The future of Ebook prices: a history lesson from the app industry

Fergus McNeill – thriller author and app developer – has spent years watching the app industry race to the bottom on pricing. Here are his thoughts on what that experience can teach us about ebook pricing. Fergus’s most recent thriller, Cut Out, is available here. You can find him on Twitter as @fergusmcneill.

Change is inevitable. If you had told me, fifteen years ago, that I’d soon be able to buy and read practically any book on a handheld device that was thinner and lighter than a paperback, I actually would have believed you. And why not? Technology marches forward at a terrific pace. However, if you’d told me that people would be paying little or nothing for these books, I’d have shaken my head; I certainly wouldn’t have thought that authors and publishers could just give away their revenue. And yet, that’s the way things are going. In a storefront packed with titles priced 99p or less, £2 or £3 can seem an awful lot to pay for an ebook “which”, the public tell themselves, “costs nothing to produce”.

CutOut_smHowever did we come to this?

Let’s begin by making something clear. I’m not opposed to digital, and not opposed to ebooks. If people want to read my novels on a Kindle rather than in print, that’s fine with me, and if Kindles mean that more people read more often, that’s great. I’m also fine with ebooks costing a little bit less than their physical counterparts.

So change was inevitable, and the advent of ebooks was always going to impact on traditional pricing models… but even so, how did we find ourselves dipping below the £1 mark? When did it become acceptable practice to give away books for free?

I write series crime for Hodder, so I watch the publishing industry trends with interest. However, in my day job, I run a successful app studio, making games for smartphones and tablets. My company works with a range of different brands and digital publishers – it’s a comparatively young industry, but it evolves a lot faster than other media such as books or music, quickly overtaking those more traditional media. We’re driven by innovation, but we’ve seen huge collateral damage to both people and businesses who work in the sector; my hope is that the book industry won’t blindly follow in our footsteps and imitate some of the dreadful mistakes we’ve made.

Let’s consider the problem of “discovery”.

Fergus McNeillIt’s true that digital publishing delivers more choice, but there’s a catch – almost everything is harder to find. Fifteen years ago, publishers fought to get their physical products onto physical shelves, where it was tough to stand out, surrounded by hundreds of rival products. But now, in the online store, each product is swamped by millions of others. The virtual shelves are never decluttered; they just keep being extended as hundreds of hopeful new titles are published every day. Remember, I’m talking about the games industry here, but doesn’t this sound awfully familiar?

Let’s consider the question of quality. In the old model, there were publishers and specialist retailers, all curating the content, weeding out the unworthy titles to make room for others. But those old gatekeepers are fading away, and now, in the era of self-publishing, a lot of shelf-space is dedicated to mediocre content.

Which leads us nicely on to price. After all, if your title is getting lost in a sea of other content, you need a way to stand out. You know that online-store ratings can be rigged, and reviewers tend to focus on the blockbusters. So what do you do to get people’s attention? You lower your price.

A very fine way to make money

A very fine way to make money

And this is where it gets interesting. The theory is that while you might make less money on each sale, you’ll make more sales overall, and come out ahead. It makes sense… if you’re the only one following that strategy. If everyone does it, things can turn ugly. In the app business, prices immediately plummeted to £0.69, the lowest pricepoint available at the time. In a bid to attract audiences, some big-budget titles dropped their price to zero. And of course, once they were free, everyone else had to make their games free, or risk being left behind. Within a year, the majority of games had followed suit – meaning there was more free content than anyone could possibly consume. In such an environment, charging anything suddenly seemed extortionate.

But games and apps are successful sectors, aren’t they? Some of them make money… doesn’t this partially vindicate the new digital model? Doesn’t this suggest that something similar could work for ebooks?

It’s not quite that simple. Unlike books, games are not fixed linear titles – they adapt to each user and usually have no end. They monitor everything that each player does, and employ a range of clever psychological techniques to sell extra lives / better weapons / power gems / etc. Games are no longer products; they’re ongoing services, designed to encourage in-app spending. And although there is plenty of scope for innovation in ebooks, I don’t believe that ebooks can earn a sustainable income through selling what amounts to digital accessories.

