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Dispatches from the Digital Revolution

Dynamic ebook pricing: What the Goliaths can learn from the Davids

By MIKE PICKETT

Most of us know that when we are traveling on an airplane, we probably didn’t pay the same price for our ticket as the guy sitting next to us paid for his. Airlines adjust their prices frequently, taking into account the demand for a given flight and the prices offered by competing airlines. These dynamic prices enable airlines to collect the maximum revenue on every flight. After all, it costs the same amount for the airline to run the flight if it is full or empty, and getting two people to pay $200 is better than getting only one to pay $300.

Since we all know and accept this, why would we be so surprised to find out we paid a different price for the Kindle edition of Steve Jobs than someone else did?

Publishers seem to set one price for an ebook and intend for that book to sell at that price for the rest of eternity (granted, ebooks haven’t been around that long, so it seems weird to talk about prices for the rest of eternity; but as a general trend, many old ebooks are priced the same as many new ebooks). I discussed this problem in a previous post.

Many self-published authors are finding they can make a living by churning out ebooks and pricing them cheaper than traditionally published ebooks. They may not sell as many copies as they would with a traditionally published ebook, but since they keep a bigger percentage of the profit, and usually make more per sale than traditionally published authors, they can easily come out ahead. This represents a threat to publishers from both sides of their business: readers are starting to turn to cheaper self-published alternatives as opposed to higher-priced traditionally published ebooks, while authors are also choosing to self-publish rather than seek out a traditional publisher.

Traditional publishers will always have the books that demand attention. These are the Grishams, Pattersons, and Evanovichs, and they will always demand a premium. But what happens to the authors who aren’t name brands? Can we really expect a reader to choose a book priced at $9.99 over a book priced at $1.99 just because a big publisher’s name is in the metadata? And can we expect an author to choose the $5,000 he would make through a publisher instead of the $7,000 he can make on his own, just for the prestige of publishing the traditional way?

In order to survive—in order to compete for readers’ money and authors’ rights—publishers need to be more creative with their ebook pricing. I think that means changing the price of an ebook over time (my ideal would be an algorithm that automatically changes the book’s price based on the book’s demand, which could be calculated using its Kindle Store rank or something similar). Since selling additional copies of an ebook impose no new costs on the publisher, the publisher can experiment with less risk on ebook pricing. This way, they can discover how to earn the maximum amount of profit from a book.

After all, it’s better to get $5.50 from two people than $9.99 from one person.

Appendix:

Here is a list of links to articles that discuss ebook pricing. The first is especially interesting. It’s an interview with Amanda Hocking, the self-publishing phenom who signed a $2 million deal with St. Martin’s Press, and Barry Eisler, the traditionally published thriller writer who turned down a $500,000 deal from the same publisher in order to self-publish.

Traditional  Versus Self-Publishing

Barry Eisler blog post (1)

Barry Eisler blog post (2)

What is the ‘New’ Publisher?

Information

This entry was posted on December 18, 2011 by in Business and tagged , .

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