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
Zoe Winters says
Hey Mark, interesting post. I also liked your free/freemium post tackling the celebrity platform model. Admittedly I have a little of that going on with “Zoe Winters.” Will I ever be a “name?” Hell if I know, but I have a big personality and a big mouth and I’m willing to exploit that. However I also write some other stuff under different names in different genres that I do NOT go out and be super social over. For that reason, the writing alone and word of mouth has to keep it afloat. I’m interested to see what the end difference is in my different identities’ success over time.
For me, I set a $2.99 price point for ebooks. Right now obscurity is my primary enemy and selling more books at 2.99 gives me more visibility then less books at a higher price point where the money would likely work out to about even.
I can get to my “1,000 true fans” faster with a $2.99 price point and it’s the entry point for the 70% Amazon kindle royalty hike starting in July.
I don’t disagree with this or anything else you said. As noted in the post, I agree that a lower price is better, so I was tempted to move down from $4.99 in your direction. What stopped me was the knowledge that I had no idea where to stop the slide. 🙂
Also, thanks for the info on Amazon, and for noting the intersection of your price and Amazon’s bottom qualifying limit for their 30% royalty. I think that’s probably a good place to be.
David Derrico says
I’ve been following your blog for a while now, and I find it very well-written and I enjoy your insight into various publishing-related issues (especially your posts on DRM). I’ve watched you struggle with the pricing question for a while now, and I think you might be over-thinking it. At the end of the day, the right price (if you aim to be a professional, which I think you do) is the one that makes you the most profit. Simple as that. And, for Dan Brown that price may be $9.99 or $14.99 (although I think it’s lower), but I believe for indies without huge name recognition and promotion, the “sweet spot” is closer to $2.99 or even $0.99. I believe the mistake big publishers are making is that e-books have zero marginal cost, so it’s better to sell 1,000 at 99 cents than 100 at $9.00 or 50 at $14.99. But my free advice is to try a few different price points and see which one works best for you.
In all your posts, I think you also missed a very important factor: impulse buys, which happen often at 99 cents, sometimes at $1.99, rarely at $2.99, and not at all above that. Heck, people pay 99 cents or $1.99 to download ringtones and wallpapers for their cellphones, things that you can easily find for free elsewhere. Why? Because it’s cheap and very easy (think 1-Click).
As for pricing based on final royalty, I don’t see any point in that. Your “unit royalty” isn’t the important number, the total royalty is. I’ll take 1 million sales at 99 cents over 1 sale at $100,000 any day. The other important number (as more of a tiebreaker) is total sales, with more sales at a lower price generally being preferable to half the sales at twice the price.
As for Smashwords, I think it’s a great service and Mark Coker seems like a great guy, always quick to respond to customers. But the reality is that I could be making 100% or even 1,000% royalty on my Smashwords sales and they still wouldn’t touch my Amazon royalties. Sales on Amazon dwarf all other channels for me, so in my mind, they’re earning their 65% and I’ll be very happy when they drop that to 30% in July.
Good luck with your stories!
We’ll call this the understatement of the century. 🙂
I could certainly have gotten to the end point by a more direct means, but doing so would have shorted me some useful context — and there’s nothing I value more than being able to place issues in a global framework. Nagging the price question has helped me better understand the industry as a whole, the consumer, and the relationship between e-books and p-books.
It may take a while, but I’ll get back what I put into it if only because I won’t have to wonder what I might have missed. Speaking of which…
This is something I know absolutely nothing about. I don’t buy a lot of books, period, and I don’t buy a lot of stuff online. (Whatever an e-book impulse buyer looks like, I would be the anti-matter equivalent.) You’re quite right that a $4.99 price is not going to make anyone think ‘fire sale’ or ‘impulse buy’ relative to other e-book prices, and I agree that might hurt me.
My built-in protection against any serious concern about profits is simply that this short story collection is both literary and quiet. If Oprah herself gave birth to it on live television I doubt it would sell more than a thousand copies, so I don’t have to worry too much that I might somehow blow a golden opportunity. (I do hope the stories are taken seriously. I just don’t see any commercial potential.)
As to Amazon, I’m still figuring out how to take advantage of what they offer, even as I’m glad I’m joining the process at a time when they are slashing their royalty rates. I’ve got some ideas about how to evolve my content across other sites and editions/versions, but there’s still a lot to learn. I’m also dubious about the fad of self-publishing, but I’m committed to the promise of it and interested in helping others keep from getting burned by the hype.
We’ll see how it all pans out. For now, consider all this a toe in the ocean.
David Derrico says
I’m sure the journey to finding your price point has been useful, and I’ve read all your posts, so obviously others are finding some use in them too. I just have two quick points:
One is not to sell yourself short. I haven’t read your stories, but I know good writing when I see it and you write very well. I’m a nobody, and I’ve certainly never been mentioned on Oprah, yet I sold over 1,000 copies last month (hoping to hit that in March as well). And others do far better than I do. So I would encourage you not to give up before you even start. Realistic expectations, yes. But why not try to sell over 1,000 copies? It can certainly be done.
Second, if you really don’t care about profit at all, then I’d say all the more reason to post it at 99 cents and hope to get it in the hands of as many readers as possible. The fact that 99 cents might end up making more money (as well as more readers) would just be a win-win.
I’m not really trying to change your mind, $4.99 is in the range of reason and I’m sure they’ll be worth that much or more. And the beauty is that you can experiment and find what works for you. Just giving my experience and thoughts.
Thank you for the compliment. I’m glad you like my writing. About the most I’m ever willing to say is that I take it seriously and try to do it well. I aspire to be good: I don’t ever claim to be good.
