Ebook Pricing Strategy Guide — How to Do It Right
Ebook pricing can feel like a maze without any exits. Publishers may get lost, or just simply refuse any new business models or ebook pricing methods. I totally understand why. Because they feel threatened by new complicated ebook pricing models and they simply defend their nominal revenue share. But if publishers shortly calculate how much they can earn in some models, you may be surprised in the end.
That is why we are here to help you understand ebook pricing strategy in overall: just keep reading, the first part of this article is for you.
If you are not a publisher, however, and “nominal revenue share” is all Greek to you, just click on the links to skip the first part, and jump to learn about international markets, Amazon KDP and tips and tricks for setting the price of your book.
Ebook pricing models
Direct purchases
This is the simplest ebook pricing model ever coming from the print book industry. However, we have to differentiate between wholesale and agency model.
Wholesale model
For instance, Google Play uses wholesale model for ebook pricing rooting back to the traditional print book industry. If you ever wondered why anyone would use the same old business model in an innovative industry, you are right. Google Play is the only one from the major players who sets its pricing in a wholesale model resulting in a 52% revenue share for publishers instead of the usual 70%.
The main difference between agency and wholesale model is that in wholesale model publishers set a digital list price, but in the end, the retailer sets the final price for ebooks. This case they are usually trying to sell ebooks cheaper than any other channel. In the case of Google, they usually set a 33% off from the digital list price. But this behavior is a vicious cycle, because other retailers or even countries may have a price matching regulation meaning that publishers cannot sell their books cheaper. So the best way is if you can set a slightly higher price for Google to receive the same amount of revenue — that is how PublishDrive already recalculates digital list prices and ebook pricing for Google.
Agency model
The most usual way of ebook pricing is agency model. That is how PublishDrive works as well — PublishDrive receives 10% cut after every book sold in any of the stores. This method gives the publisher freedom: publishers set the price for end users. If there is a promotion, then all of us will share the costs of it. But the nominal revenue share remains the same, so there are no strings attached.
This model helped Apple grow to a real competitor of Amazon. Of course, it wasn’t seamless — they got into a lawsuit because of Apple and the Big 6 (minus Random House) colluded to artificially increase the price of ebooks by letting publishers set the prices. Apple has lost this war, but on the long term, they are still gaining more users and quality content throughout their partnership model. So they are still competitors of Amazon.
Subscription can be a big game changer if we think about music or movie industries. On the ebook market, subscription is something different because average readers usually read less book per year then watch movies or listen to songs. So as a customer, you have to be a heavy reader to choose the subscription-based business model.
Pure subscription
But that is where the beauty comes in when you are a publisher: stores with subscription based business models such as Scribd pay after how much readers have read, not after real purchases. It means in practice from a user perspective that for an average of 10 USD subscription, readers can read whatever they want for one month — which is the dream of bookworms.
But of course, publishers have to have a financial gain to provide books to these stores, so the publisher is paid out usually after reading more than 10% of the book. Even though with a lower royalty of the digital list price, but in a quantity which cannot be generated with direct purchases. So in the end publishers may earn more.
Defining parts of the book and lending
Other subscription-based business models cutting the text of the book into 5 parts and they pay out some % of the digital list price based on the length of usage. This way publishers earn as much as the ebooks were read, not more, not less.
Subscription and characters read
In the case of newer subscription-based stores such as Bookmate, publishers are paid out based on the amount of characters read by all end users in publisher’s books plus they receive some part of the end user subscription receipts. This model gives flexibility, fair reporting, and revenue share to all stakeholders. Meanwhile, readers are happier.
Libraries
Digital libraries are getting more popular in ebook purchases where there are again different confusing ebook pricing models. But in the end the result is the same: the publisher reaches out new readers and earns money. However, you have to understand the basics of library pricing models to feel safe in this environment.
Libraries usually buy a book once, and anyone who is a member of the library can reach that book. That is why a higher ebook pricing is used when publishers are selling to libraries.
1 copy/1 user
Libraries may buy a book permanently, until an expiration date or for metered checkouts. This flexibility of ebook pricing let libraries choose the best way of buying your books. Meanwhile, publishers may earn much more. For instance, in the case of perpetual ebook pricing of a 10 USD book, publishers may earn around 16 USD (c.a. 55% of 30 USD), because the list price is tripled for libraries. This way one library will have a right for lending your ebook for good.
Pay per use
Pay per use is the ultimate way of ebook pricing based on the reading experience. As mentioned in the subscription based ebook pricing as well, pay per use is used to pay out publishers with a typically recommended 10% of List price for 21 days: 10% of $10.00 for 21 days = $1.00 per 21-day loan. This option allows librarians to meet a short-term demand for a popular title without having to overburden their budgets or turn patron away if their ‘permanent collection copies’ already borrowed. After the 21 day period, the title must be repurchased for another 21 days.
