Archive for May, 2009

Some thoughts on ebook pricing models..

Friday, May 22nd, 2009

A million dollar question, quite literally. Ebooks that are out there now, are priced anywhere from a couple of dollars to a few thousands, the most common price point being $9.99 of the Amazon Kindle. Amazon, in its model, allows publishers to set a selling price and reconciles 30% of that amount, irrespective of the selling price being at $9.99. Having more or less taken up a loss-leader position in this for all popular titles,  their model focuses on gaining market share.  They do charge higher for the less popular and niche books. They are making sure that people get habituated to buying and reading ebooks, though their reconciliation to the publisher may be higher than the selling price of the book – at least in some cases (http://www.teleread.org/2009/05/13/amazon-losing-money-on-999-e-books/).

One other interesting case study to look at would be that of O’Reilly, probably one of the most innovative and early-adopting publisher in the market today. They offer a deeply discounted model of selling most books in DRM-free ePub and PDF versions at $4.99. They have experimented constantly and arrived at a model that covers the marginal cost of an electronic version. The fixed costs still remain in getting a book out. The marginal cost of going from print to electronic is what O’Reilly is focusing on. They are, as always, experimenting with different models and trying to figure out the expectations of the market. In fact, today they sell more ebooks than print books from their own site! (http://radar.oreilly.com/2009/02/state-of-the-computer-book-mar-24.html)

The recent boycott of books on the Kindle, priced over $9.99, provides an interesting comparison on how much the market expects an electronic edition of a book to be priced at.

  • Are people right in demanding that all books be sold at the same price, irrespective of the nature of the book?
  • Can a different model be explored that offers better choice than a high priced ebook?

“I’d charge fifty cents for an online rental. It would immediately hammer the rental stores (which is fine with Hollywood) and DVD replicators (also fine with Hollywood) but would instantly teach people a new habit. Then, once the new habit is set and you’ve earned permission, sure, charge more for new movies and for blockbusters. 300 million movie theatres, all selling tickets every single night–you don’t need to charge $10 a seat when you have access to everyone.

It’s important to charge something, because the act of paying fundamentally changes the dynamics of the relationship. The question is this: at the start, is your goal to maximize profit or to build a platform that scales? The fact is that the market is too small right now for the price to matter. What matters is whether you can build an audience that is in the habit of paying you, an audience that wants to hear from you, an audience that you can build a business on.

At fifty cents a rental, all desire for piracy goes out the window, replaced by convenience, ease of use and a clear conscience. More important, entire new services show up, habits are built and the studios end up with a direct relationship with consumers who want to hear from them. If they don’t get greedy at the start.”

(http://sethgodin.typepad.com/seths_blog/2008/01/how-much-for-di.html)

This was written almost 17 months ago by Seth Godin when he was pondering over on how much movie studios should be charging for digital downloads. Probably, the answers lie in Seth’s quote above. Micro-payments and micro-subscriptions, broadly put as rentals, is one model that has rarely been explored in electronic books.

  • Can publishers look at a market segment that is willing to pay a small price for a limited time access to content?

But isn’t this very similar to our real-world or electronic libraries?” - one might ask. It is, to some extent. Yet, it is not a membership-based cover fee to access multiple titles. That particular model already exists for electronic book sales to institutions.

For single users, though, one can look at a model where access is limited to a particular title of choice, for a restricted period of time and has a small attached fee. This model will also be easier to reconcile in terms of royalties, compared to electronic library models, as the payments are for specific titles. A sale can be easily broken down into the royalty percentages and reconciled with authors and content creators.

The market segment that we are talking about here, would probably not buy the print book at all. They are on the fringe. They are consumers, but not buyers, of the print book. This segment of the market is price sensitive and will not buy beyond a price point. However, they will buy in great numbers - if the price is right. There seems to be a good elasticity at lower prices for ebooks. The consumer wants access to read, if it is legal and within their expected price-point - they will go for it. Otherwise, they will look at alternatives. If the price is too high for them, they will explore an alternative Wiki text or risk pirated sources of access on torrents or YouTube-like user uploaded websites for books. We are talking about:

  • Students who refrain from buying that ‘important, but non-prescribed book’ needed for their examination.
  • Researchers who would rather refer at a library than buy books required to prepare a report.
  • Professionals who would not buy all the books that cover a topic.
  • Readers who want to check out the book by an author before making the buy decision.

If you look at it closely, everyone benefits from this ‘fringe market’ sale; from the publishers to the authors and more importantly the readers. Will this model work for all segments in publishing? Maybe not. Will it work for popular paperbacks? Again, maybe not. However some early experiments by Harper Collins and Random House indicates that giving easy access to books in the electronic format does have a positive effect on people buying the print edition. (http://www.idpf.org/events/presentations/digitalbook08/lHulse08.pdf

The micro-subscription models will encourage people to explore more books and may result in driving more print sales. What it does warrant though, is experimenting. With technology and tools available now to actively experiment, it is just a question of trying.

Some more links on this topic..

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How do you get your content discovered once you create an e-strategy and deliver your content online?

Thursday, May 14th, 2009

In the new blog series from AEP, What’s Keeping You Up At Night?, experts offer their advice on the most pressing issues facing the educational publishing industry.

The following question was posed to the current featured expert, Sameer Shariff of Impelsys Inc.

Q. How do you get your content discovered once you create an e-strategy and deliver your content online?

A. In the electronic space where more and more people are reading online, viral marketing tools like widgets and book previews provide good opportunities for publishers to market their titles across the web. Here are few ways you can use widgets and book previews to get your content discovered online.

1. Capitalize on web 2.0. Use widgets and book previews to spread the buzz around your titles on social networks and blogs. You can blog about your latest title, add a title’s preview link to your social network profiles or as status updates, and also tweet about it. Readers who include your content on their social profiles in turn send out access to your content samples to all the people on their respective networks. This helps in spinning out a viral web of individual content nodes without having to spend time, effort, and money to contact these readers and their networks directly.

2. Search Engine Optimization. Widgets also come with a ‘buy link’ option that allow readers to buy directly from your e-commerce portal and get traffic to your website. Most of the social media is indexed by search engines. As the number of people who include your content samples increases, it increases the weight of your content in search results. As these widgets are spread across the web, they increase the back links to your website that improves your web page ranking and search results.

3. Make new announcements. Each widget becomes a small window that a publisher can use to send additional announcements and updates to already existing network of readers without having to create additional marketing programs. For instance, promotional offers and discounts can be effectively communicated to readers to see immediate results on your promotional program. This can be used in addition to your marketing email campaign and as a tool to reach out to existing readers and their networks.

With widgets and book previews you can reach global marketplaces and build a presence in online communities that will help you understand your readers, their preferences and build direct relationships with them.

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