Wednesday, January 4, 2012

The Missing Link in E-Book Pricing

kindle e-reading device in front of christmas lights
E-book prices are getting a lot of attention these days, both with delight and concern.   The discussion and apparent hand wringing about the (low) cost of e-books and what it means to publishers, agents and writers.  

Part of the discussion of cost hinges on the perception that an e-book is less in itself than a physical book.  It has no matter, so there's a savings of printing, shipping, storing etc.  However, there's still the cost of writing, marketing, preparation and formatting (perhaps multiple ways).  These are largely  up-front costs, with very low ongoing costs.  

E-books through the Kindle and other devices are fairly restricted. Unlike physical books, I cannot sell or "give" my copy to someone else, and sharing, if allowed at all, is very limited. Because of this, the e-book is diminished in value here as well.      
E-books are going to engender a different behavior. If e-book prices are sufficiently low, the risk is low to dabble or try a new author or title. So rather than loan the book or give it away as I can now, I recommend it to a friend.  If they can pick up that title for the price of a cup of coffee ($1-3) or a magazine, they're more likely to buy it.  This means that rather than selling one $15.00 book, authors and publisher may sell eight $2.00 books to reach the same number of people (or more).   How much encouragement does it take for most people to put down $15 to buy a book versus the barely perceptible (immediate and easy) process of purchasing a $2.00 e-book?

This means that though the per unit cost is lower, margins are higher and number of units will be higher. Sales will need to be larger to garner the same profit, but the threshold for people to purchase the title is lower.

Going forward, e-book publishers are going to have to focus on getting eyes on their titles, creating opportunities for sharing and recommending.   When we look at sales statistics we'll need to be considering the impact of this change, number of units is going to mean something very different in the world of e-books.  

Image courtesy thekellyscope

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