Some thoughts on ebook pricing models..
May 22nd, 2009 by Ulhas Anand
A million dollar question, quite literally. Ebooks that are out there now, are priced anywhere from a couple of dollars to a few thousands, the most common price point being $9.99 of the Amazon Kindle. Amazon, in its model, allows publishers to set a selling price and reconciles 30% of that amount, irrespective of the selling price being at $9.99. Having more or less taken up a loss-leader position in this for all popular titles, their model focuses on gaining market share. They do charge higher for the less popular and niche books. They are making sure that people get habituated to buying and reading ebooks, though their reconciliation to the publisher may be higher than the selling price of the book – at least in some cases
“I’d charge fifty cents for an online rental. It would immediately hammer the rental stores (which is fine with Hollywood) and DVD replicators (also fine with Hollywood) but would instantly teach people a new habit. Then, once the new habit is set and you’ve earned permission, sure, charge more for new movies and for blockbusters. 300 million movie theatres, all selling tickets every single night–you don’t need to charge $10 a seat when you have access to everyone.
“But isn’t this very similar to our real-world or electronic libraries?” - one might ask. It is, to some extent. Yet, it is not a membership-based cover fee to access multiple titles. That particular model already exists for electronic book sales to institutions.
For single users, though, one can look at a model where access is limited to a particular title of choice, for a restricted period of time and has a small attached fee. This model will also be easier to reconcile in terms of royalties, compared to electronic library models, as the payments are for specific titles. A sale can be easily broken down into the royalty percentages and reconciled with authors and content creators.
The market segment that we are talking about here, would probably not buy the print book at all. They are on the fringe. They are consumers, but not buyers, of the print book. This segment of the market is price sensitive and will not buy beyond a price point. However, they will buy in great numbers - if the price is right. There seems to be a good elasticity at lower prices for ebooks. The consumer wants access to read, if it is legal and within their expected price-point - they will go for it. Otherwise, they will look at alternatives. If the price is too high for them, they will explore an alternative Wiki text or risk pirated sources of access on torrents or YouTube-like user uploaded websites for books. We are talking about:
If you look at it closely, everyone benefits from this ‘fringe market’ sale; from the publishers to the authors and more importantly the readers. Will this model work for all segments in publishing? Maybe not. Will it work for popular paperbacks? Again, maybe not. However some early experiments by Harper Collins and Random House indicates that giving easy access to books in the electronic format does have a positive effect on people buying the print edition. (http://www.idpf.org/events/presentations/digitalbook08/lHulse08.pdf)
The micro-subscription models will encourage people to explore more books and may result in driving more print sales. What it does warrant though, is experimenting. With technology and tools available now to actively experiment, it is just a question of trying.
Some more links on this topic..