Subscription
This way of ebook pricing at libraries gives you a lot of flexibility. Publishers may offer ebooks at a discount with an annual subscription to the whole catalog or publishers may sell your titles with a scaled option of 10, 20, 30 for scaled discounts.
Simultaneous
Here publishers can be creative — publishers may scale it to the number of users in an example of setting a three times higher list price allowing a maximum of 5 users to read the ebook.
International ebook pricing strategies
If you want to sell your book across the globe, there are a handful of things to take into account. VAT on online services differs from country to country — and within the EU, it applies based on the buyer’s country of residence. The VAT can even change based on the fact whether you have an ISBN or not! Fortunately, this is something we manage for you: you just enter your list price, and we calculate your royalties based on your sales in each country. There are also different trends and ideas everywhere about how much an ebook should cost, but this should be the topic of a separate post.
Amazon KDP Select
As the strongest kid on the playground, Amazon KDP (Kindle Direct Publishing) worth mentioning. We will explain to you how it works and whether it worth it. Amazon KDP offers an either 70% or 35% royalty to the author based on specific requirements. To qualify for 70% (without VAT, less delivery costs: yes, you pay for delivering your ebook to customers $.15 per megabytes!), you have to price your book between $2.99 and $9.99, and at least 20% lower than the print version. You also have to agree on your book being available through Kindle Owners’ Lending Library. In this case, you get 70% royalties from books sold in specific countries and 35% of books sold anywhere else.
Amazon KDP Select gives you the opportunity to sell exclusively on Amazon for a 90-days period. During this time you earn royalties after the Kindle Unlimited downloads ($2 per book) and you can select five days on which your book is available for free. You are right to wonder why ‘free’ is such a magic word: because your free downloads also count into your rankings, which can give you a real boost and pop you to the top of the category.
But exclusivity has its price: while your book is only available through Amazon, you might lose your potential customers from other countries where Amazon doesn’t have the biggest share of the market.
Setting the price
So far we covered the models used for direct purchases, subscription and library use and Amazon KDP. It is all beautiful and interesting, you might say, but I still don’t know how much I should sell my book for. At this point we have to disappoint you: there is no “one size fits all” answer for this question. How much you charge for your book depends only on you — and on several factors which you should consider before you decide to sell it for $.99 or $10 (or $100).
How much writers in your genre are charging
You need to do your research: go to an online bookshop and check out the genre in which your book is going to appear. People searching for your book are going to see similar titles — if your book is much more expensive, odds are that people are going to buy a cheaper one.
Your primary goal
You have to decide whether you want to go for more readers or more money. Yes, you want both, but nothing comes easy at first. Setting a low price could help you draw in readers who are just browsing and came across your book. If you’re selling for $1.99, you can get many buyers by impulse shopping — but bear in mind that low price is often associated with lower quality. Unless you are selling a short book (under 100 pages), going under $2.99 can be considered suspicious. A very often used strategy is to sell a gist or chapter of your book for $.99, and prompt your readers to subscribe to your newsletter if they liked it.
Your audience
Fiction and entertainment books on Amazon are usually sold between $2.99 and $9.99, well-known authors on the higher, and newbies on the lower end of the range. However, educational, self-help books, textbooks in hot topics can sell for much higher. This is also the case for certain uncommon hobbies and interests — as an extreme example, the International Encyclopedia of Social & Behavioral Sciences is priced $11776.66 on Amazon. (But don’t worry, you can get a hardcover for only $799.95!)
Your peace of mind
Writing your book wasn’t a piece of cake, and your worries still cannot end: “Will people read it? What if no one buys it? But if I sell it for too cheap, I won’t earn any money!” Thankfully, you are an independent author, in complete control over your sales. You can easily start with a lower price and change it once you built a readership who are likely to come back and buy your second book as well — or recommend you to their friends. Indie-publishing an ebook gives you the flexibility with your pricing you would never get with a publishing house.
PublishDrive chooses the best options for ebook pricing and make sure you will earn money in either way. We set ebook pricing techniques in the metadata, so you just have to give the average list price for your book as you were in an agency model and we will do the magic for you.
You may benefit from all ebook pricing models by reaching out new readers and by increasing your sales. However, it is the best if you can find a partner who can manage all different pricing models for you, so you will not get lost. PublishDrive is taking care of all pricing models, so you have to focus on what you are the best at: creating beautiful content.
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Originally published at publishdrive.com on January 28, 2016.
