The Myth of the 99 Cent Book

http://www.baekdal.com/opinion/the-myth-of-the-99-cent-book/

by barredo • 15 years ago

30 26 15 years ago

billswift• 15 years ago

This post makes the same mistakes many critics of the Laffer curve make. The Laffer curve, despite their simplistic criticisms, does not say that lower taxes increases revenue, it says that there is a "sweet spot" where tax rates maximize revenue; if your rates are higher than that, then lowering them will increase revenue, but if the rates are lower then raising them should increase revenue.

Similarly with pricing schemes; there is some price point which will maximize revenue, often it is lower than the seller believes, but not always. J A Konrath on his blog has discussed his experiments with pricing and revenue several times over the last few years (http://jakonrath.blogspot.com/).

JayWilmont2• 15 years ago

The concept you want is "price elasticity".

patio11• 15 years ago

I fail to see how receiving 70 cents per e-book sold is a radically worse proposition than seeing $2 for every on-dead-treebook sold.

You know what you call an author's principle source of income? A day job. This is true for the overwhelming majority of authors and has been since time immemorial. A change in market power from publishers to Amazon will not wipe out the stunningly lucrative career option that being a midlist author was.

jonnathanson2• 15 years ago

This.

Most people don't realize that the vast majority of authors -- even your J.K. Rowlings, Stephen Kings, and John Grishams -- make their money over a big volume of works, rather than on any individual work. Amanda Hocking, with her much-storied, self-published millions, is no different. She didn't get rich off a single book; she got rich because she cranked out 20 bajillion books at once.

If anything, the new economics of publishing will push things further in this direction. The pressures of this market will favor prolific authors over one-hit-wonders. It's debatable whether that's a good thing or a bad thing for authors and, ultimately, readers. You could certainly describe it as the fast foodization of the book world. But the new dynamics would simply represent an acceleration of an existing model. After all, the John Grishams of the world were already massively richer than the modern-day James Joyces of the world before Amazon showed up. That's not a new or particularly startling phenomenon.

cfn2• 15 years ago

A prolific writer is in a better position to make a killing but bad user reviews may eventually put an end to it. A big difference from the past is that self-pubbed authors can receive up to 70% of the sales whereas they would get 10% or less with legacy publishing. This greatly reduces the threshold of success (if measured as being able to live off writing).

mikeash• 15 years ago

That is an excellent point. The amount of money extracted by middlemen between the buyer and the author in a traditional publishing setup is astonishingly awful.

smackfu• 15 years ago

Taking logic to absurd extremes doesn't prove it is wrong in general, it just proves it is wrong at the extremes.

Look at games on the iOS App store. Would anyone sell a polished game for $1 back in the day? No way! A game is worth $20-30. Yet developers are making a killing selling them for $1, the minimum allowed price. And yes, this does hurt the people who think they need to charge $10 for their game, because they think there is only a small market. But that doesn't mean the people charging $1 are wrong.

ctdonath2• 15 years ago

New delivery mechanisms have changed the, er, game. When the audience has to get in a car, drive to a game/book store, physically peruse voluminous units, etc. just to identify and purchase the product, the practical audience is much smaller than the potential audience. When the acquisition process is simplified to tap-tap-tap-[password], the practical audience equals the potential audience.

A ballpark guess is Angry Birds is probably selling some 10x as many copies via on-a-whim instant downloads vs. the go-to-a-store-and-get-a-cardboard-box model.

SNK• 15 years ago

"Every other type of product cost more today than 10 years ago. A bottle of milk costs more today than in the past. A bicycle costs more than in the past, a meal at a restaurant cost more today than ever before. The gas prices are off the scale (but for other reasons as well.)"

Lying so egregiously to this audience is insane; ever heard of computers?

sethg3• 15 years ago

There’s no Moore’s Law for novels.

There have been some technological improvements that make writing more efficient (e.g., word processors), but the process for making most other consumer products has become efficient at an even faster rate. The Baumol effect predicts that this imbalance will lead to more expensive novels and/or cheaper novelists.

kstenerud• 15 years ago

Cheaper novelists. Like with apps, the new publishing model lowers the bar to entry, resulting in a substantial increase in publishing authors.

sethg3• 15 years ago

Nick Mamatas (who is both a writer and a small-press editor) once argued that the true market value of an ebook, at least for fiction, is around 99 cents, because that’s how much a typical book costs in a used bookstore. (Not having visited a used bookstore in a while, I have to take his word for it.) In other words, if you want to read a novel and you don’t care about its format, you can get one for 99 cents.

larrik• 15 years ago

Seriously, I've replaced my new book buying habit with used bookstore visits, NOT with ebooks (I've never payed for an ebook, but I do like Project Gutenberg)!

It helps that I mostly look for obscure sci-fi, which is quite under-represented in new book stores.

kamikazearun• 15 years ago

The whole article is based on a strawman. Who contended that reducing price per unit by an order of magnitude would result in an equal increase in volume?

Pricing at a dollar is a definite advantage for certain products which have mass appeal and have potential for massive volume ( Ex: Angry Birds ). People are significantly more likely to buy something that's only mildly interesting if it costs an insignificant sum like a dollar.

