Hugh Howey

Bestselling author of Wool and other books. Currently sailing around the world.

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Authors: Take Control of Book Prices

This week, AuthorEarnings.com turned 2 years old. To celebrate, we released our latest quarterly report on Kindle ebook income.* We also looked at print and audio in this report, something we will be tracking in the future. Also, Data Guy revamped our methodology to double-check our previous work. Turns out the old methodology was spot-on when it comes to relative market share by publishing type. Here’s the crazy bit: Check out the 23-month trends on author earnings by publishing path:

author-earnings-trend-20160110

Things look rosy for authors who are retaining their rights. They don’t look so great for authors who sign with major publishers without also negotiating price ceilings for their ebooks. This is something I’ve been advocating for years. If you sign with a publisher, get your max ebook price in writing. Make sure it’s in the contract. Don’t leave this crucial decision up to the whim of your publisher or editor. The #1 obstacle to your ebook being given a chance by new readers is how much they’ll have to pay. And if you think your publisher understands this and has your best interests in mind, you’d be wrong.

Last year, publishers negotiated furiously with Amazon for the right to institute higher ebook prices. This is the same power they craved when they colluded with one another in conjunction with Apple, who was found guilty for the role they played and levied with enormous fines. The publishers knew they were busted and took a deal. In trial testimony, it was shown that they believed higher ebook prices were necessary to slow the adoption of ebooks and protect the print business.

This is critical to understand if you are a trade fiction author, because more than half the market is now in ebooks, and half of what’s left is online print sales. 75% of your market is online, and publishers are willing to nuke your career in order to protect historical relationships with the 25% that’s left. We have this in their own writing. This is not speculation. Even industry insider Mike Shatzkin has blogged about this strategy and how it has backfired. Look at the trend lines above and see what publishers are willing to do. The dive in the purple line corresponds with a return to Agency pricing. Note who is being harmed.

Publishers are giving up market share to independent authors, who are gobbling it up gladly. This matters to you, as an author. You cannot go into negotiations with a publisher assuming that their only goal is to sell as many of your books as possible. That is certainly a goal, and we can assume a rather high one. But above selling tons of your books is selling lots of another in-house author’s books, which is why they will get frontlisted while you are in the middle or back of a catalog. A higher goal as well will be to protect relationships with distributors, resellers, journalists, and reviewers. Understand how these goals might conflict with one another and where you are likely to be on the hierarchy. Most of all, don’t take chances when it comes to critical decisions on your books such as price. Good publishing contracts give authors the right to approve cover art. They should give authors the right to decide how much readers pay for their work.

Granted, you might not be concerned with your ebook’s price. There are authors who aren’t. There are even bestselling authors who blast their readers for expecting affordable ebooks, equating this with a sense of “entitlement” and accusing their readers of having a “Walmart mentality.” But then there are the authors who have approached me at conventions, lamenting the price of their debut novel’s ebook edition, and asking if there’s anything they can do. Their established fanbase is balking at paying $14.99 for an ebook. Do they have any recourse?

Yes, they do. But only during the negotiation phase. When negotiating with publishers, price is always something my agent and I discuss. When negotiating with publishers for the rights to WOOL, I had a max ebook price in the deal memo ($6.99). We went back and forth on this price point, just as we would on advance size and royalty rates. This is negotiable, and publishers will make allowances. If they won’t, you know where they stand: For ridiculous ebook prices that will hamper your readership and diminish your earnings. If they won’t budge, you know to be wary and to walk away.

The fight over ebook pricing will continue. For now, it’s largely been a fight between retailers like Amazon and publishers like Hachette. Like parents who can’t get along, it’s the kids who end up taking the brunt of the abuse. It’s time for authors to understand that they aren’t powerless children, standing by. If you have an agent and are pursuing a publishing deal, negotiate a max price right in your contract. And fight for a number of “freebie” days and for the ability to accept promotional opportunities from retailers who offer to slash prices and boost sales.