I do promise to try to sell as many copies as I can. 🙂
Your point about cutting prices to increase readership is one I cannot refute. It’s the ace in the hole of the free/freemium approach, and I can only say that on some philosophical level I have hardened in my belief that a low price (or no price) poses risks to all writers collectively. While we may never belong to a cartel, and individual writers may profit by their own lower prices, I’m not going to participate in devaluing content if I can help it. $4.99 may limit my readers compared with a lower number, but I think it’s fair for the experience I hope to provide. (I know markets don’t care about fairness, but I don’t really care what markets care about. If I did, I’d be selling sugar to kids, pills to middle-aged adults and rip-off insurance policies to the elderly.)
I’m still a bit dubious about the rate at which a lower price point generates increased demand, but I don’t argue the general point. I’m also not sure where the benefit tails off relative to free, but again, that’s not something I have to worry about.
As you say: it’s an experiment, and one that we’re all participating in.
David Derrico says
Just one quick point: I agree with you on the free thing and will not be releasing my stuff for free. Also, when Amazon changes its royalty payments in July, I will be changing my prices to $2.99 to earn the 70% royalty. I think $2.99 @ 70% will give me a fair royalty for my work, while still being a great deal for readers.
I guess I just wanted to make clear that I see a WORLD of difference between free and 99 cents, for many reasons. As I said, the total revenue (for me) trumps the unit revenue (if I could sell a billion copies for a penny each, I’d do it in a second and abandon any “pride” that my work was “undervalued” as I counted my millions), and infinity x zero is still nothing.
Brent Robison says
Mark, my respect for your well-thought-out and well-expressed opinions is high (see my link to you on my blog post “For Free”). But my jaw has been dropping further and further the last two weeks as I’ve seen how far your thinking can go into the depths of the pricing question. 🙂 Makes me very curious about your fiction, actually (ah, maybe it’s a sales ploy). I’m always interested in folks putting out short story collections that, like mine, are “literary and quiet.” That may be the most subversive work in the marketplace today.
And I thank you for coming to the same conclusion I just did regarding my own collection: $4.99. (I got there just by shrugging and saying, Hmm, that feels about right.) I’ve already had it on Smashwords for a couple of months at “Set your own price.” I disagree with you about the guilt factor there, but I agree with your other points about “free,” so I’m changing it. Maybe I’m old… I just don’t like the idea of my work being worth $0. And about impulse buys — somehow that concept doesn’t seem to apply to my kind of work.
As a dead-tree booklover, I started on the p-book side (Lulu) and still feel resistant to the lack of aesthetics in e-books, but I’m slowly being dragged into that camp. My 194-page collection goes for $14.95, priced by comparing to trad-pubbed lit collections, and no lower because of Lulu’s unfortunately high unit cost.
I look forward to reading your book!
Well, this is a hard-wired trait, and plenty of people who know me would testify under oath that there is much to NOT recommend it. On the other hand, I learned at a young age that most people tend to skate across the surface of issues and ideas, as opposed to digging down — and that that holds true even for many so-called authorities. (Politics comes to mind.)
To the extent that the internet has opened up myriad pathways between people it has also exacerbated this tendency to the point of cultural ADHD, leaving me ever more prone to leaning on in-depth analysis of issues that are germane to my own life. (Wisdom seems a quaint notion these days, no?) In a world dominated by fake friendships and 140-character limits, there is something to be said for being able to push past conventional wisdom and hype in order to see the foundation and supports of an idea. (None of this should be taken to mean that I think I’m right about my conclusions. I try to be right, but I could very well be a blithering idiot multiple times over.) In a way I guess I’m always less interested in where I’m standing and more interesting in what I’m standing on.
I would like nothing more than for someone to think I was being subversive. 🙂
Validation! (I am quite interested in the fact that you’re making this change, and I wonder if that won’t be more common in the next six months or so.)
Thanks for mentioning those numbers, and your experience with POD. As I said in the post the POD options are overwhelming, and strike me as not particularly cheap. I would hope that prices would come down some as demand increases, but there’s always the cost of paper, fuel costs for physical delivery, etc. It may well be that the same pricing issues that are hurting traditional publishing will settle on POD as well. (Further encouraging digital works.)
Brent Robison says
Yes! That quaint notion of wisdom is incredibly refreshing in a world that seems to be ALL surface… and getting behind the masks, the illusory duality of things, is my main passion these days, uncommercial though it may be. I just don’t naturally lean toward business-type analysis, so I need others who do. Thanks for your work here!
Joel Friedlander says
Glad you finally settled on a price–any price–so you can move on to other things. And I just had to chuckle at your line, after all the thousands of words on this subject:
“Why $4.99? Well, I can’t point to any single determining factor.”
Anyway, print books really aren’t that big a mystery. The ebooks are much more difficult to figure out for me, maybe it’s my print book background.
My suggestion would be to forget about Lulu and Createspace, since you won’t get the control you want from them, and go straight to Lightning Source, have full control, get into the useful Ingram catalog, and pay the lowest print prices of any POD supplier. It’s not hard to do, let me know if you need any help.
Great stuff Mark, thanks for posting.
I’m really glad you brought up Lightning Source. I knew about them months ago, then forgot about them in the Lulu/CreateSpace barrage. (I kept having this nagging feeling I was forgetting something when I talked about POD, and I was.)
As to all the posts about price, they helped me anchor a lot of issues that were previously free-floating. I’m also fascinated by how the big publishers are also wrestling with these issues, and thankful that I don’t have their legacy problems to deal with. (And that’s not a slap at publishing. Overhead is overhead — and right now it’s crushing everybody.)