If you sell a textbook on Applied Thermodynamics for a dollar though, you sir are an idiot!

ctdonath2• 15 years ago

Per a prior post, a book is only worth what it costs used. Amazon lists used books titled "Applied Thermodynamics" starting at $0.51. If you're one who realizes education is nigh unto free (personal review & certification being the expensive bit), such textbooks are only worth a buck.

Note that that the textbook market is skewed to artificially favor expensive titles per school requirements and publisher racketeering. Considering it is AFAIK a fairly settled topic, at least in an educational setting, without such price-fixing the introduction of yet another textbook on Applied Thermodynamics would command a far lower price than the typical $50-$150.

Yes, the simplified lead premise is a strawman. So is saying selling a textbook dirt cheap is idiotic. Both are used as a lead-in to a valid detailed discussion of what does constitute reasonable pricing.

larsberg• 15 years ago

I'm not sure this author actually reads the 0.99 books from Amazon. I read quite a few of them (kicked a bad video game habit), and it appears many authors of the SciFi multi-volume publish book 1 at either free or 0.99, with the rest of the books in the series around the 2.99 price point.

Like apps, I will buy almost anything at the 0.99 price point. But at 2.99, I'd probably skip the first book unless I had a recommendation, and for all of these "long tail" authors, there is little chance of me discovering them. But with this pricing model, the top-100 books are always churning up a few new authors every week for me to check out.

It's very interesting because it is so different from the app or standalone-book models.

Triumvark• 15 years ago

Prices float toward the marginal cost of production.

Saying that's heading in the wrong direction is like saying that we could make a better plane if we just had less gravity.

JayWilmont2• 15 years ago

Despite how poorly this guy describes price elasticity, I do think he has one decent point: that if the "customary" ebook price becomes $1, that is too low for most authors to make it. Based on just a gut feeling, I think the sweet spot would probably be $3-6 for ebooks.

brackin• 15 years ago

Making $10 of ad revenue is actually very good for a small blog. People don't just do these things to become millionaires but for a mix of recognition and for fun. Doing things for fun is still very prolific...

EponymousCoward• 15 years ago

This guy is seriously misunderstanding the long tail. First of all the long tail is an opportunity, not something that "dies" (his words). It's an opportunity for authors because what authors have today is the opportunity to self publish and instantly receive global distribution and in the case of say Amazon sit on a store shelf that has millions of visitors a day. On top of that, they take 70% of the books retail price.

So all this and he's going to cry about the price point dropping?

For the record my book buying rate has probably gone up 10x since Kindle, partly due to price partly due to convenience.

prof_hobart• 15 years ago

"Another example is if you write a book for a nice market, totaling 20,000 potential readers. And you predict that for the price of $9.99 you will reach 35% of that audience."

If you're able to reach 35% of your total possible audience at $9.99, then of course you're not going to make more money by slashing to $0.99. But where did the 35% figure come from?

How about I pluck the figure 1% out of the air instead? And pluck 50% out as the figure I'd reach at $0.99? Suddenly the economics look totally different. I'm now making 5 times the amount at $0.99.

Unless he's got any particular basis for his figures, mine are just as valid as his (and based on my personal buying habits on the iPhone, mine are not entirely unreasonable. I have spent far more in total on $0.99 apps than I ever have on $9.99 ones and I very much doubt I'm the only one. I know books are different, but there's no fundamental reason why you couldn't see a similar pattern).

I'm not suggesting that authors definitely would make more money. But basing your argument on what seems to be a figure plucked randomly out of the air isn't a good way to prove your case.

Oh, and whilst we're at it, why does the long tail apply to $0.99 books but not to $9.99 ones?

robertskmiles• 15 years ago

It seems to me that this article is pretty clueless

The part about the relationship between price and sales shows a total obliviousness to basic economics

> A 99 cent book may bring authors a lot more money than $9.99 one.

> ... I don't know where they got this idea from. It is not true.

> Sure, providing something at a discount yields a higher sale, but it is not at the same rate.

The author has sort of independently reached some of the conclusions of simple economics, but honestly you'd be far better off just reading the wikipedia page of Elasticity of Demand (http://en.wikipedia.org/wiki/Demand_elasticity).

The question is pretty much just "Is demand for ebooks elastic or inelastic?". I don't hold it against the author, but they're really reinventing wheel, and the wheel they've come up with is kind of wonky.

> Every other type of product cost more today than 10 years ago. A bottle of milk costs more today than in the past. A bicycle costs more than in the past, a meal at a restaurant cost more today than ever before. The gas prices are off the scale (but for other reasons as well.)

That's just dramatically factually untrue (in real terms). Yes, with inflation, a lot of things now cost a larger number of currency units than they once did, but in real terms bicycles (to use their example) are a lot cheaper than they were, because they can be mass produced in enormous numbers in China.

> Content is the only industry in which the price of content has dropped. ... Every other product costs more. Content costs less.

I might be wrong here, but I believe just about all manufactured goods have substantially fallen in price in real terms since the 60s.

tl;dr This person needs to read a high-school level book on economics (or just the chapters about Inflation and Elasticity of Demand) before telling people how to price their goods.

The Myth of the 99 Cent Book

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