Who will buy? Jane Davis ponders ebook pricing

Yesterday I joined a discussion in a forum for a group of self-confessed book lovers. An on-line book club, if you like. One member commented that she had noticed a steep hike in the cost of ebooks and didn’t understood the reason for it. Others rushed to agree.

Time for a little clarification:

(1)    Ebooks prices have increased because, since 1 January 2015, the rate of VAT applicable to digital products has been raised from 3 – 20% (This is the UK rate. It is as high as 29% in some European countries.) The base price, to which VAT is added, has not necessarily increased, although some publishers and retailers will no doubt have taken the opportunity to review pricing policies.

(2)    Digital Book World have been tracking ebook prices over an extended period.  Average reported prices are subject to far greater fluctuation than paperbacks prices but overall, from a peak of $12 for fiction titles, there has been a downwards trend. Expect to pay more for nonfiction.

(3)    It is well documented that Amazon have been instrumental in driving the cost of ebooks down. During their public dispute with Hachette, they said, “If customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same ebook at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,00.”

(4)    The average reported price of an ebook is affected by the mix of higher-priced ‘Big Five’ titles and lower-priced self-published titles in the bestseller lists at any given time. When the charts are dominated by self-published titles, the average reported price reduces. When the chart is dominated by titles published by larger publishing houses – as it was in March 2014 – the average price increased by 20%. Since many ebook retailers display their bestsellers first, it may appear that all prices have increased.

But what is the ‘right’ price for a book?

Most readers contributing to the discussion said that they would not spend more than a certain amount on a book. For many, this self-imposed cap was well below the RRP, typically in the region of £5.00 for a paperback – even if it was a release they had eagerly awaited. Most said that, if they felt the price was ‘too high’, they would wait for it to come down. After all, there is no shortage of books to read. Others said that they would keep an eye out for a second hand copy, which usually became available quickly. Disturbingly, for a group of bookaholics, many said that they never paid for ebooks and only read those that were free.

How much do authors earn from a book sale?

It became apparent that misunderstanding about how – and how much – authors are paid was rife. So here’s an overview:

(1) Newspaper headlines are reserved for best-selling authors. Average author earnings in 2014 were £11,000. However, that figure is a very long way off for some. Average self-published author earnings were £600. After expenses, mine were far less.

(2) If a book is by an author who is under contract to a publisher, the author will only receive a royalty once his or her advance has been earned out. Recent years have seen a marked reduction in author advances. Gone are the days of six-figure deals. Figures quoted at last year’s London Book Fair suggested that £5,000 for a one-book deal or £8,000 for a two-book deal was now the norm, with very little in the way of marketing support. However, lower advances mean that (provided the books sells – and not all do) advances are earned out earlier. The author will then start to receive royalties. The rate will have been the subject of a contract but usually varies depending on how many copies are sold and if the sale is of a hardback book (typically 15%), a paperback (typically 7.5%) or an ebook (typically 25%).

(3) If the book is self-published (and 75% of ebooks are), the author will have paid for all professional services out of his or her own pocket. If that book doesn’t sell sufficient numbers, the author bears the loss. Depending on the price, the earnings per e-book is either 35% if the book is priced at under $2.99 (before VAT) or 70% if the book is priced over $2.99. The percentage of payment received for the sale of a paperback varies considerably and depends on factors such as the book’s dimensions and the number of pages. By the time I factor in the cost of selling, I make a loss on every face-to-face sale. Fortunately, 95% of my sales are from ebooks and so I base my business model on that.

Self-published authors set their own prices. To be honest, it’s a bit of a gamble. We must ask ourselves, if I price my book below $2.99, it may attract more buyers, but will it sell enough copies to justify falling into the 35% earnings bracket? On the other hand, if I price my book too low, will readers assume it is amateurish?

Bookpromotion.com estimate the price of self-publishing a book (without a budget for marketing) is $2,300 (£1529.80). The book APE: Author, Publisher, Entrepreneur suggests it is nearer $4,000 (£2660.52).

To illustrate the point, I have rounded production costs down to £1,500 – making no allowance whatsoever for my time (and therefore with no ‘salary’ to speak of).

* If I price my ebook at 99p plus VAT, I will receive 34p per sale.