So if the outlook is really so bleak, why doesn’t someone do something about it? The answer is simple – the new model makes money for the platform-holders.

Remember, there will always be plenty of new people who are desperate enough to give their content away for free, in return for a little exposure. This wealth of free content draws audiences away from other retail channels, and some of the audience will spend some money; it won’t be as much as before, but if traditional retailers die, then the one or two dominant platforms that remain can carve up the world between them, and take a percentage of everything.

Cynics may say that these platform-holders are killing traditional retail. I think it’s just a matter of basic maths – if we keep giving our content away for nothing, then we really can’t expect to make much of a living from it.

This is a complex and emotive subject. Once again, I’m not particularly pro-print or anti-ebook, and I think that there’s room for sensible pricing models which ensure books are affordable for everyone. However, I also want to see the industry operating in a sustainable way and, for content creators, that means not going free. Because, in the long-term, free is just too high a price to pay.

Fergus’s most recent thriller, Cut Out, is available here. You can find him on Twitter as @fergusmcneill.

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  • Aonghus Fallon

    Giving away books for free seems to be common practice when the book is the first in some fantasy trilogy. I guess the book is a lost leader? I’m not sure how effective this is in the long run (re generating revenue) but I can see a scenario where a low-price business model could still generate a substantial income for a certain type of author. For example: readers of romantic fiction often have a heavy reading habit. Let’s say a RF author with established form in legacy publishing and therefore a following, decides to go it alone. This type of author could make a tidy income selling e-books in the $1.00 – $2.00 bracket*, especially as their percentage of the profits would be much higher than if they were to go with a traditional publishing house. Crucially the product wouldn’t be demonstrably different to the customer – ie, I think it would be hard for the likes of Harlequin to play the quality/gatekeeper card when they’re selling the literary equivalent of junk food.

    * needless to say, most charge a good deal more.

  • Ross Harris

    Digital content has always been a rather nebulous concept for people to grasp.

    Videogames have always been digital, of course, but some publishers in the early days (such as Infocom or Microprose) sold more than a floppy disk in a box to enhance the experience and make the thing more ‘physical’. You could still obtain pirate copies of course but it was less enjoyable an experience than having the ‘actual’ game.

    Similarly music was once coveted as a thing in itself to own, with 12″ LP covers and liner notes works of art that also just happened to contain music you liked listening to. CD’s brought convenience and (arguably) better sound fidelity but the CD case was less of an item in itself to covet, and album art less impressive at such a small scale.

    But the reduction in packaging helped hasten the conversion and acceptance of digital only versions of these mediums. No one listens to CDs anymore, so why buy a cd and turn it into mp3s when you can just buy the album (or just the tracks on the album you want) already converted. Games install on console hard drives, so why own a data DVD or BluRay disk.

    Books however are different. You can’t really separate the physical medium of a book from the content, the way you can with the above examples. A book is more than the content. And it’s understandable that even though the cost of physically manufacturing a book is relatively miniscule to the entire production of the book, it’s hard not to feel that a physical book deserves to be much more expensive than an ebook, especially if it is a hardback.

    The ebook industry is still in its infancy and the technology isn’t quite there yet, with basic typography and layout making it a poor runner up to physically printed books. It’s the first technology that reduces visceral quality for convenience, abeit in a zero sum sort of way. I still prefer physical books but I find ebooks easier to read in my day to day life.

    The race to the bottom found in game app pricing is unfortunate, and something I suspect will implode at some point in the future. There is already some push back and I think will really stay a part of the large casual gaming more than the smaller core gamer market.

    Another part of the problem with books is that people already experience price stratification, from first release hardback to oversized paperback then finally airport sized paperbacks and discount shelves. Having an epub priced the same as a paperback would be more acceptable, but you wouldn’t want to undercut the initial hardcover run nor delay ebook publication until the paperback was released.

    Similarly html5 would allow for more additional content in an electronic book rather than the physical version, but again why penalize owners of the more expensive version. Having said that, the opportunity for Infocom style ‘feelies’ in an electronic book (especially a crime novel) would certainly be far more cost effective than doing the same for the physical book.

