I am publishing a collection of short stories as an e-book. Concluding a series of posts on that subject, I’m setting a price for that content today, subject to further modifications, complications, frustrations and disturbances in the time-space pricing continuum, as prophesied below.
$4.99. That will be the price of my short story collection on Smashwords*, where I’ll be making the work available as an e-book. To the extent that I have now answered this vexing question, I am relieved. To the extent that I have unwittingly uncovered a new and nightmarish parallel problem, I wish I had been born with no curiosity and wealthy parents.
Why $4.99? Well, I can’t point to any single determining factor. Rather, I took everything I learned over the past few weeks (and months) and tried to find a price that met the evolving criteria without contravening my basic assumptions, which included:
- No free/freemium pricing.
- No price above $10, because that’s getting into (discount) print-book territory.
- All things being equal (meaning equally profitable), a lower price is better because it produces more readers.
- Psychological price points matter. $4.99 is much better than $5.01.
Particularly helpful was data from Smashwords CEO Mark Coker, which pegged pricing sweet spots at the $5 and $9 price points. Following the maxim that a lower price is better when profit is the same, I chose the $5 price point over the $9 price point because I thought it would spur demand, and because I thought $9 for an e-book was simply too close to the low end of current print-book and print-on-demand (POD) pricing.
Which brings me to the new nightmare I uncovered over the past two weeks. (Regular readers will be relieved to know that although I have identified this problem, I do not intend to tackle it immediately. It’s a downstream issue, and I will simply have to deal with its effects as I attempt to cross each of what looks to be an unending sequence of burning and booby-trapped bridges.)
Just as there are multiple conflicting factors that lead to a given price point for any product, once a price is set there seem to be as many divergent consequences leading away. These consequences are mainly a function of the product pipeline, and in many cases are determined by people you will be doing business with as you attempt to move product between yourself and the consumer — even if that product is a digital file.
My initial interest in self-publishing was very clear. I liked the idea that my writing could be communicated directly between myself and any interested readers. This blog post — and indeed this site, and all its content — is an example of the internet’s ability to function both as a publishing and distribution medium. Had I decided to offer my short story collection for free, I could have simply posted it here and been done with it. (Obviously there would be advantages to making my work available via more outlets.)
Because I intend to set a price, however, I’m forced into a basic decision. Either set up the ability to handle transactions on my own site, or take advantage of third-party sites that provide such services for a fee. That’s a big part of the reason why I chose Smashwords as the initial point of departure for my short stories. On Smashwords I can plug my content into a system that will handle and track purchases. I’m sure it’s possible to make something like that work in my site, but right now I’m trying to balance what is most direct with what is easiest — both for myself and any customers I might eventually have.
In exchange for all that Smashwords can do for me, they take roughly a 15% cut of my asking price. So if I’m selling for $4.99 they’re getting about $.075 on each transaction, and I’m getting $4.25. One of the additional advantages to Smashwords, at least for me, at this early stage, is that they can also pipeline product into other sites and markets, including Amazon.com. But note: Amazon also charges a cut, and it’s here that the waters get murky, if not completely clouded. (Hey…was that a fin?)
As I understand things right now, Amazon and Smashwords would combine to take a 58% cut of my $4.99 asking price, meaning I’d end up making a little over $2.00 on any sale Amazon made from content pipelined to them via Smashwords. (Other sites that Smashwords is connected to may charge more or less, and Amazon’s royalty may also vary.)
As bad as that combined bite is, if I understand the costs associated with doing business with Amazon directly, their standard royalty for e-books is 65%, although a new plan will (or has) cut that to 30%, apparently to bring it inline with the royalty Apple charges for similar content. There are various requirements for qualifying for this new lower Amazon royalty rate (which I believe I meet), but I’m not yet clear how this new rate might affect the combined Smashwords/Amazon rate I just quoted.
Despite the inaccuracy or incompleteness of any of the above, three things should be immediately clear. First, what happens to your profit after you set your price is out of your control unless you handle the sales and distribution yourself. Second, the possible permutations of all these royalties and requirements is almost endless — and the requirement of keeping up with them is neither trivial or optional if you intend to make writing and self-publishing a profitable business. Third, the agency model — wherein retailers charge a percentage of each sale, rather than purchasing at a wholesale price and then setting their own retail price — provides pricing consistency to the consumer, but complicates pricing calculations for the content producer.
Why? Because instead of selling to everyone at a single wholesale price, after which each individual reseller/retailer fixes their own consumer-friendly price, content providers must now anticipate all of those pricing permutations before a sale is made. This echoes the February sea change in the greater publishing industry, which essentially forced Amazon to accept the agency model, although Amazon may profit from the change as well. Publishers are now more in control of the prices that consumers will pay, but they must now negotiate contracts and terms with each reseller acting as an agent. (As an independent author, you’re not going to get to sit down and negotiate with Bezos or Jobs. You’re just going to take what they offer.)
