Saturday, May 21, 2011

Opening Pandora's Box


By Keith N Fisher

How do you feel about gas prices? Do you express misplaced anger at the owners of gas stations? Just for the record, service station owners only make about 2.5 cents profit on every gallon of gas. The real money is going to taxes and the executives of the oil companies.

I can remember prices at 19 and 22 cents/gal. I worked at a station when they rose to 60 cents. For many drivers, It was a hard pill to swallow. Now, we are paying close to 4 dollars and most of us wouldn’t mourn the demise of those who are raising prices.

I wanted to bring this up to illustrate a point. Are you angry that gas prices keep going up?

As a kid I watched the original Star Trek on TV and marveled over the gadgets I saw. I noticed a lack of paper and everything, from reports to novels, were read on a piece of hardware, about the size of an I-Pad. In the later series’ they used Palm Pilot sized pads. When I saw a character writing a speech in one episode, I realized electronic medium was probably the wave of the future. I figured we would see electronic books in my lifetime, but I thought it would be like checking out reader pads from the library, or buying them from the bookstores.

Now, we stand at the edge of a precipice. E-book technology has come into our lives. You can download the classics for 99 cents.

Recently, at the Storymakers Conference, Marion Jensen talked about the e-book trend and what we might expect in the future. I noticed a prevalent attitude in the class. Writers were thinking they might use the medium to bypass publishers and self-publish. I also noticed many of them hadn’t given much thought to how much work it would be to promote those books.

Marion went on to quote some experts who think electronic books will never replace the traditional. Still, I was disturbed. Apparently, some authors are promoting their work, by selling it for pennies.

I once heard an author say he didn’t mind his books getting passed around because it builds a fan base for the next book. I agree with his thinking, but keep in mind that he didn’t drop the price on the book that gets passed around.

Okay, here is the way I see it. When people get used to paying 99 cents for an e-book how are we going to raise the price? Like Pandora, are we opening a box that can never be closed? Is it better to sell five books at 15 dollars, or fifty books at 99 cents?

Yes, you can touch more lives at 99 cents, but isn’t your time worth more than that?

Like with gas prices, people will resent a raise. Keep in mind that gasoline has become a necessary staple in our life, books are still a non-essential item in our budgets. Well, I know some writers who ... Anyway, Since book publishing is mostly a good will business, you will never be able to make more for your books. Neither will I.

At this juncture, I have no intention of self-publishing. If, after the hard copy comes out, my publisher wants to sell it in electronic format, I will expect it to sell for a reasonable price. If the costs of other books are far below that price, my book won’t sell.

So, before you launch yourself into this final frontier, consider the future when the market is flooded with low cost e-books, and everyone works for free. I have another parable for you.

There once were two kids who each opened a lemonade stand. Billy opened on his corner, and Mary opened across the street. They drank a lot of lemonade, but didn’t get many customers. Then, Billy decided that if he lowered his price, the customers would buy from him, rather than across the street.

Incensed, Mary lowered her price and got all the business until Billy lowered his, again. This went on, until Mary got fed up and offered hers for free. Well, Billy couldn’t compete with free, so he packed up and went out of business.

After a while, Mary noticed a significant fact. Even when she gave it away, she still could not attract the majority of passersby. They just didn’t care. That’s when Mary got an idea. She developed better lemonade. It was far superior to anything anyone had ever tasted. Mary advertised and tried to sell it for a reasonable profit. After all, with advertising, she had overhead costs.

Soon, she found that customers wouldn’t buy it. “It may be as good as you say, but we can get lemonade from Jane, down the street and she gives it away.”

Be careful where you tread. You might be stepping on a landmine.

Good luck with your writing—see you next week.

7 comments:

Susan Gourley/Kelley said...

I'm worried about the same thing. I don't know the answer to what is a fair price for an ebook and there's a wide range or prices.

boredmormon said...

I won't buy a new e-book that sells for 99c. (Classics and backcatalouges are a different story). 99c implies that it is not worth reading. I'm more inclined to pay $7 or $8. Most stuff self published and sold at cheap rates is just that, cheap. Having a known publisher print your work still counts for a lot, and they can't make a profit off 99c books.

Rebecca said...

The funny thing is that by having lower prices (say $2.99 average) self-published books are selling really well because people are willing to give them a chance at that price.

Self-published or e-publishers' books are perceived as a better value, therefore they sell a lot more. Amazon has sold far more e-books than print books. Many out there aren't worth the price, but it's the same idea as a fast food value menu: people are willing to buy more at a lower price. Then when they find what they like, they seek out the author and buy more. Since e-books are available forever, eventually the cream rises.

The only problem is that writers have to put a lot of work into their e-books and not just slap .99 on something vastly inferior and hope it sells. There is a TON of junk out there. But there are established, great authors who have lower prices and sell very well.

The reason publishers command such a high price for books is because everyone has to get a cut. When you self-pub or go with a strictly e-book retailer, the overhead is lower and the royalties for the author go further.

As for low-priced ebooks not being worth reading--at least you can sample them on Smashwords and sometimes Amazon. I can tell by the second page whether the book is decently-written and something I want to read. To discount something because it costs .99 is an interesting statement on how our society perceives worth. For me, I consider $4.99 and under to be a decent deal--if I've gotten to read a sample.

As far as publishers go, most average readers look for their favorite books by author, not publisher.

Rebecca said...

I also have to add, people buy more when they perceive value. Getting more for your money is the "American way." There are authors who are doing extremely well selling their books for .99. I don't consider making a couple hundred grand a year working for free.

Of course, they market themselves and are established authors. But if a new author works hard on their marketing and learning their craft, the potential is there for doing even a fraction as well--and that's still way better than working for "free."

James Blevins said...

Hmm . . . These are interesting theories. There's an author named Joe Konrath whose experiences run contrary to what you are predicting. Actually, his results are precisely what economic theory predicts. You should read his blog sometime. It's quite informative.

Keith Fisher said...

Thank you for your comments. Yes, James, I'm familiar with with Mr Konrath, but as I asked, would you rather sell 5 books at $15.00 or 50 at $0.99 and then be locked into that price forever?

I hope the brave new world doesn't come back to bite you.

James Blevins said...

Actually, Keith, I would take neither option :-D

If you're not familiar with it, there's a principle in economics called the price elasticity of demand. That number is defined as the percentage change in units sold divided by the percentage change in price.

Assuming demand for a product--in this case books-- is not perfectly elastic or inelastic, you will want to price your product at the point where elasticity is -1. That's where you maximize revenues.

According to data gleaned from many sources--Konrath included-- that price for e-books is $2.99. So if you want to price your e-books at $15.00 and lose out on sales because most people think (rightfully so) that $15 is waaaaay too much to spend for an e-book, go right ahead.

"I'll take 'However Many E-books I Can Sell For $2.99' please, Alex."