The Real Problem With $.99 Ebooks

Yesterday, Dean Wesley Smith linked to a great post by Zoe Winters about why she doesn’t agree with charging $.99 for novels, and why that should never, and will never, be the standard price for novel-length fiction.

For the record, I agree with both of them.  When the editor is done with Masters and I’ve got a final draft ready to go (there have been some unavoidable delays in the last couple weeks on that front; unfortunate, and annoying, but I understand stuff happens so I’m not too terribly antsy about it), there’s no way I’ll price it that low.  I keep going back and forth between $3.99 and $4.99.  I’ll talk price points a bit later.

But that said, I think there’s a key economic principal that both Dean and Zoe are missing.  Now, I’m not an economist.  I’m just a guy with an MBA.  But I’ve done a bunch of reading on matters economic, and routinely listen to economics podcasts.  And I think I stayed at a Holiday Inn Express once.  So allow me to elucidate, por favor.

Price serves a very important purpose in economic realms.  It’s a signalling mechanism, a way to let people in the marketplace assess the relative value of their options, so they can make a rational choice about how to use their resources.  Hayek wrote extensively on this subject.  Don Boudreaux, the chair of the economics department at George Mason University, wrote an article in the Concise Encyclopedia of Ecnomics (CEE), hosted by the Library of Ecnomics and Liberty, that talks about this concept better than I can.  I suggest you take a read.  Beyond that article, there are literally dozens of others, written by top economists on just about anything you might wonder about when it comes to economic theory, public policy, or things like that.  A disclaimer: econlib and the CEE is hosted by George Mason, which is about the most anti-Keynsian place in the country.  As an institution, it has a very libertarian slant, but from what I’ve seen they do a good job of keeping their biases out of their scholarship.  As much as anyone can, really.  Now, I agree with their biases, but that doesn’t mean we shoudn’t be aware those biases exist.

Getting back to the topic at hand, if price is a signalling mechanism, and fiction of all lengths, shapes, and sizes gets priced at $.99 indescriminately, then the signal we’ve sent to the consumer becomes confused, muddled, and chaotic.  How is the buyer to evaluate what he’s getting for his money, or whether he’d get better value going somewhere else?  Oh sure, you can put word counts in your product description, but I think writers project a bit when they think that solves it.  I’m 35 years old.  I started writing fiction last December.  Before then, if you’d told me a document was 2,000 words or 20,000 words, I would have recognized that one is longer than the other, but in terms of what that really means…yeah, not something I thought about.  Now granted, somewhere nestled in the back of my mind was the 250 words/page that I learned back when I had to write essays in school.  But it wasn’t something I routinely accessed, if you know what I mean.

So I think just throwing a novel out there at $.99 muddies the waters.  When I can get a short story, novelette, novella, novel, or a door stopper for the same price, it’s a poor representation of value.  A poor signal.

My idea of pricing goes like this:

  • $.99 – Short Stories < 10,000 words
  • $1.99 – Novelettes 10,000 – 20,000 words
  • $2.99 – Novellas 20,000 – 50,000 words, Collections of 5 Short Stories
  • $3.99 – Novels 50,000 – 75,000 words, Collections of 10 Short Stories
  • $4.99 – Novels 75,000 – 100,000 words
  • $5.99 – Novels > 100,000 words

I think this pricing scheme works well, both in terms of signalling to the consumer what he’s getting for his money and in terms of paying the author proportionate to the amount of work required to produce any given piece of work.

0 thoughts on “The Real Problem With $.99 Ebooks”

  1. I’ve never agreed with $.99 for an ebook, unless it’s a short story. It’s like we’re telling people our work isn’t worth much.

    My book would end up at $5.99 under your pricing system. However, since it’s my first, I’ll probably knock it down a bit.

  2. Nice post. I really cringe at the idea of pricing my stories at 99 cents, It just seems unfair to me. I may not have put years into my writing like some have but I have worked at it. And seeing comments on another writer’s blog when asking about buying ebooks made me cringe more. Too many people put price as their first indicator to buy an ebook.

    Honestly, I think before ebooks, price wasn’t that important of a buying factor. People would go to book stores, find one they want to read and THEN look at the price and decide if they had the money to spend. I know that sometimes, I didn’t even look at the price before buying.

    I guess everyone is just expecting ebooks (especially of the self published variety) to be cheap as hell. They don’t realize the time and money it takes to make that story a book – even an ebook. If I had one question for those people I’d ask them how exactly am I expected to cover the costs I spent making my book a reality at 99 cents?

