic about authors I've never heard of or books I've never heard of.
So here's a totally hypothetical idea I just thought of – there's this plugin/widget on many blogs called Linkwithin. at the end of a post it shows 3 or 4 posts that are related somehow. I wouldn't be opposed to having something like that embedded at the end of my e-Books that said, "you liked this paranormal YA about zombies, here are 3 other paranormal YA about zombies" either from the same publisher or others. And maybe if you buy from that related books spot you get a discounted e-book price.
I would like to see more of to see more of the process working to promote books but also cater to the needs of the readers. I'd like to see best sellers do more for the little known debuts. And while I don't think we should be selling at basement prices so that no one makes money, I think it is fair to rethink the pricing of e-books because it is pretty clear that most people do not FEEL like the thing they are buying is worth the cost, even if behind the scenes it is. There has to be a middle ground.
Musicians are already experimenting with the price thing through Bandcamp and that kind of thing–look at what Amanda Palmer is doing, for example, or Radiohead's previous album, wherein they set a minimum amount for a download but the buyer can pay more if they think it's worth more and can afford it. Sort of a reverse kind of barter, really. Strangely, at least in some cases, it seems to work.
I hope the 99 cent thing will lose its appeal soon. Most authors do it to get on the lists, but as more authors do it, staying on the lists will become increasingly difficult, and making money that way will become almost impossible.
People are willing to pay for quality, but the problem is discerning quality from an unknown writer. Readers need new, more reliable ways of discovering writers–a new system of vetting that would eliminate the need for unsustainably cheap e-books.
I don't really know what to say about all of this. The one thing that is sad to me is that if a book is really great, it's worth a lot more then $0.99 to me.
I wouldn't feel right paying less than say about $10.00 for some of my very favorite novels. Hell, I'd probably pay many times more what they ask for some of my favorites. They're worth it.
Traditionally, even before e-books, the only people who ever made real money in publishing were the best selling authors. Most mid-list authors still had day jobs, either teaching or whatever they did to survive.
I also think there's a huge trend happening right now. Most of these so-called authors will publish an e-book, decide it's not really for them, and more on. And we won't really know who is going to survive until the dust finally settles and people move on to the next new trend.
I wish there was a way to tweak the way readers buy e-books.
I'm one of the old guys, but I remember the days when I would go into a bookstore to find my newest friend. (Still do. The proverbial old dog and new tricks thingie.)
Did I look at the cover? Sure, but it wasn't the driving force behind my decision to buy. And it CERTAINLY wasn't the price listed on the back. What made me carry a book to the counter? I read the first page, or maybe even several pages.
I know, I know. The "sample" thing. I do it all the time, even with the freebies and cheapies.
But here's a thought. (My own little tea party) Let's abolish price listings on books, and abolish the "buy" button until after a browser has gone through the first several pages. I think that would go a long way toward weeding out the haves from the have-nots. Maybe even curb this downward spiral in pricing.
Because if the writing isn't there, I walk.
Hey, I can dream, can't I?
As an author with her foot on both sides of the coin (traditional and self-published), I have a different view. An example, when my self-published book comes up in an Amazon search for YA romantic comedy, both traditionally published and self published books come up. I think your theory supposes that self-published authors only view other self-published authors as competition and therefore you could eventually deplete the 99 cent discount, theoretically. But what if we view our primary competition as traditionally published books?
I personally viewed both traditionally published books AND self published books as my primary competition. I was trying to woo long-term readers of established authors to give me a try. So, all other things equal (quality, good editing, marketable, book cover design, etc), when competing against traditional publishers, I really only had one competitive advantage—price. Fact is, despite short-term promotions, traditional publishers cannot afford to set their prices at 99 cents over the long haul, so the 99 cent discount could never be depleted.
When competing against self published authors, a very high-quality, well-edited product was critical to sustaining my competitive advantage. Price being equal, my hope was that a reader looking at my book would think they were getting a great deal on a traditionally published, small press book as opposed to a cheap self published book.
I think it’s all about perspective. While I think your theory is valid for one perspective, I don’t think it’s valid for many self published authors who use the 99 cent “advantage.”
I don't know what WILL happen, but I certainly hope we will find a way to charge what people are willing to pay, because there is a larger issue at stake here: Will the market be dominated by professional writers, or by hobby writers?
You talked about the decrease in resources necessary to reproduce books, which has brought down the price. But there's one resource that has not changed significantly, and that is the writer's time. It still takes many, many hours to craft a really good book. It takes a number of hours, but not nearly as many, to craft an okay book–one for which the truly appropriate price point might be 0.99.
If anyone is going to be able to continue to devote the many, many hours necessary to craft really good books, there has to be a decent source of income available. As Margaret Atwood said, those cheese sandwiches have to come from somewhere. Either that, or we go back to the patronage model, or the gentleman-writer model, and I don't really see either of those working in the modern world.
Hobby writers are willing to give their work away for next to nothing. Professional writers are not. If you ask me whose work I would prefer to read, I hope the answer is obvious. I hope and pray the hobby writers do not take all the bananas before the professionals can get to them.
By the way, I don't know if I'd pay $100 for Harry Potter, but I would for The Lord of the Rings, especially for one of those leather bound editions with all three volumes.
I can't say this worries me too much. Everyone said the same thing about iPhone apps, but I think they are turning around. At first people expected them to be free or no more than $1, now we're seeing more apps at $5 to $10. All it took was a few quality apps at a higher price to make the consumer think "oh, some of these pricier games are wroth it."
