Bye Bye $9.99 and Price Competition in eBooks

The mantra for many ebookers over the past year or so was “get rid of agency pricing and bring back lower ebook prices based on competition.” These ebookers are ecstatic over the approval of the settlement terms in the Department of Justice’s lawsuit against five of the Agency 6 publishers and Apple by Judge Denise Cote on September 6, 2012.

I think it is way too early to celebrate and I think ebook prices of bestsellers will rise, not become lower.

To set the mood to say goodbye to $9.99, here is a song from the past — Don McLean singing his Bye Bye Miss American Pie:

Now that you’ve been entertained, let’s discuss why I think we can say goodbye to the $9.99 bestseller and to real price competition among the big publishing houses which control the majority of popular publishing today.

The first problem lies within the settlement agreement itself. As Judge Cote wrote (p. 10 of the Opinion & Order filed September 6, 2012), the publishers, although they cannot use agency pricing, which presumably means a return to the wholesale pricing of the preagency days, can “enter into contracts that prevent the retailer from selling a Settling Defendant’s e-books at a cumulative loss over the course of one year.” This is a threefold problem for consumers.

First, it means that publishers will be able to require Amazon (and/or Barnes & Noble and/or Apple and/or all other ebooksellers) to disclose both sales numbers and pricing, something that Amazon has been loathe to disclose even to its shareholders. Under the current system of no such requirement, a publisher knows how many of a title have been sold by Amazon because Amazon has to pay for each title sold. But what has not been known, and what every analyst wants to know, is whether the sales are profitable, not just how many units are sold. Analysts want to know whether Amazon has sold 1 million ebooks and made or lost $5 million from the ebook sales alone. And knowing that information, analysts can determine whether or not Kindle hardware sales are profitable — all information that Amazon has steadfastly refused to isolate.

This is problematic because if Amazon has to verify that over the entire line of, say, Macmillan ebooks it is making a profit — and note that it is over the entire Macmillan line, not over the combined lines of Macmillan and Simon & Schuster — Amazon will have to be very cautious about pricing. One cannot easily take a loss on a million-selling ebook in hopes that over the course of the next months it will sell enough ebooks from that publisher to end the year in profit. How likely is it that Amazon will take that gamble and reinstitute $9.99 pricing?

The second reason this is problematic for consumers is because the order essentially orders a return to the wholesale pricing scheme but sets no boundaries on that scheme. There is nothing to prevent the publishers from altering the discount rate or even giving a different discount rate to different ebooksellers. As part of its order, the court did away with the most-favored-nation clause, which said whatever terms you give X you must give me.

I know the response to this is that the publishers need Amazon more than Amazon needs the publishers. I think, however, that Amazon’s caving in to Macmillan when Macmillan demanded agency pricing demonstrates that it is the publishers who are in the catbird’s seat, not Amazon. Amazon is the seller of product and thus needs product to survive. Each of the Big 6 publishers controls a significant portion of the necessary product that Amazon cannot afford to do without. Besides, I expect that each of the publishers will come, independently, to the position of squeezing Amazon similarly, so Amazon will have little recourse, just as it had little recourse in the Macmillan dispute.

The third problem for consumers is that the answer to the worries of the publishers that brought about agency pricing is simply raising the list price of newly published books. The way publishers do this is to take an expected blockbuster and raise its price to the new price point and watch sales. If expected sales (or close thereto) occur, then the next expected blockbuster is given the same price point, and this is repeated until there is confidence that consumers are now expecting to pay the price point.

And this is already beginning. J.K. Rowling’s new book, The Casual Vacancy, a Little, Brown, imprint, has a new price point for a novel: $35. If you check Amazon and Barnes & Noble, you will find that the ebook price at both is $17.99 — a far cry from the previous bestseller price point of $9.99 at Amazon. And the $17.99 is a 49% discount off the list price, which means that the ebook is likely to be generating a 1% gross profit for the retailers, just barely meeting the condition in the settlement order. I see this as an indication that the ebooksellers are concerned about profitability over the entire Little, Brown ebook line over the coming year.

Under the agency system, it would have been expected that Rowling’s new ebook would carry a price no higher than $14.99.