    1. When I go to buy a new book, I only look at cost compared with the print variety. I personally won’t spend more on an ebook than on a printed version, or to be more precise, than on a mass market paperback. Which is why I haven’t bought A Dance With Dragons yet. I’m not paying $14.99 for an ebook. So I’ll wait until the price lowers, then read it.

  3. Interesting article Michael. I agree with the premise that $0.99 is too low, not for any economics reason, but because it indicates a “dollar store” value. With eBooks, you can always download the first few chapters and if you do not like the sample, a $0.99 price point you will not persuade you to buy. The trick is to find the maximum price at which large numbers of people, having read the first few chapters, like it and buy it. For my own novel, Junkie, (119,000 words) I have set the price at $2.99 which is the low end, but then I am an unknown author… so far.

  4. Price per book is not relevant in a digital world…
    Costs have dropped dramatically in our digital world and prices have usually followed. Maybe a books price to me should be linked to how many people I refer to read who buy the book?
    A progressive author can lower the price of a book (retroactively) as total buyers/sales go up… This would drive readers to refer the book to others…

    1. I must contest that. Just because it’s digital and not print does not mean a book suddenly didn’t cost anything to produce. Cover art, editing, and formatting all cost money. But more expensive by far is the time the author spends to write it. Depending on the book length, we’re talking many hours, days, or even weeks. Depending on the opportunity cost of the writer’s time, that can be anything from a massive to an astronomical expense. Even considering the virtually eternal long tail an ebook has, there comes a point where the time value of money will render additional future income virtually worthless. So the writer will still need to recoup his expenses relatively soon, if he does at all.

      So yes, per unit costs and pricing are very relevant, even for digital books.

      Not sure what you mean by a progressive author, though. In what sense do you use the word progressive?

      1. Agreed!

        I have 178.5 working hours invested in one of my novels right now, and it’s going to cost me just under $1400 to produce in ebook and print versions, what with editing, covers, ISBNs, formatting, and the majority of the expenses are for editing.

        My current PT day job pays $15 an hour, so if that’s what my hourly worth is, there’s another $2,677.50 ‘expense’ (plus however much longer it takes me to finish it, edit/revise until my eyes cross, and finally send it for final edits/proofing).

        And there are some people who think I should price it 99 cents? I’d have to sell 11,650 copies at that price to break even!

        I’m currently selling 1.3 copies daily. Assuming my sales never grew, it would take 24.5 years to break even, if that was the only ebook of mine people purchased.

        I think 99 cents is fine for short stories (that’s my price for shorts of 5k or less), but not for anything longer.

        Just for the record, I’ve sold novelettes of 10 – 15k for $3.25, and novellas of 35k for $5.25. Those were actually my best sellers on my old pricing scheme. =)

        People will pay what you ask, if your cover/description/sample pique their interest.

  5. While I absolutely understand that the price of the book needs to reflect everything it took to get the author to that point, when I decided on the price of my ebook, I went with something simpler – my personal feeling as a reader. The paperback is $10-12, the ebook is $5. In my mind – I kept thinking of Zoe Winters’ logic here – was that people spend $4.50 on a cup of coffee.

    I was sure that no one in my target market would be buying the ebook but it’s running very close right now.

    And when my manager at work came over to my desk to ask me about it, and mentioned that he bought it, and I said, “Really? You bought it?” He said, “Sure! It was $5.”

    1. Exactly. I think writers delude themselves about how little $5 really is.

      I think it’s a sort of weirdly excessive concern for others. Case in point. The last few recessions, the news routinely had interviews with various people saying, “Well, I’m doing fine, but I’m worried about my neighbor down the street.” People hear that times are rough, and assume that everyone else is doing much, much worse than they are. But are they really? Folks assume they are, but I’m convinced they exaggerate in their own minds just how bad off others really are.

      The reality is that $5 is nothing these days. It’s one and a third gallons of gasoline. It’s three 20-oz bottles of coke. Or, as you point out, it’s just barely more than a cup of coffee. So why would $5 be unreasonable for a book?

    2. I do not agree that the price of an eBook should reflect the cost of producing it. I spent close to 1,000 hours writing and editing Junkie plus $8,000 with my editor in NYC. Does that mean that I should price my book at five times the price of someone who wrote a book in 200 hours?

      We are in a competitive business and price must be based on the market – the buyers of books. If a reader likes two authors equally and one sells for 2.99 but the other sells for 4.99 the buyer will most likely choose the lower price. The buyer is unaware of, and not likely to care about, the author’s cost.

