Sunday, May 8, 2011

eBook Pricing: Intrinsic Value versus Market Realities

I have engaged in a number of debates on ebook pricing both online and offline as of late. Through this process I have started to formalize my opinions on ebook pricing. Also, I have continued to encounter two arguments that I dislike: intrinsic value and pricing tiers.

The intrinsic value argument I feel is especially specious. All artists want to believe their work has value. That somehow their creative efforts transmutes raw materials into something of value. But, much like the alchemists of old, it is a fool’s pursuit.

Logically, nothing has an intrinsic value. If an ebook had intrinsic value then that would be tantamount to printing money. A publisher could simply print out wealth. Granted, the hyperbole in that example is extreme but the point is valid.

Art in general is worthless and in a scale of worthlessness the most worthless of cultural artifacts. Why is that? Simple, art is the most rarefied product a culture can produce. In order for an artifact to have value it must be understood. This understanding is limited by education, perspective and wealth.

At a base level, some artifacts are easily understood across many cultural groups; some approaching universal recognition. An example would be a car. A car is understood by a wide range of people. The skills to drive a car are common. Many people have the proper perspective as well for cars, a perspective that understands the value of quick transportation. The limiting factor for most is wealth, can you afford a car.
Now, lets leap to the far end of the spectrum to art. Art is the rare earth element of a culture’s period table. Each culture generates unique art. That art is defined by the internal experience of that culture’s members. These cultural expressions are exclusive to other cultures.

They are exclusive in the sense that other cultures lack the education, perspective and need to even understand the art. Education as a limitation is easily found in language barriers. It is difficult to appreciate another culture’s art if you speak different languages.

Perspective is found in the unique point of view found in each piece of art. The consumer of art needs to find this perspective for the art to have value. Some people understand Picaso’s Guernica; others merely see ugliness.

Finally, wealth. Art more than any other artifact has no use beyond pleasing the consumer of art. It produces no return. Wealth expended on art does not feed you or produce more wealth. You must simply have enough wealth to purchase the art.
So, ebooks have no intrinsic value. Worse, as a piece of art, they are more worthless than most cultural artifacts. Instead, ebooks must hope to find enough people with the right education, perspective and free wealth to purchase a copy.

The second argument I dislike is the tiered pricing approach. A tiered pricing approach closely resembles the pricing structure used for music and that is often the analogy made. In effect, a novel would cost one price, a novella a healthy fraction of a novel’s cost and finally a short story would cost a small fraction of a novel. The idea is that a novel is equivalent to an album, a novella to an EP and a short story a single. While this approach is pragmatic and what may be the best fit for the publishing industry, I am philosophically opposed.

The reasoning is fairly simple. I am repulsed by the idea of literature being priced by the word or length of the work. The idea that the longer something is the greater its value is absurd. Especially in an industry that constantly harps about tightening up prose and trimming the fat.

This idea would make paupers of the greatest of literary achievement...poets. A poet’s work is never voluminous, often taking nearly a lifetime to fill a book with poetry. What would be charge per poem, 25 cents? What of Shakespeare’s sonnets, maybe 50 cents each? The Bard’s lifetime of work is a mere book. Lastly, and my favorite of short form literature, what of epigrams? Maybe they would be the penny candy of the literary world. Martial would be the King of the Paupers.

What my disgruntlement is leading to is the fact that ebooks must price themselves to reflect market realities. eBooks as an entertainment medium do not exist in a vaccum. In fact, books in general have never faced such stiff or varied competition as they do not for your time: videogames, music, TV, movies and the Internet...oh my.

Books and ebooks must compete with these options for a buyer’s time, a pool of time that is ever shrinking in today’s digital lifestyle. Books must make a value argument to prospective reader; a book must be the best option in some way. That alone makes books and ebooks a difficult sell.

But, publishing finally has an advantage: the ebook. Books are expensive to publish and expensive to sell. Look no further than the profit margins of the Big Six to see this fact. eBooks have the potential to turn this fact on its head and give authors and publishers means to not only to make more money but to aggressively compete with other entertainment options.
I believe that publishers and authors need to attack the market with a wide variety of pricing tiers and products. Selling short stories in an ebook format is a bold new option. No longer will potential readers have to buy whole anthologies. Now they can purchase a single short story.

Publishers can get creative in other ways as well. Why not sell just the first three chapters of each book? In the digital world this is easy to do. What is even more exciting is that in this new retail experience, there is no limit to shelf space. Out of print backlog can/will become a thing of the past.

How do I think ebooks should be priced? In a purely digital format, I think ebooks should start off at a fairly high price. Once the fixed cost of the book is paid off, I think the price should slowly start to go down with no lower limit to where it can go. However, if there is a spike in sales due to unexpected interest, I think the cost of the book should rise to meet demand. The basic idea is to use pricing to grow your market, rely on long-tail sales and let your pricing ride the surges in demand.

To wrap up this huge post and summarize my point, ebooks have tremendous flexibility in pricing and format. To ignore this tremendous asset in the face of fierce competition is foolish. To stubbornly cling to artistic pride and argue that your book has an intrinsic value and simply cannot be price below a certain point risks obsolescence. eBooks have given publishing a weapon that lets them attack the market. Utilize it.

Image Source: Amazon

3 comments:

  1. I did have to tweet this. I wonder what "fairly high" price range you are talking about when it comes to new books. I am actually in agreement that books should be priced "reasonably high" (those words again) until basic costs are paid off, and then begin to fall to the point of maximum income. It appears, from people who have been following this for awhile, that somewhere isn the $5-$8 range is optimum pricing: most income-producing. But you have a logical inconsistency, don't you, when you say that a popular book should be priced higher? Is this because there is less price elasticity with a title that everyone wants? Should this is exploited so mercilessly? You make it sound like common sense.

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  2. In my view, price should rise with demand. The digital music industry does this to a degree, such as with Aimee Street (now part of Amazon). When there was low demand for a song, the price was low. As demand rose, so did the price.

    Here is a scenario as an example. As an author releases books, he generates interest in his back catalog.

    If you are writing in a series, say G.R.R. Martin, each book release generates buzz for previous titles. In G.R.R.M.'s case, his back catalog suddenly hits the NYT Bestseller list.

    Why leave this back catalog at a low price when there is demand? Why not raise the prices? Maybe not to new release price but maybe 20-30% or whatever the new sweet spot is for pricing.

    Demand will come in cycles. Whether triggered by new releases, movie tie-in's or a review on a high traffic sight, digital allows you to take advantage of it.

    Perhaps I am merciless in the pricing. But I like to think that if authors get paid, we will see more books and higher quality books.

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  3. I noticed I forgot to answer your first question.

    I was intentionally relative with my "fairly high" and "reasonably high" pricing comments.

    I am a bibliophile and think books are chronically under priced. Compared to other forms of entertainment I think books are incredibly cheap.

    The second part of my response is that I do not like standardized pricing. That is a relic of the print industry.

    In the digital world, why not release books in premium editions that have fun extras? These extras could be high resolution copies of the cover art, copies with bonus art within the book, author interviews, etc.

    The digital format allows more granularity in both product and pricing. So I think there should be more price points and product versions. We shouldn't be stuck with the standard hard-back, trade paperback, paperback pricing system.

    Sell a premium version to hardcore fans. Sell vanilla copies to the masses. Generate more revenue and profits.

    If nothing else, be creative with the flexibility of the digital format.

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