I think we'll see the same thing in the ebook world, especially with self-published books. There's going to be a race to the bottom, but it won't stay there.
As far as debut authors go, I think they would do themselves a favor by setting a minimum price of $1.99. It's all about creating a value anchor. It reminds me of the story of the woman that tried to give away a mattress on Craigslist. She kept the posting up for weeks and no one bit. Her husband took the posting down and put a new one up–"Gently used Queen Mattress $130." It sold that same day. No one wants a free mattress, that implies that it's all gross and old. But $130 seems like a fair price. It implies that the mattress is used, but still high quality. I think authors should use the same tactics. Give away short stories, podcasts, and blog posts, but charge–even if it's just $2–for your books. It implies that they are worth charging for. Of course the trick is to make it so.
As an author with her foot on both sides of the coin (traditional and self-published), I have a different view. An example, when my self-published book comes up in an Amazon search for YA romantic comedy, both traditionally published and self published books come up. I think your theory supposes that self-published authors only view other self-published authors as competition and therefore you could eventually deplete the 99 cent discount, theoretically. But what if we view our primary competition as traditionally published books?
I personally viewed both traditionally published books AND self published books as my primary competition. I was trying to woo long-term readers of established authors to give me a try. So, all other things equal (quality, good editing, marketable, book cover design, etc), when competing against traditional publishers, I really only had one competitive advantage—price. Fact is, despite short-term promotions, traditional publishers cannot afford to set their prices at 99 cents over the long haul, so the 99 cent discount could never be depleted.
When competing against self published authors, a very high-quality, well-edited product was critical to sustaining my competitive advantage. Price being equal, my hope was that a reader looking at my book , would think it they were getting a great deal on a traditionally published, small press book as opposed to a cheap self published book.
I think it’s all about perspective. While I think your theory is valid for one perspective, I don’t think it’s valid for many self published authors who use the 99 cent “advantage.”
It's the publishers who have created this situation, not the independent authors, by the unfair "deal" that they offer their authors for ebooks. Yes, 10% of retail price to authors is fine for print books (not great for authors, but understandable given the real costs of printing, warehousing, distribution).
But offering 25% to authors for ebooks, when publishers have none of those real costs, and claiming this is the industry "standard" is unfair, and it is also what is driving the high ebook prices.
For a $9.99 ebook released through a publisher, the author will earn somewhere around $1.50 to $2.
For a $1.99 independent ebook, the author will earn $1.40 – but will probably sell a heck of a lot more copies at that price. (Yes yes, in both cases the marketing needs to be done properly – but publishers are not actually doing much about that for most of their authors these days).
A large part of the cost of "real" books is due to their physical presence: printing, shipping from printer, warehousing, shipping to sellers, sellers' retail space/warehouses (plus the mark-up that each of these players must add in order to be profitable). Ebooks have none of that. Pricing them at $9.99 is an artificially high price, set by publishers who are desperately trying to set a new industry standard that will rake them some big profits.
Yes, at $0.99 it will be hard for anyone to make a living from ebooks (although it does open the market to shorter works – long stories or essays, novellas). But ebooks priced at $1.99 and $2.99 really opens the door for us, for authors, to actually make a living from what we do.
There is limited readership attention span for books. Given that I can now purchase e-books for the same price at which I purchase used or dollar store books, these e-books are now not only competing with each other and with best-sellers but with, frankly, every book that’s ever been widely distributed. Or even narrowly distributed. They’re competing, pricewise and cachet-wise, with any of this fungible commodity I can find on the market.
When I peruse the shelves at the thrift store, I’m not concerned that a “new” author is, in fact, deceased now, or that his or her book was published thirty, forty, fifty years ago. Most of what I see on the thrift store shelves is new to me and carries with it not only the thrill of discovering a new author but also what previous readers have left in the book, from book marks to margin notes to the fact that long ago they took the trouble to get a signed copy of a book from an author and then, later, gave the book away.
The tragedy of the commons is actually a non-tragedy. Elinor Ostrom won the 2009 Nobel Prize for Economics for showing that commonly owned resources are often very well managed by the local communities that depend on them.
Plus, books aren't exactly a finite resource. The market for books is definitely finite but the creation of books isn't tied to any constrained resource. If anything it's actually the opposite. The act of writing is so pleasurable in itself that the thought of being a successful author is very attractive. So much of your blog is dedicated to trying to prove the opposite :-).
These days it's almost impossible to charge differing prices in the consumer market for the exact same product. Amazon knows all about my past purchases and probably has enough information to be able to charge me more for some stuff than it charges to other people but imagine the bad press it would get if it did that (economists always seem to ignore human psychology for some reason). Even if Amazon could get away with charging me more you'd instantly see companies spring up to take advantage of that price inefficiency by acting as a middleman between people who can buy something cheap and people who actually want that product.
Well, as a writer I don't want to sell my books for free, and as a reader I don't want to pay $100 for a book.
Perhaps I'm simply feeling nostalgic for something that hasn't even passed yet…
"For a $1.99 independent ebook, the author will earn $1.40 – but will probably sell a heck of a lot more copies at that price."
On Amazon, this author would get 70 cents. And just because they're cheap, doesn't mean they'll sell a hell of a lot more copies. There are plenty of .99 books earning about a hundred bucks a year.