    The future is rosy though, thanks to the post iTunes generation. People who have grown up not owning digital content, only licensing it for their electronic devices. While not there yet, eventually there will be atping point where owning a physical book will be to them as unappealing as owning a cd. Unfortunately, this will probably spell the doom of physical bookstores (already under attack from online retailers and their discount prices). So whatever the solution is, someone better come up with one before then!

  • Aonghus Fallon

    I guess what I’m saying is that there is a substantial section of the ebook community for whom a book *is* just content. These people read an average of 5 – 6 books a week, invariably genre fiction – fantasy, sf, romance – and are immune to a book’s visceral appeal. Like any addict, they need their fix and how they get that fix is academic. Cost is the only consideration.

    I think it’s possible that their attitude may establish a trend. If so, then digital will supplant the paperback in most genres, with the odd high-end hardback version of a particular book being published after it has proved itaelf digitally, and then only for the more devoted fans.

  • I take the point that different genres might attract different pricepoints, but I still worry that this may perpetuate the myth that ‘digital content doesn’t cost anything to make’.
    I’m also very interested by the idea of enhancing the reading experience – and I know a bit about the Infocom era – but that will have to wait for another article!

  • Harry

    What’s curious is how very little most publishers want to explore the enhanced ebook. At the moment the quiet consensus is that there’s no added value there: that is, readers won’t pay for enhanced content, so why produce it. There are exceptions, of course, but that’s certainly the general approach.

  • Ross Harris

    I think ebooks are still waiting for the formatting technology of PDFs
    and a cheap piece of hardware to view them on. The Kindle illuminated eInk readers are close but I fear people are now heading back to the eye strain and distraction of color LCD devices.

    This is not without opportunity too. I picked up the physical copy of JJ Abrams/Dorst S. But still haven’t read it as it requires time, space and light with all the feelies contained within. I though the iPad (demo) of the book looked like the way to go, but the control is just a little finicky. More like navigating a PDF document than an ebook. Still, it had some really nice features such as removing the handwritten annotations on the pages of the meta book within so you could read it ‘straight’.

    I too am familiar with IF, my first 4 games being Quilled! But I see IF and fiction remaining seperate, although some slight personalization could be interesting. Imagine a horror novel that pulls your location from the Internet and drops in references to local landmarks or the current weather, news or time. Nothing that changes the narrative so much as tailoring the colour to each reader.

    I’m sure the changeover from physical to electronic books will happen quickly. Look how the music and movie industry changed almost overnight. But do we really want to see an end of large bookstores. I think we will miss those more than large music stores.

  • I write in both the mystery and horror genres with traditional publishers, and I fear that I see a trend toward the death of mass paperback. Shelf space in the US is being cut to the bone as more of the big box retail stores pack their shelves with toys and games rather than books. Other outlets such as Wal-Mart, Target, chain groceries and pharmacies, are reducing space for all books. Print runs of mass paper are being cut across the board.

    There is a sweet spot for pricing digital content that has to be considered. My publishers keep the e-book rate high. I understand the thinking there, but I also think too high a price, especially for a new pseudonym or a new author, slams the door on the reader who might give a new name a read. I hate the whole “my book is free” trap, because writers who write for a living can’t afford to give their work away. I don’t want to give my work away, and the expectation, that has been fostered by this ploy, is hard for me to swallow.

    Many readers who download hundreds of free books never read any of them. So this method of trying to gain readership often doesn’t work anyway, but it builds an expectation that ALL digital content should be cheap or free. I hope e-publishing doesn’t follow the trend of music. I have friends in that business who must tour constantly to make a living because digital downloads of their songs (and these are successful bands) aren’t producing enough money. They are forced into live performances to survive. I seriously doubt “author tours” would be effective for the average author.

  • Anthony

    There’s a lot of emphasis on what author should be doing, and how they should be pricing their books. I think the emphasis needs to be placed on the platforms. As the article mentions there are millions of titles to compete with. The platforms need to develop better discovery algorithms and better advanced searching. On top of this better enforcement of metadata usage and applications.