Now, as complicated as all of this gets, keep in mind that we’re only talking about e-book prices. We’re not talking about print books, including individual print-on-demand copies that can be created directly from e-book content. I want my short story collection to be available as a print book of some kind, and sooner rather than later. Toward that end I’ll probably start with one of the main POD services (Lulu or CreateSpace), and then look at other options, including limited editions. But all of that involves more questions of price, and more obscure pricing relationships.
For example, for fun last night I tried to get a rough estimate of what my short story collection would cost as an e-book. I went to both Lulu and CreateSpace, clicked on their easy-to-use POD calculators, and immediately become both overwhelmed and completely confused by all the options, sub-options, and veiled pricing relationships. Pricing an e-book seems like child’s play compared with the the idea of pricing a physical book — and that’s before I confront the shipping, handling and processing fees that all of these intermediaries (including Amazon) are likely to charge.
I’m not saying any of this is rocket science. Plenty of people are putting works up or getting books made and shipped. What I am saying — which I think echoes what April L. Hamilton has said — is that really knowing what’s happening with all these numbers is a big and critical job if you intent to write professionally. (As an aside, I think raw economics will eventually pop the self-publishing fad. A lot of people are going to spend a lot of money and get nothing in return — which I caution you not to see as a defense of traditional publishing.)
Although I’m completely absent any hard data, I have a general sense that print books or POD books can be had for somewhere between $10 and $12 a copy. (Again, that could be completely wrong, and I’m aware that it depends on a multitude of factors.) My goal with my e-book price was to come in at about half what the eventual p-book cost would be, and I think the $4.99 price does that comfortably. As to what happens to my potential profit in any or all of these possible scenarios, I have no idea other than the specific numbers I quoted for Smashwords.
One uncomfortable byproduct of all of these intermingled retailing relationships is that I can’t pick a price based on my eventual profit. If I decided I wanted to make $4.00 per sale no matter what (yeah, I know that’s crazy, but it is what a sale on Smashwords will net me), I would have to start with the most abusive combination of royalties and fees in the retail pipeline and calculate back from that.
For example, let’s say I decided to sell through Amazon using their standard royalty rate of 65%. If I sold my e-book at $4.99 I would only net a profit of $1.75, while Amazon would keep $3.25. In order to protect my $4.00 profit target I’d have to set my price at $11.50 on Amazon. Not only would that be death, but then I’d have to decide whether I was going to sell at that price everywhere, or whether I was going to simply try to make a $4.00 profit everywhere, meaning my book would be priced differently in multiple places. Madness.
One thing I did notice, however, is that a lot of this greed-based obsession with profit goes away if you simply order your thoughts correctly. If I think of Smashwords’ 15% royalty rate first, then Amazon’s 30% or 65% royalty rate, I get incensed. By the same token, if I think about Amazon first, then Smashwords, I feel as if I’m making out like an e-book bandit. (None of which says anything about the relative size or importance of these two sites, or how Amazon could easily deliver more profit to my bank account even at the higher royalty rate by virtue of its scale and prominence.)
In the end, after considering all of the above, I decided — must like the industry at large — that my main concern should be finding a price that fit the customer’s expectations, even as I knew those expectations were absurdly subjective and constantly evolving. If it turns out that someone in the product pipeline is taking a bigger cut than I think is fair, then I’ll have to decide whether bypassing that market/site is a good idea or not.
Fortunately, I am not in these fights alone: competition between distribution channels will tend to drive prices and agency fees down over time. (Whether a third party challenges the Apple and Amazon 30% royalty rate, or the government steps in with anti-trust/price-fixing investigations, I do not believe that 30% fee will hold. In fact, I would be surprised if Apple or Amazon didn’t drop their royalty rate to 25% or even 20% in the next year or two — if only to combine a market-share grab with a well-timed and plausible defense against further federal scrutiny.)
In conclusion I want to state categorically that none of this fretting should be taken as a complaint. There are complex puzzles to solve here, made all the more difficult because of the shifting nature of these new opportunities. As always I remain thankful for the chance to participate, and for the fact that I don’t have to convince anyone else that my stories are worth publishing. Maybe they are and maybe they aren’t, but I’d rather find that out from readers themselves than trust the self-serving opinions of agents, editors and publishers who are ultimately slaved to their own bottom line.
* Why Smashwords? Whether that’s the right place for these stories or not I have no idea. I chose it because it’s accessible, it has a relatively shallow learning curve, and it feeds directly into other markets. I did not choose it because of anything having to do with other content on the site or with the Smashwords community. Given the prominence of erotica on the site, and the use of the words ‘prude filter’ to describe the toggle for turning adult content on and off, I tend to think it’s not my ideal literary springboard. Then again, Mark Coker has been nothing but helpful and responsive, he seems serious about his business, and he’s trying to create exactly what I need: a seamless pipeline that feeds all e-book markets. If there’s a problem, I’ll let you know, but right now I’m simply grateful that a site like Smashwords exists.
— Mark Barrett