      1. You’re likely not aware of, nor do you care about, the cost to the manufacturer of any product you buy. But you know that cost is there, and you don’t begrudge them a profit, right? Well guess what, the largest cost of pretty much every product out there is the cost of the labor that went into making it.

        I don’t think it’s necessary to literally price proportionate with the relative number of hours it took to produce, in the manner you suggest here. But I DO think something that took more labor should be priced higher than something that took less, for the simple reason that it is more costly to produce the former than the later, and thus requires a greater cash flow to break even in a similar amount of time.

        Will some buyers pass the product up, in favor of a cheaper one? Maybe. But if price is the sole determining factor in why they bought your book vice someone else’s, it sounds to me like they’re not all that into the book to begin with. Besides, for every person who gets put off in the manner you describe, there will likely be a person like my Mom, who thinks my price points are too low. And because she is a person who associates lower price with lower quality, she worries that I’ll be chasing readers away. I kind of think it’ll even out in the end.

  6. Michael, great post, and I like your thinking of “signal” to consumers. And I think you are spot on.

    I also agree with your pricing schedule for the most part. I don’t do anything at $1.99 because of the 35% factor. It’s either a short story at 99 cents or a short novel at $2.99. And five story collections I also do at $2.99.

    Great post.

  7. $5 is not unreasonable for an e-book. $10 is not unreasonable for an e-book. $15 is probably not unreasonable for an e-book.

    OTOH, $30 *is* unreasonable for an e-book when I can buy it in paperback for $20.

    1. From the standpoint of the correct price being whatever the market will bear, I’d agree with you. But for me, personally, the book better be something really special for me to lay down more than $10 for the ebook. I’m waiting on A Dance With Dragons, The Way of Kings, and a few others precisely because I can’t justify paying as much as the publishers are charging for the ebooks, and I’m not buying print any more (it’s a space and weight thing).

  8. An index card’s been sitting on my wall above my desk for about a month with more or less the same pricing plan… I don’t have an MBA, but I figured it just doesn’t make sense to charge the same for a short story as a novel. Thanks for the article — it reinforces my own thinking.

  9. Michael, I’m with you and Zoe on this. I saw Zoe’s post the other day and more or less had the same thoughts. I really, really think there’s a correlation between price and perceived value, especially since the evidence for this (anecdotal as it may be) keeps coming up.

    I have a (short) post on my blog regarding price vs. reviews as it seems as though people generally value the less expensive ebooks, well, less. If that’s the case, then it seems that one can infer they would value the more expensive ones (let’s say in the $2.99-5.99 range as an example) more, and would also be willing to spend the money on them.

    As you and others have pointed out, $5 isn’t that much so long as one isn’t really struggling and having to watch every penny. I know from my numerous purchases on Apple’s iOS App Store that an app priced at $6 (or $10 — that’s about my personal limit for the platform), so long as it’s good quality, is both perfectly acceptable, and in some cases, feels like a complete bargain.

    So long as you produce a high quality item and readers feel they’re getting their money’s worth from it, one can definitely charge $3, $4, or $5 without too much trouble. I just think that for those of us who are either just published, or haven’t published yet (me, but soon!), the higher end might slow purchases down because readers don’t have an established rapport with that author yet.

    1. Sure. At first. But really, who expects anything but slow sales at the beginning anyway? If you’re going to not sell very much regardless, that makes it even more important to get a good margin on each sale. Otherwise, you won’t earn squat.

  10. Excellent post, Michael, and a very compelling discussion in all the comments. I like your pricing logic and set-up. I don’t have an MBA, either, but i know that my work has, for 20 years, been commercially viable in the non-fiction marketplace and I’ve earned a very good hourly wage whenever I wanted and needed to. I guess that’s all to say that my skills are quite good and if I can make the transition to non-fiction successfully, I believe I have as good a chance as any of us and better than many simply based on experience and discipline in the craft.

    Your comment “Depending on the book length, we’re talking many hours, days, or even weeks. Depending on the opportunity cost of the writer’s time, that can be anything from a massive to an astronomical expense” intrigued me. While I wrote the first 50,000 words in a month (as part of NaNoWriMo, it was *only* the beginning and I expect that my book will end up around 125,000 words.

    It’s historical fiction and the research alone I’ve done on it has been months (not hours, days or even weeks!) to try and make it accurate and something appealing to readers of this so of historical fiction. In fact, I’ve taken the year off from work to research and write it so I figure my theoretical investment is actually quite high–never mind the actual expenses yet to come. (I laugh that next time I’ll write something contemporary that I know really well but this is what I’ve wanted to do for a long time and I’m enjoying it.)