There is also the question of whether Amazon has gotten used to actually making money on ebooks and is using the profit to subsidize the Kindle hardware. Nate Hoffelder raised this question in Did the Agency Model Lead to Cheap eReaders? at his The Digital Reader blog. Having made money on ebooks over the past year, how likely is it that Amazon will want to subsidize both the hardware and the content, perhaps taking a loss on both? At some point, Amazon has to show a profit to prevent shareholder rebellion. And now it has the perfect excuse to do so: Judge Cote’s approval of the settlement agreement that allows publishers to require Amazon to earn a profit on ebooks.

It is the combination of forces that have been unleashed by the approved settlement agreement that will result in no agency pricing for at least 2 years but, instead, higher prices for consumers and the end of the $9.99 bestseller price. We may occasionally see a bestseller being offered at the $9.99 price, but it will be the occasional bestseller, not all bestsellers as in the past. And if we watch prices, I think we will see list prices climb; it will be the rare bestseller that will have a list price below $30. Rowling is leading the way and if her book is a bestseller at $35, it won’t take long for other top-tier writers to insist on equal list pricing. That is how it happened in the past and how it will happen this time.

I may be wrong, but I doubt it. History does tend to repeat itself and the DOJ and Judge Cote have let loose a rising tide. Do you agree?

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Are Free eBooks Killing the Market?

Every day I find another traditional publisher is offering free ebooks. Amazon has made a business out of offering free ebooks. And let’s not forget the many indie authors who are offering their ebooks for free.

What is this doing to the market for ebooks?

I admit that I may be atypical in my buying and reading habits, but I do not think so. I have watched my to-be-read (TBR) pile grow dramatically in the past couple of months from fewer than 300 ebooks to more than 1,100 ebooks. If I obtained not another ebook until I read everything in my TBR pile, at my current average rate of reading two to three ebooks per week, I have enough reading material for between 367 and 550 weeks or 7 and 10.5 years.

How has this impacted my buying of ebooks? Greatly! In past years, I bought ebooks regularly. Granted, I was buying mainly indie and low-priced, on-sale traditionally published ebooks, rarely spending more than $6 for an ebook, but I was spending money.

That has all changed. Now I rarely spend any money on an ebook. In the past three months, the only ebook I paid for was Emma Jameson’s Blue Murder, which is her sequel to Ice Blue (which I reviewed in On Books: Ice Blue), at $4.99. Otherwise, all I have done is download free ebooks.

I understand the reason for giving ebooks away for free. How else are authors to attract new readers? This is particularly true when one considers how many ebooks are published each year in the United States alone — more than one million. Some how one has to stand out from the crowd. But with the ever-increasing number of free ebooks, giving away ebooks is less of a way to stand out.

The problem is that too often all of the ebooks in a series (or at least many of the ebooks in a series) or older, standalone titles by an author are given away. All an ebooker need do is wait. Giving away the first book in a series makes a lot of sense to me. If I like the first book, I’ll buy the subsequent books. But when I see that if I have patience I’ll be able to get the subsequent books free, too, then I don’t rush to buy.

The giving away of the free ebooks has brought about another problem: the decline of the must-read author list. I’ve noted before that my must-read author list has signficantly changed over the past few years. In past years, I had a list of more than 20 authors whose books I bought in hardcover as soon as published; today that list is effectively two authors. My must-read ebook author list has grown, but that is a list of indie authors, not traditionally published authors.

Again, the problem is free ebooks. As a consumer, I like free. However, free has so radically altered my book-buying habits — and I suspect the book-buying habits of many readers — that I find it difficult to see a rosy future for publishers, whether traditional or self-publishers. It is because of this that I wonder what lies behind the thinking of publishers who give their ebooks away, especially those who do so in one of Amazon’s programs.

Publishers who participate in Amazon giveaways double hex themselves. First, they undermine their own argument that ebooks are valuable. Second, they antagonize ebookers like me who do not own Kindles or are not Amazon Prime members and thus unable to get those ebooks for free. I have seen so many ebooks available for free on Amazon that are not available to me for free as a Nook or Sony or Kobo owner, that I have simply resolved, with some limited exceptions, not to buy ebooks. Either I’ll get them for free or not at all.

The Amazon giveaways also tempt me to join the “darkside,” that is, if there is a book in which I am interested, to search for it on pirate sites. The publishers, by their action of giving away the ebook on Amazon, are enticing people to pirate by not making their ebooks free at all ebookstores. When publishers degrade the value of ebooks, their message is received by all readers and is acted on by many readers.

