The journey through eBook pricing trends
Thursday, August 19th, 2010
A lot has been said about eBook pricing in the past year. Publishers now are in a stronger position of control, shunning older pricing models for models that fit in with their business objectives.
The Retail model
In the recent past, the retail model, made popular by retail giant Amazon, has been facing a lot of criticism from publishers. Under this model the publishers sells books to online retailers, who then sell it to readers at a price that the retailer determines. Amazon was buying eBooks from publisher for about $13 and selling the same eBook, at a loss-leader pricing, for $ 9.99 for reading on its Kindle eReader device.
The strategy of taking a loss on each eBook was aimed to push sales of the Kindle mainly succeeded in establishing $ 9.99 as an acceptable and popular price for an eBook.
The problem publishers have faced with this model are two fold. Besides having limited control over pricing, publishers believe that a standard pricing of $9.99 devalues the book — negatively impacting sales of the hardcover paperback.
The Agency model
Many publishers such as Macmillan, unhappy with the Amazon eBook pricing model that resulted in devaluing the content of the book, began pushing for an ‘Agency model’ for the sale of eBooks.
Under this model, the publisher shall remain the sole seller, and an online vendor like Amazon would merely act as an “agent,” in exchange for a percentage of the commission. This ensured that the publisher had full control over prices, rather than having to accept the standard $ 9.99 price made popular by Amazon. Under this system, Amazon would probably earn extra dollars from publishers as compared to their current loss-leader pricing model.
The war against the $ 9.99 eBook price was started when Macmillan challenged Amazon head-on and refused to settle for the $ 9.99 price. Macmillan was soon followed by the Hachette Book Group and Harper Collins. Amazon initially retaliated by refusing to sell Macmillan books through their online store. But in a short span of time, Amazon accepted Macmillan’s terms and put their books back on the Amazon store — but not without insisting that Macmillan prices were still needlessly high for e-books.
Apple too has adopted the agency model for eBooks on its iPad, by signing up with publishers such as Harper Collins, Hachette Book Group, Macmillan, Simon & Schuster and Penguin.
The Subscription model
The problem that publishers faced with both the above models, be it the wholesaler-retailer model or the agency model (selling through agents), was lack of access to buyer statistics and behavior. In the future, publishers are largely going to shift from B2B to B2C business models i.e. selling directly to readers / end-users or institutions.
Under a B2C business model, the publisher enjoys certain advantages. Publishers have control over prices, get to know the readers directly and can gain insights into the usage of their content. They can also sell several supplementary / ancillary assets at incremental prices directly through their website. This type of content monetizing is possible by adopting newer models such as marketplace Apps or subscriptions.
Many publishers are now choosing to supplement their retailers by distributing books and eBooks via their own branded eBookstores that have e-commerce systems built into them.
A buyer looking to purchase a particular book can visit the publishers’ eBookstore and buy the book directly from them. This is useful particularly when readers wish to gain access to several books in the store. Along with selling the titles individually, publishers can offer a monthly or yearly subscription to all the books in the store. Publishers can also go one step ahead and offer eBooks, eBook supplements or content chunks to customers on ‘rent’. i.e. enable micro-payments to provide access for a short periods of time. For example, a reader no longer has to buy an entire book just to access say Chapter-7 of the book. He can instead loan out the content for just as long as s/he needs it.
In the future, it is likely that more and more publishers will create and manage their very own eBookstores to supplement sales through their retailers, intermediaries and other online distributors. The advantage of reaching out directly to the end user, not only allows publishers greater control over prices, but also helps them understand their reader buying and consumption habits better.
Other Noteworthy Business models
Harper Studio
One model worth taking note of is the game changing business model by Harper Studio that pays the author 50% of the profit sharing as compared with the traditional 7-15% royalty that an author gets.
The model aims at seizing the doors of opportunity that technology has opened. Harper is looking at packing and supplementing their products with multimedia tools such as DVDs and / or embedded videos or narrative blurbs.
Odyssey editions
A group of well known and well respected authors, have formed Odyssey editions to sell their titles as Kindle ebook editions. Most of the books are priced under Amazon’s target eBook price of $9.99 and mostly undercut the price of the paperback edition. The model which offers self ePublishing authors 70% of sales, is facing flak from traditional publishers who have, under newer contracts been claiming exlusive eBook rights, offering authors only around 25% for ebook sales.
With the agent taking on the role of the publisher, Publishers such as Random house are disputing Odyssey’s rights to sell the ebooks.
References:
http://blog.macmillanspeaks.com/macmillan-ceo-john-sargent-on-the-agency-model-availability-and-price/
http://www.digitaltrends.com/gadgets/three-publishers-now-reject-amazons-9-99-ebooks/
http://www.fastcompany.com/magazine/135/fast-talk-the-experimenter.html
http://industry.bnet.com/media/10006134/harpercollins-inkpop-another-step-in-the-digital-publishing-revolution/
http://www.i-programmer.info/the-stone-tapes/1098-publishers-bypassed-by-kindle-ebooks.html
