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Thoughts on Smashwords Finding That Higher Ebook Prices Are Better

Jul 2, 2012   [permalink]

As I've been saying for a while now, ebook demand is fairly inelastic with respect to pricing. I find that with our ReAnimus Press titles and my own. I've done a number of experiments and it seems that the number of units sold doesn't vary as much with price as one would think. Indeed, I've often found that I sell as many units at a lower price vs. a higher price. (So, yeah, right, a lot more profit at the higher price.)

Smashwords founder Mark Coker posted an analysis he did of a huge amount of sales ("millions of dollars of sales" and over 50,000 titles).

He too found that pricing toward the $6-10 end of the spectrum is better than at the lower.

(There are various caveats that go along with his data. For example, his data doesn't include Amazon — and I suspect Amazon buyers skew toward a higher tolerance for higher prices than the Smashwords average, since folks visiting Smashwords are more ebook-aware and, I suspect, more likely hunting for bargains than your typical 1-click Amazon reader. I'd suspect Apple buyers are likewise willing to pay more, given the higher cost of iPads and such. Also, his data includes a mostly unknown authors, whereas, for, say, us at ReAnimus Press, or SFWA members, the titles will come from professional authors with better known names, and thus it's more likely readers will be willing to pay more. Anyway, I'd bugged Mark to do that analysis, so I'm really glad he did, and I think if anything, the Smashwords data underestimate the ultimate notion that ebooks priced higher make more money. Another caveat would be that cheap/free a book (free or 99¢) used to get lots of readers and drive sales of one's other titles wouldn't be reflected in the data, and might be a good strategy.)

What it seems to me is that with ebooks, it's largely the inherent value of the content that drives sales, not the price. I.e., price isn't really what drives the purchase decision; it's whether the person think it's an interesting book or not. If they like it, they'll pay a higher price. If they aren't interested, even a low price won't hook them.

That makes sense. There is still a "cost" to any ebook acquisition, namely the time to look at the blurb, to download it, to have it taking up visual space on your "shelf", etc. If a book is completely uninteresting to me, it's understandable I won't download it even for free.

So ebooks might be at the sort of "perfect market" point, where price isn't the issue, just the contents of the book. (How well written it is, if someone likes the topic, the attractiveness of the cover, etc.)

And if price isn't the issue, then (assuming one wants to maximize profit), one would want to price ebooks higher rather than lower. Smashwords' data and my own seem to indicate that $6 is the lowest one would want to go for a novel. $10 is the highest effective price Amazon will allow (since they halve the royalty above $9.99), so $6-10 seems to be the optimal price zone.

It's hard to know if $5.99 or $9.99 is better, though I will say that our best-selling ReAnimus Press titles — in terms of unit sales! — are those priced at $8.99 and $9.99. (And, conversely, our slow sellers are slow at $9.99 or 99¢.)

For all we know, $12.99 is even better, since that's where the big publishers are at, and one might suspect they've studied it. (But to a small fish, the royalty is lower at $12.99 than $9.99, alas.)

Anyway, vewwwy interesting.

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