This is a no-win situation for everyone. Ultimately, even readers lose because the incentive to write disappears when there is little to no hope of earning any money for the effort. And even if authors continue to write, the quality of the writing will suffer because no one will see the sense in investing their own money in a product they are going to give away.

It is still early in ebook revolution, so no one really knows what eBook World will look like in a decade or two. But it is pretty clear to me that freebie programs like Amazon’s are detrimental to the overall health of the book market. Authors and publishers should rethink the giving away of their ebooks, other than, perhaps, the first book in a series, before they establish in concrete the reader expectation that “if I just wait, I’ll get it for free, so why pay for it now.” If nothing else, the giving away of ebooks is helping to depress the pricing of ebooks and perhaps driving some ebookers to the pirate sites. My own experience as a buyer of ebooks demonstrates this.

I know that ebooksellers like Amazon are reporting rising ebook sales, but the data I want to see are sales numbers without the one-shot blockbusters and the price levels. The current problem with sales data is that we are seeing only the macro information and so do not know what the real effect free ebooks are having on the market. We are also still in the era of growth in the number of ebookers. When that growth stops, we may get a clearer picture. In the meantime, I know that my spending on ebooks has declined from the thousands of dollars to the tens of dollars and is getting close to zero. I’m sure I’m not the only one who has experienced this decline in spending.

Why Aren’t Publishers Pushing eBooks?

In a post discussing a twit from author Brent Weeks, Nat Hoffhelder of The Digital Reader wondered, in his blog post “Not All of Us Drink a $4 Coffee, Mr. Weeks,” why publishers aren’t “trying to convert paper book buyers to ebook buyers,” considering that publishers make more money on ebooks than on mass market paperbacks. Setting aside the question of whether publishers make more money on ebooks than on mass market paperbacks, the question is truly piercing: Why aren’t publishers trying to convert readers to ebooks?

We can begin with the proposition that ebooks are clearly the tsunami of the future for reading. It is not that the demand for pbooks will disappear entirely, just that ebooks will become greater than a majority share of the book market. One would think that publishers would want to grab the brass ring early while they can still steer the market.

Under the current scheme of things, ebooks are a much better investment than pbooks for publishers. If I buy a pbook, I can share it with an infinite number of friends, none of whom has to buy his or her own copy as long as they are willing to wait. In contrast, assuming I don’t pirate the ebook, every one of my friends who wants to read the ebook has to buy a copy.

OK, I realize that I cannot just shunt aside the pirating problem as if it didn’t exist, but there is a certain reality to pirating — the very vast majority of readers do not pirate ebooks. Instead, they buy a copy and if they share it, it is shared only among immediate family, often by letting the family member borrow the reading device. It is a small number of readers who post pirated copies of books and a small number who go to the trouble of finding them and downloading them.

Offsetting, I think, what believe the cost of pirating to be — or at least a goodly portion of that cost — are that with ebooks, publishers have no physical inventory to maintain, no cost of returns (unsold and overinventoried pbooks are returned by booksellers), errors can be inexpensively fixed (i.e., books do not need to be destroyed and entire print runs lost; with ebooks, the errors can be fixed and the ebook replaced very inexpensively), and sales are certain (under the pbook wholesale model, the publisher sells pbooks to a bookstore but doesn’t know how much it will ultimately be paid for the pbooks because they are subject to returns by both the consumer and the bookseller; contrast this with how the ebook market works). I’m sure there are other offsetting features of ebooks.

The publishers have been focusing, I think, on the wrong numbers when they discuss pirating. They seem to focus on the number of books available rather than on the number of downloads. Haven’t the Harry Potter ebooks demonstrated the problem with piracy numbers? Before the release of the ebooks, pirated versions were available. But their availability doesn’t seem to have affected very much sales of the official-release versions.

Publishers should be pushing ebooks, trying to convert pbook readers to becoming ebookers. In fact, if publishers wanted to twist Amazon’s nose a bit, they could subsidize Barnes & Nobles’ Nook: Buy a Nook for $99 and receive $99 worth of popular books of your choice (not the publisher’s choice) published by XYZ Publisher. Yes, the publishers would probably lose a bit of money to start, but once people get in the habit of reading electronically, few, I think, would stop.