    The idea of selling this sort of fiction for 99c, naturally, does not appeal. In fact, I’d question this sort of book being sold for this amount. In fact, I’ve bought half a dozen 99c works of fiction now just to read what others are writing and in some cases because some aspect (I thought!) related to my subject. Three of them I couldn’t even read–they weren’t worth the 99c as they were poorly ‘typeset’, nearly un-edited and the ‘historical’ part was hard to identify in amongst the ripping bodices. Two I skimmed through–so-so, probably worth 99c–and one was a darned good little murder mystery I enjoyed thoroughly.

    It’s comforting to see the comments and a trend amongst writers that everything doesn’t have to be thrown out there for 99c if one is to publish in that way. I think there’s a place for 99c fiction and I’m glad to find good stuff when I look for a bedtime read.

    Keep that MBA working for all of us, you hear now? Excellent, thanks!

    1. Hey thanks for commenting. 🙂

      Don’t sell that investment short. It’s NOT theoretical. By taking your time and spending it on research and writing, and particularly since you took a year off work, you missed out on all the money you could have otherwise made doing something else. That’s the definition of opportunity cost: what is the value I could have gotten had I chosen to do something else? In your particular case, that sounds like an awful lot of money, and you are well justified in charging enough for your work to make up for that investment.

  11. Great post and an interesting linkage of prices with book length!

    Quite frankly (and here I speak as an economist – I happen to have gotten my MA at Columbia U.) there’s another aspect to pricing: it’s a marketing/promotional ploy. Low prices, often called “loss leaders” are routinely used to attract customers in a shop. And once you’re inside, zap, you get hit with a big price!

    For writers this translates in using 99 cents as a promotional ploy, nothing more. And since it’s a ploy, you shouldn’t keep your book(s) at that level: just use it for a little while, make sure it works on your sales, then raise the price to the level you are comfortable with.

    1. Oh yes, absolutely. I wasn’t trying to address the short-term sale aspect of pricing. That’s definitely a valid tactic. The issue I have is with people who think books have to be at $.99, and stay there.

  12. Thanks for the post Michael. I’m definitely on board with your reasoning. I currently have 4 short stories out each priced at 0.99 (each between 5000-7000 words) and one collection of all 4 stories I’ve priced at $2.99. I haven’t sold a single one of the $2.99 collection but it’s only been up for about 3 weeks. I’m going to leave it up at that. I’ll be releasing a novel in September and I’m waffling between $3.99 and $4.99. I think these are fair prices. Thanks again for the great post.

  13. Michael, I wanted to let you know I completely agree with you. I’ve got an economics background (completing a major in it next year) and your logic is spot-on and sound. My novella, “Fire: The Anzhelin Legacy” is priced at $1.99 and comes in a little bit below 20,000 words. I shared your blog post on my Twitter, my FB page, and my private FB profile. Cheers!

  14. I have a pricing tier, as well, however I use the SFWA word count definitions to split off where to to start and end a tier. Other than that, pretty much identical.

    When I first started out, I did experiment with $2.99, $3.99, and $4.99 price points for a full novel (and for one month even $.99). Interesting thing was, the book sold almost the exact same number of copies at each price point. That’s when I decided to definitely stay with the tier system, use lower prices only to lure readers into a series (bwahahahaha), and let it ride.

  15. Let’s put the pricing strategy in this perspective. An indie author, just like any business has two choices: gain market share or maximize profit. One of the easiest ways to maximize the market share is to compete on price, lowest possible price. Amazon does this. In case of low price, not many people will complain about the quality of the product (quality of writing.) Maximize the profit, means increase the price, and indirectly it will affect the volume of units sold, they will go down. However, the quality of the product (writing) will play a very large role. Customers will not mind paying a higher price if the quality is there, but if it is not, they will not hesitate to return the product (book) and give it a bad review.
    So, market share -> low price, and perhaps the risk of being categorized as low quality. Profit -> higher price, but the quality better be there, or there will be literary “hell” to pay.
    Theory aside, for my Kindle edition of “Arboregal, the Lorn Tree” I took the approach of higher price, except in the spirit of the holiday I lowered the price to $0.99. Come January 1, I’ll raise the price back to $3.99. The color enhanced edition of the same book (higher quality) I left the price at $4.99 even during the holidays.

  16. So, I’m sold on the price points for my fiction books, but what about the non-fiction books? I don’t see much discussion on how to price those. Can/does the word count idea work as well there? I write both types of books, but currently sell significantly more non-fiction books, so I would really like to get my prices set well there.

    Thanks for some great food for thought.

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