Monday, April 18, 2011

Soon ebook pricing will cease to be relevant

There has been more than a little freaking out buzz regarding ebook pricing. Specifically, this freaking out buzz is bi-directional. One side features authors and/or publishers pissed at morons who have lowered the value of ebooks by pricing them as low as $.99. The other side features consumers pissed at moronic authors/publishers who price ebooks higher than their dead-tree versions.

[caption id="" align="alignright" width="240" caption="Image by evo_terra via Flickr"]Five O'Clock Shadow 50[/caption]

So who's right, and who's wrong?


Welcome to the world where no one controls the price. No one. Not the author. Not the publisher. And not even the customer. That world is just around the corner, where a complex algorithm figures out the right price point for the book (e, audio, enhanced, print, holographic, etc.). And that price point will be different tomorrow. Hell, it might be different five minutes from now. It's demand-side pricing, and it's dynamic. And doable. And it's coming.

So keep buzzing freaking out if that is important to you. Venting is good for the soul. But ultimately futile.

Because number of books sold takes a back seat to number of dollars earned in a post-scarcity world. Would you rather sell 10,000 books and make on average two dollars profit, or 100,000 books and make thirty-cents each on average? Do the math. I'll wait.

The good news is that you won't have to figure it out. Someone will come along and create the Google Adwords analog that works for book pricing. Its job will be to maximize the bottom line. For the author. For the publisher. For everyone.

I, for one, welcome our algorithmic overlords.
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  1. I think you have to choose a price that best fits what you believe the value of the eBook to be and not compare it to others. I had a hard time doing this for my first eBook, but in the end, I feel good about what I did. I've only received two complaints about being over-priced, and two comments about it being under-priced, so I figure those balance each other out.

    And really, who cares about the people who price their eBooks at $.99. Plenty of people are giving away eBooks for free just to build their mailing list. If you base your pricing around that, you'll be in trouble.

  2. Seems someone like you should be devising such a system.

  3. You make an excellent point about our post-scarcity economy. I shared an article this morning about misconceptions about the Information Age that argued that digitization has actually increased our consumption of books in whatever form. It makes sense. Digital media have increased our exposure to books through eBooks, social media, sharing, Amazon recommendations, Goodreads... And then there are a great many of us who prefer print books on some occasions and eBooks on others, so we buy in whatever form is most convenient or practical or appealingly-priced.

  4. In a culture of value-based pricing, 'value' is determined by the people holding the money. Personally, I can't wait for it. It's about time that iTunes realized that not all songs through all eternity are worth $.99. I've thought for a long time that it would be a great idea to set up a time-decay pricing strategy. Part of the value of media is related to primacy. The further you get from it being 'new', the less inherent value it has. This works for physical goods as well, because you're more likely to clear inventory completely with a price that declines to the end. It's true capitalism, and it's great for all involved. Unfortunately in our country, if nobody wants the product, then Republicans pass laws requiring you to buy it (*insurance**cough**insurance*).

    Sorry, I just started 'bettering' myself and it's making me grumpy.

  5. @Kristi - Not a bad plan for now, but it's a temporary fix. Experimentation is the rule of the day until someone develops the algo.

    @Tyler - Not enough math in my background.

    @Jessica - And it's that increased consumption that will cause pricing to be flexible.

    @Mat - I like the concept, but am not convinced that value deteriorates over time. Especially for digital goods. Time seems arbitrary to me.

  6. Your title caught my interest and got me to click from Twitter to read the article. Your argument seems logical at first but becomes impractical the more I think about it. You're talking about "demand-side pricing" of a commodity for which there is virtually unlimited supply (serving up the same ebook to millions of buyers). So, let's say this ebook is not being heavily promoted. People who stumble upon it or hear about it from a friend in private (in-person conversation or email as opposed to at a conference or via social media) might be able to buy it cheap, right? But then if there's a powerful advertisement or a social media buzz about it, and a lot of people want to download it, it goes up in price? A run on the product means a price hit for consumers? Doesn't make sense. You can't auction everything to the highest bidder and expect people to pay exorbitant prices for popular items. Or would it be the other way around? Hardly anyone's buying the book, so the prescient cognigenti have to pay the big bucks because they're the only ones who know the book is going to be the next big thing? So it doesn't pay to recognize value until other people do, but as soon as everyone wants to buy it, everyone can get it cheap? Or is there a sweet spot, and if so, how on earth do you find it, and how much time are you willing to waste checking the wildly fluctuating price of a book you want to buy? And worse, when you have a shopping list of many books or other consumables?

    I'm just not seeing how this would actually play out. Besides, we already have the technology--have had it for years--so if this were going to happen, it would have happened already.

    I like the creative, forward thinking of your article, and I don't mean to squash it! I'm just being a critical thinker. :-)

  7. A complex algorithm looks at more than demand. It will consider intent, time to purchase, quality of content, buzz and a host of other signals. Things that change over time. Things that humans have to guess at but processors handle with ease.

    And be careful tossing out "if it hasn't happened by now it never will" argument. Because it's going to be the future soon. :)


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