Monday, August 1, 2011

How much for those electrons?

Everybody knows there is a sweet spot.

In cooking, in driving, in relationships - everything seems to have its sweet spot, a point of diminishing returns beyond which extra effort does not produce extra results. Business is no exception. In the publishing business, book pricing is an art. Where do you set a price point to maximize profit? The trouble for traditional publishers is that there is fixed cost to produce a printed book ( or "treebook" as author Bill Jones calls them). But what about ebooks? Once you edit it and give it a cover, electrons are so cheap to produce (and reproduce) it begs the question: is there a non-fixed production cost for epub books?

"Every single time I’ve heard anyone defend higher ebook prices, they cite the fact that “just because the publication is electronic, that doesn’t eliminate costs.” This fact is what I like to call “true but useless.” Yes there are costs associated, but all costs in ebooks are fixed. The publisher does whatever they need to do editorially, formatting wise, etc. When that is done, they push a file to Amazon/B&N/Smashwords et al and that is that. Whether there is 1 sale or 1,000,000 unit sales, the costs are identical. I’m treating promotion as a fixed cost although I can be argued on that. Regardless, the costs of promotion do not rise as a function of sales. They may drive sales, but if you sell 10x what you estimate, your promotion costs don’t expand ten-fold."

What this means is that ebooks can and should be priced differently than pulp books. How much less? That is still an unfolding question. According to David Slusher's analysis from 2010, $3-4 is how much an ebook should cost. Certainly there are many books both more and less expensive than that, and many of them do well. The curve is currently so broad the market cannot be pinned down to a standard price. But the idea that ebook production costs are non-fixed means we must change our mental approach to pricing them, understanding that the business model is so different they may not be compared with pulp books. In price as in so many other areas, ebooks are truly in a class by themselves.

No comments:

Post a Comment