* If I price my ebook at £1.99 plus VAT, I receive 69p.

* But if I price my book at £2.99 plus VAT, I receive £2.09.

On this basis, the number of books I would have to sell before I break even:

* 4411 ebooks priced at 99p.

* 2173 ebooks priced at £1.99.

* 717 ebooks priced at £2.99.

(These figures make no allowance for other costs I incur, such as the design and upkeep of my website, my tools of trade, software, professional fees, the cost of attending conferences, my own reading material, etc.)

In a business where word of mouth drives sales, and there is the potential for a higher number of reviews, it would be wonderful to have the greater number of readers.

However, statistics show that only 5% of books sell more than 1000 copies (Many sell far less). If I were to put together a formal business plan, the only model that works is the £2.99 pricing strategy.

Others disagree. Fenella Miller sells her incredibly popular Regency Romance novels in volume at 99p. However, the ‘sweet points’ for different genres of fiction vary dramatically. My market is not the same as hers, and so it would be unrealistic to expect to replicate her results.

Author, creative writing teacher and mentor Lynne Barrett-Lee added, ‘You offer the odd loss-leader to drive full-price sales of other titles. If people read one book at 99p and like it, they will pay a decent price for others. The depressing aspect is that new authors don’t have a backlist to sell, so when they price their one precious book low, they see no benefit. And giving away the one thing you have to sell is madness.’

The fact that the figures don’t add up means that some authors are tempted to cut corners. However, many self-publishers spend far more than the figures quoted because they want their books to be the very best they can be.

(4) ‘Free’ is a marketing strategy (You might also call it a gamble if some readers only look for free books, as many of the contributors to the discussion said they did). A publisher (who may also be the author) may decide to give away a debut novel in order to garner reviews. They may also make the first book in a series free in order to hook readers. The fact that some ebooks are offered free doesn’t mean they have cost nothing (or next to nothing) to produce. The author’s time and the cost of professional services have all been incurred. Nick Stevenson, an author who offers other authors marketing advice, argues that writers must give away their best work, if this strategy is to work. In this piece, Porter Anderson encourages debate on whether ‘free’ is good or bad for the industry. Be warned: feelings run high on both sides.

The problem I have with free is that it creates the impression that all authors could afford to give away their work if they chose to do so and that the ‘real’ price of producing an ebook is far lower than it actually is. For too long, we have been educating readers to expect something for nothing.

(4) When you buy a second hand book, regardless of whether it is from a charity shop, from e-Bay or from Amazon, the author doesn’t receive any of the proceeds.

(5) If you borrow a paperback from a UK library, the author receives a fee of just over 6p. However, if you borrow an e-book, the author doesn’t receive a fee.

(6) One cash-saving tip for avid readers was to ‘start a book blog, review the books you read on your blog, tweet about your reviews… Then join NetGalley. Publishers will effectively pay you to promote their books by letting you read them for free. You’ll never have to pay for a book again!’

But blogging isn’t for everyone and another contributor admitted that she had felt overwhelmed by the experience.

So where can go readers go in search of value?

And by that I don’t mean rock bottom pricing or free, but a permanent and sustainable offer.

The answer, as far as I am concerned, is box sets.

The multi-author box set

* Usually available for a limited period.

* Great for readers who:

* Like a bargain, and

* Tend to read the same genre, or

* Want to discover a ‘new’ author, or

* Are willing to read outside their comfort zone

Try:

Outside the Box: Women Writing Women represent excellent value, bringing together seven boundary-breaking authors and a host of unconventional character. The price represents a 75% discount, but be warned – it is available for 90 days only. Find out more on www.womenwritewomen.com.

or

If you’re looking for a great Valentines read, spoil yourself with The Regency Quintet: Valentines Edition 

The single author box set

Great for readers who:

* Demand excellent value

* Enjoy reading series of books, and

* Don’t want to wait for the next one, or

* Are willing to experiment with a new author, and

* Cannot choose between several novels with an average of 5 star reviews.

Try

Second Chapter  which brings together my first three self-published books, I Stopped Time, A Funeral for an Owl and These Fragile Things.

If you like detective novels with unusual twists, The Beatrice Stubbs Box Set by JJ Marsh is the one for you! Highly recommended.