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  • Giving away a book for free–any content for that matter–is an ancient marketing practice. There’s nothing exceptional about it, except that we’ve never applied it to books like we do today. We used to go to the book store and take time to read through possible reading choices.

    Basic marketing works–people will spend money for the items they want. The problem, in large part, was that when ebooks dawned, we couldn’t figure out what to charge. Now we see that strong authors sell between $2.99-7.99 USD typically. Often, they give away a book–the first in a series, a novella, etc. while the rest earn profit.

    This isn’t going to destroy anything–it’s marketing. That’s it. Those who are foolishly writing for free and never charging enough for their books will hit some markets of readers. But the rest will continue to be profitable. Poor quality will often sell–how do you think we ended up with Old Navy and Walmart?

    The sky isn’t falling–it’s business as usual. And consumer psychology never changes. 🙂

  • joe sixpak

    digital books are NOT FREE to publish!

    the author needs to be paid fairly for their time.

    the editor and others laying out and converting the book format
    need to be paid for their time too.

    all told ebooks are maybe 20% cheaper to make than real books
    when you subtract the paper and printing/binding expense
    and maybe warehouse/shipping costs.

    amazon wants authors and publishers to give them a free ride
    to more sales where they make 100% of their fee no matter what
    and want us to give away books dirt cheap so amazon can make
    more money on the volume while authors and publishers starve

    agency model is the only way to go with serious content

    the million wannabees can sell kindle krapp for 99c if they are
    desperate to get anyone to read their trashy amateur novels

  • I know for my own books, they did quite well at the start of the e-book phenomenon but as the sheer numbers of books on virtual shelves increased, the sales of mine slowed. Now I see the same sort of thing when I put a book on sale: inflated sales while it’s £1.99 or 99p, then back to a trickle when it goes to a price that’s more in line with worth. You can’t buy a cup of proper coffee for the regular price. I’m not over-charging even then. But you are right: the perception is that it costs nothing to produce, ergo it should also cost nothing. Head-bangingly depressing.

  • Fran

    I work in electronic publishing, but as a consumer, I still have a groaning bookshelf. Some of its content are loved books provided by my grandparents, and enjoyed by my gradndchildren. I have no answer to the viability issue, but I can see a revivial of vinyl in music, loss of media when hardware collapses or is no longer upgradeable/compatible, and court cases that declare that a download is not an inheritable item. I have machines to convert my vinyl and tape to MP3 for my own use, but I retain the originals as my legal right to own and do what I like with, as I do my books.
    We already know the lifespan of fiche and tape, but there are books centuries old. In other conversations, I am seeing ownership of software no longer being free, and if you do want to retain your media for more than, say, 5 years, we are going to need some kind of conversion facility, for which we may have to pay. I have received very polite requests to know if anything can be done to continue use of a CD that was part of a package sale with a book some 7 or 8 years ago that no longer runs since Windows 8. Who will fund Adobe to keep centuries of backwards compatibility 🙂

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  • Excellent article and, as content creators, we need to look a head, evaluate, plan, and behave consistently.

  • Phil

    I agree that ‘freebie’ books are painful – but they can serve a useful purpose in getting people to read ‘older’ books and guide those readers towards newer works. As a reader, (taking publisher hat off), if I buy an ebook I know the cost of physical production is just about nil so I’m generally pissed at having to pay the same price for an ebook as a physical one. After all there’s the cost of paper, ink, printing, binding, distribution, etc. which simply doesn’t apply to an ebook. As a writer, the effort I put into both is the same. Indeed, once my manuscript is done the rest of it is out of my hands. I would like to see a publishing model where the author gets his/her royalty at the same amount, irrespective of the vehicle that carries it, the publisher adds their uplift to the manuscript only and the price of the sold item reflects those, plus the appropriate necessary add-ons for production. I know that an increasing number of published writers (and obviously self-published writers) now put out ebooks that don’t go via their publishers because they will actually make more money selling the ebooks themselves than selling books via publishers. And, to be fair, it’s usually a lot faster to get to ‘print’ for an ebook than a printed book.

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