Dispatches from the Digital Revolution

A tale of two ebooks: The pricing problem


Here is the ebook pricing problem in a nutshell: a memoir by Elna Baker (published by Plume) and the new memoir by Diane Keaton (published by Random House) both cost $12.99. I expect that you have heard of Diane Keaton, and that you have never before heard of Elna Baker. And that you wouldn’t remember her name if you read it again two weeks from now. For your information, the Diane Keaton book is ranked #131 in the paid Kindle store and the Elna Baker book is ranked #33,138.

The problem is that publishers don’t seem to realize that even though these books cost the reader the same amount of money, one of them is overpriced.

Any time you ask your customers to give you money in exchange for a product, you are asking them to take a risk. The risk is that your product will not be worth the money. And the higher the price, the bigger the risk. Companies can decrease the customer’s risk and encourage more purchases in two ways: gain the customer’s trust or lower the price.

A company that has done the first is Apple (by the way, you can get the Steve Jobs biography for only two dollars more than the ebooks in question and its paid Kindle store rank is #13). People are willing to pay a premium for Apple products because they trust that they will work almost all of the time. The risk is low because the customers believe that they will get their money’s worth.

Publishers would like to think that they can be like Apple. They would like to think that their name on the spine of a book (or in the metadata, in the case of an ebook) is enough to give a book value. But how many people in the general public have even heard of Plume, publisher of the Baker memoir? I’m in publishing and I’m not even familiar enough with it to have a sense of its quality. I don’t even think that Random House, the publisher of the Keaton memoir and the biggest of the Big Six, has enough clout with the general public to charge a premium price on its name recognition alone.

People aren’t buying the Keaton memoir more than the Baker memoir because they like Random House more than Plume, but because they have heard of, and are more interested in, Diane Keaton.

Most publishers can’t be like Apple. They are not brand names. Authors are—I know what to expect from a David McCullough book because I’ve read other books by David McCullough, not because I’ve read other books published by Simon and Schuster.

A new or unknown author, like Baker, doesn’t have the reader’s trust and has few means to gain it. What she can do, or what her publisher, who owns the ebook rights, can do is decrease the customer’s risk by lowering the price.

Many people in publishing will protest that lowering the price implies that the book is of lower quality. Not so. Prices are an indication of demand, not quality. Quality products are usually priced higher because people demand quality products more than they do non-quality products.

Obviously, the demand for the Baker memoir does not match the demand for the Keaton memoir. So why do their prices match?

Before I finish here, I want to be clear about what I am not arguing for. I am not arguing that all ebooks should be cheaper. The demand argument works both ways. If there is demand for something—like the new Janet Evanovich, Michael Connelly, John Grisham, Steven King, and James Patterson novels (all priced over $10 and all in the paid Kindle store top 10)—then it should be sold at the price that the customer is willing to pay. Cost of production doesn’t matter, and quality of the product doesn’t matter. It’s price should be what people are willing to pay.

Ideally, as the writer’s career develops, the more trust their readers have in their work and the more the demand for it grows. The goal is to get the maximum amount of money out of the maximum number of people. The problem is that unless publishers are more willing to lower prices on works by new authors, they may never find what the maximum amount they can get is.

2 comments on “A tale of two ebooks: The pricing problem

  1. Leah Thompson
    December 4, 2011

    I don’t know that I agree. Does it cost any less to produce the Baker memoir than it costs to produce the Keaton memoir? Excluding advance, no. In fact, based on the Elna Baker cover, it looks like these books rely on different selling points: Elna’s relies on the subject; Diane’s relies on celebrity name recognition.

    But, for the sake of argument, let’s assume they’re both trying to sell based on author name. And while Diane Keaton may be more popular, and many people would value her biography at $12.99, that doesn’t mean that Elna Baker’s (presumably smaller) fan base would not also think Elna Baker was worth $12.99. Not all publishing houses are trying to sell 100,000 copies of every book. Some publishers operate on a much smaller scale. They may have higher prices, but they are catering to a very specific audience. Pricing ebooks for the general public would kill their model.

  2. Pingback: Dynamic ebook pricing: What the Goliaths can learn from the Davids « appazoogle

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This entry was posted on December 2, 2011 by in Business and tagged , .

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