Self-published authors have all these powers, but this need not be an exclusive club. Every author should care about what goes on the cover of their works, in addition to the manuscript that makes up the interior. And nothing is more important on the cover of that work than the price. Don’t leave this up to the publisher. And only work with a publisher that is willing to work with and partner with you. You know your readership better than they do. Over half your readers are now reading digitally. Keep this always in mind.

 

* To be fair, we were going to release a quarterly report with or without the birthday.

23 replies to “Authors: Take Control of Book Prices”

I admit it; I take price control for granted.

I originally priced my book at $3.99, and it sells a few copies each week. Every three months I run a $0.99 Countdown Deal it sells quite a few copies.

In December, I released an audio version, and I thought the ebook looked a little silly next to the $18 audiobook. So I raised the ebook to $4.99 for a week. Sales stayed about the same. Then I tried $5.99 for a week and sales tanked, so I went back to $4.99.

My focus is on expanding my readership. I can’t fathom the idea of not being able to make these kinds of changes.

Pricing is the number one reason for me to be indie (and it’s one of many, many, many reasons). I can learn to be flexible on pricing, watch my sales, and know when to discount. I doubt there are people at publishers that watch individual books so closely! They set the price and walk away for months at a time, which is a shame for the author sitting and watching their book do nothing. This was a great topic to pull from the AE report!

“And only work with a publisher that is willing to work with and partner with you. You know your readership better than they do.” As indies, we are closer to our readers than ever. Plus they are a cool bunch of people. I so very much enjoy writing for my readers now instead of an editor who doesn’t understand that all stories don’t fit into their little box.

Thanks for all the great info you share. Hugh.

I can see a fine balance to play here. Tradpub authors are by and large earning a lower royalty per ebook sold, so negotiating for a price cap on their ebooks means they’ll make less per ebook but could stand to sell more ebooks since they’ll have a lower price. Tricky stuff.

“There are even bestselling authors who blast their readers for expecting affordable ebooks, equating this with a sense of “entitlement” and accusing their readers of having a “Walmart mentality.””

Doug’s way of thinking is so elitist that he should be French. ;)

For someone who is just getting started in publishing (after writing for a long time), I thought that was another HUGE advantage of getting my first publishing experience through Kindleworlds. (Thanks for making the world of Sand available through KW, btw . . . very, very cool of you to do that.) KW automatically set the price for my novella at $1.99, which is reasonable. If I had self-pubbed, I would not have understood price points and probably muffed it up and cost myself some sales. If I had trad-pubbed, I wouldn’t have known to negotiate max ebook prices.

We have reached the point in the war where publishers retreat to their high castles.

The marketplace is now open. A mass of indies are in the middle offering their wares. Some will do well. Others will get trampled.

Soon those shiny castles will fall, but not before one final sally, as the last legion of trad best selling authors and their trumpeters, the reviewer corps, leave their mansions.

Pride comes before a fall.

Or in this case, price comes before a fall.

The end of the beginning. The beginning of the end.

Admittedly am a bargain hunter where it comes to ebook purchases. I take full advantage of the Amazon wishlist notes feature and price watch a book like a hawk if I’ve found it too expensive. It amazes me there are ebooks that are more expensive than the published version. Regarding Hugh Howey’s books, I hemmed and hawed bc the cover turned me off (silly reason, amirite?) and was finally drawn in over the acclaim and price– which happened to be free. I checked his first book out via Amazon prime, and purchased the subsequent books happily.

I’m just beginning this adventure. My writing isn’t anywhere near ready to publish and as I take a break here or there from what has become, editing and revising more than writing, I come read your words of wisdom.
You should know, though, one day, I will have a boat like yours and then the race is on!

Great points (as always). Publishers have an understandable but out-of-sync-with-the-market expectation for ebook prices. Lower ebook prices will sell more. Further, lower ebook prices will increase sales by significantly more than enough to offset the reduced revenue per book – a solid win for authors who price their own books lower or negotiate a contract that ensures the publisher does that.

