✚ The Sweet Spot in Ebook Pricing

Yesterday on Twitter, I flippantly suggested that (‘literary’) ebooks that cost less than $4 will eventually come to dominate the market. Any higher, I think, and you begin losing potential readers to piracy, free content, and other media. $4 roughly correlates to the price of a good cup of coffee, and I think a lot of us hold to a subconscious belief that anything cheaper than a cup of coffee is pocket change.

In explaining the iTunes Store pricing structure in 2005, Steve Jobs’ explained that, “We’re trying to compete with piracy — we’re trying to pull people away from piracy and say, ‘You can buy these songs legally for a fair price.’” The notion that it’s possible to compete with piracy appears absurd, but the success of iTunes suggests that the key is to offer a superior user experience, at a negligible cost. For most of us, being able to download a high quality track quickly and easily is worth the $1 we might save were we to navigate over to The Pirate Bay.

For ebooks, I think the price falls closer to $4. That might seem strange to publishers accustomed to selling paperbacks for $20 and hardbacks for $40. The difference is that, in the print environment, publishers are competing against other publishers for sales. Online, publishers are competing against pirated copies of their own works. I don’t think book piracy is as big a deal as music piracy (largely because, demographically, readers skew a little older than music fans), but I still think the emergence of book piracy as a phenomenon is going to influence how ebooks are valued, even by those who don’t pirate works themselves.

Now, my gut tells me that $4 is the point at which most reasonable people would prefer to pay for an ebook title than spend the time skulking around shady websites searching for the torrented file. At an average wage, $4 represents somewhere between five and fifteen minutes of work. The tradeoff in this case is between time and money, and I think $4 tips the scales in favour of going legit. It’s important to remember that a lot of people don’t want to pirate, and will happily pay for work if they believe the experience is great and the price is reasonable. Whether or not $4 is reasonable for the author, publisher, and distributor is another matter.

I decided to comb through the top 100 books on Amazon.com in the print and digital (Kindle) categories to see whether my hunch is already shaking out in the marketplace. The graph below represents the number of books in the top 100 falling between certain price ranges:

It’s worth noting that the bestselling books in the digital/electronic/Kindle category are not the same as the bestselling works in print. Many of the extremely cheap electronic titles are works of genre fiction that have been “published” by Amazon Digital Services, which essentially means the author has self-published. The fact that production costs are virtually non-existent and the author doesn’t need to split profits with his or her publisher means that it makes sense for some of these electronic-only writers to set the price of their work extremely low and “gun for volume”. It would be interesting to see whether these writers are, in fact, making a decent living off these 99 cent ebooks. Does the “App Store Principle” (that extremely low prices can be countered by increased sales) hold true in the realm of ebooks?

What’s also interesting to me, however, is the swift drop-off in electronic sales as soon as the price range shifts to $10 and above. A similar drop-off point is reached as soon as print works hit the $20 mark (and begin rising around the $35 mark, as we dip into luxury editions and box sets territory).

All things considered, my gut tells me that you’re selling yourself short if you price your electronic edition below $3 (unless you’re able to rapidly crank out works of genre fiction for your hungry audience), but if you decide to price your work above $8, you’ll probably have a hard time fighting against piracy and other free stuff. If that $4-$8 range seems low, maybe that’s just tough. I don’t think the market necessarily stabilises around what’s fair for all parties involved.

Update: Kevin Nguyen, who knows much better than me about these things, has suggested the sweet spot for ebook pricing on Amazon.com may lie somewhere between $10-$15. I think it’s likely that, were I to dive in a bit deeper and perform the same analysis on the top 10,000 selling ebooks, most would fall somewhere in the $5-9.99 range. I’m still skeptical that most consumers would be willing to pay above $10 for ebooks. At that point, you’re competing not only against the pirated version of your own product, but also against the paperback edition. Even if the consumer isn’t interested in print, if the ebook is priced close to the same level as the paperback, the consumer will make the mental calculation that you (the publisher) are ripping them off. The consumer recognises that an ebooks costs less to produce, and they expect to see those savings reflected in the retail price.

If you’re interested in kicking around some thoughts about ebook pricing, hashtag #ebooksweetspot on Twitter.