However, there’s also a long-term effect here which is often ignored — with lower prices come changing expectations by readers. For every book that comes in below market prices in order to better gain reader interest, the market perceives every book as being worth a little bit less. While it’s hard to know the overall price elasticity of the marketplace to determine the optimal average ebook price from the perspective of generating the most revenue for authors, it’s probably somewhere between $3.99 and $4.99. Price books above that true optimal figure, and the resulting lower sales volumes means less revenue for authors. Price books below it, and authors are losing money on every book sold (leaving money on the table, as the salesmen say). But that’s the average – depending on the market segment, some hot books could make more at $7.99 or $9.99. Others, that aren’t as well reviewed, will do better at $2.99 or even $.99.

Unfortunately, as each new or struggling author tries to gain readers, there’s an individual incentive to low-ball pricing. This is good for the author who does that by attracting readers, but it moves that average price ever lower. If current trends continue, this figure will fall below the optimal. Right now, paradoxically, publishers are setting prices that are bad for the authors they publish, exactly as you point out, but good for the indie authors by providing a huge pricing shelter. The publishers help the $2.99 book seem like a great deal. But when the most expensive books on the market are $2.99… well, then it’s a race to the bottom, with free books becoming commonplace.

If interested, I wrote a three-part series “Saving Book Prices, Saving Authors” on this subject, with part 1 at: https://medium.com/@Scribliotech/the-long-slow-decline-in-book-prices-2147a4738847#.ngqpoauk0.

Yes, you are right that reader’s expectations change because of lower prices. This has largely already happened. I haven’t read your articles on Medium, but may do so. In the meantime, I wish to mention one problem which may or may not apply to your reasoning. Many people making this “devaluing books” argument do so with the underlying assumption that books have a correct market price at about the level that Traditional Publishing has been charging. However, this ignores the huge increase in supply that self-publishing/Indie Publishing/EBooks has brought about. Simple market economics then tells up that prices must go down, and substantially. And of course readers become used to the new prices and come to expect them. Sometimes this expectation pans out, other times it does not. I am not convinced that this is not an unremarkable application of the laws of supply and demand. Big Publishing adopted the strategy, which so far does not seem to be working very well, of trying to differentiate its products on the basis of quality. IMHO had they performed their gate-keeping/curatorship role better they may have pulled this off. Like it or not, I think the new prices are here to stay, I don’t, however, expect them to decline much further. Amazon, in particular, seems to be very adept at pricing optimally.

Darryl, you are indisputably correct that publishers have sought to hold to inflated prices for ebooks, ignoring the reduction in cost of production and distribution intrinsic to ebooks. Frankly, that’s one of the major reasons they have seen falling market share relative to self-publishing authors. However, their mistake doesn’t mean that running as far as possible in the other direction is the best alternative either, which is sadly the path many self-publishing authors are taking. What’s really needed is an alternative — ensure authors get 70% on sales, with titles priced in a wide spread around a new proper median price point around $4.99 (say, free all the way up to $9.99), where the top tier titles are higher to preserve the perceived value and less popular titles are priced lower to help them attract readers. As with most marketing challenges, success at this depends on proper market segmentation and truly understanding the customers’ purchasing behavior. KDP, B&N, and Kobo’s self-publishing systems don’t really support this, because they penalize authors trying to reach readers by cutting royalties as low as 35% for prices below $2.99. They have a good reason for doing this (explained in that Medium article), but it’s still a problem for self-publishing authors. One alternatives is Scribl’s CrowdPricing system for self-published authors, which ensures authors always earn at least 70%, even on Amazon when pricing below $2.99 and on B&N, who normally never pays above 65%. Another is seeking revenue from other sources, like advertising, though that has so far not been able to produce enough revenue to offset the falling book prices.

Yes, all of that. My last trade pub series is priced (book one, two, three): $5.99, $10.99, and $5.99. Why? Why is book two twice the price of book one? Why, when they had a sale, did they put book two down to $5.99 instead of book one to $1.99 or something that actually made sense? *sigh* But that kind of scenario never occurred to me. I couldn’t ever have predicted a Big Five publisher didn’t understand basic marketing re price of ebooks.

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