Electronic reading done on an ereader is addictive, or at least I, my wife, and our ebooker friends have found it so. We are reading at least twice the number of books we previously read, and we read a lot. What we are not doing is reading more of the Big 6’s books — in fact, we are reading significantly fewer of those books. The reasons are simple: the big publishers, often called the Agency 6, are not pushing us toward their ebooks but away from their ebooks by their overpricing and their use restrictions.

Yes, pricing is an old argument that keeps coming back, but the bottom line is that it is an argument that cannot be avoided. Brent Weeks’ new novel — regardless of how much time and effort he put into its authorship — simply is not worth $14.99 to many of us. He is not a must-read author. Each reader has his or her own set of must-read authors, that handful of authors for whom we will pay $14.99. But the kicker is that for many of us, we’ll spend that $14.99 on the pbook version, not the ebook version, because that is the way publishers are pushing us.

This is a strategic mistake. It would be better to push us to the ebook version at a significantly lower price so that we become accustomed to buying the ebook version at a “reasonable” price. I have found that my list of must-read authors has dwindled considerably over the past several years. The more ebook reading I do, the less pbook reading I want or am willing to do. Consequently, when a must-read author’s new book arrives, I rethink how “must-read” the author really is.

The more time I spend with my ereader, the less willing I am to pickup a pbook. Yet that unwillingness does not convert to a willingness to substitute the ebook for the pbook when the ebook costs as much or more than the hardcover pbook. Increasingly, I find that I just pass on that “must-read” book and the author becomes a former must-read author. My list of must-read-traditional-publisher authors has dropped from more than 20 authors to 4 — David Weber, Robin Hobb, Harry Turtledove, and L.E. Modesitt, Jr. — although I expect Hobb and Turtledove to be dropped from the list over the next few months. (I also have a list of ebook-only indie authors, like Emma Jameson, Michael Hicks, Vicki Tyley, Shayne Parkinson, Rebecca Forster, and L.J. Sellers, among others, who I consider must-read but whose ebooks are at bargain basement prices compared to what the Big 6 and Brent Weeks want.)

By not pushing ebooks, the Big 6 are shrinking their market rather than expanding it. They are losing a significant number of sales that they (and their authors) should be making. More importantly, from the publishers’ and the authors’ perspectives, they are causing must-read author lists to shrink. As I noted earlier, it is clear that growth in the book marketplace lies in ebooks. pBooks may have some small growth, but not enough to sustain the industry.

Interestingly, I think that if the Big 6 changed their focus and pushed ebooks, they could easily pickup some of the best indie authors and publish them in ebook-only versions. The biggest problem that the indie authors have that the Big 6 could solve for them is getting the word out that they have a new book available.

I think three changes need to be made. First, publishers need to wrap themselves around ebooks as their future and start pushing them and doing so by pushing readers toward ebooks.  Second, they need to come up with a way to make brick-and-mortar bookstores relevant as showrooms for ebooks. Failure to make these changes is likely to exacerbate the decline of the Big 6. Agency pricing at current levels is really only a stopgap measure, not a sustainable plan for the future. Third, the Big 6 have to change their attitude toward indie authors and start looking to become the publisher of the better indie authors by offering intensive, high-quality marketing (along, of course, with better royalties than the standard pbook royalty scheme).

On Books: Value in an eBook World

eBooks have changed the way we think of value in regards to books. For myriad reasons, ebookers think that the price of ebooks should be no more than the price of a mass market paperback, and often less. Price is a reflection of value.

Much of the thinking revolves around a central point: unlike pbooks, ebooks are intangible — just a collection of bits and bytes. Yes, there are other reasons, too, such as the lack of secondary market value, lower production costs, restrictions on usage, and the like, but the reality is that most of the conscious and unconscious reasoning revolves around the matter of intangibility.

When I buy a pbook for $15, I have something solid to hold in my hand. I can put it on a shelf and admire its cover beauty; I can open the book and feel the pages as I turn them. An ebook lacks all of the sensory qualities of a pbook — it is intangible. The sensory experience lies with the reading device itself, not with the ebook.

I am aware that many ebookers pooh-pooh the sensory argument, but it really is not so easily dismissed. Many of the things that ebookers complain are restrictive about ebooks are not restrictive about pbooks because of the sensory experience. More importantly, it is difficult to become enamored with bits and bytes, yet the beauty that a pbook can project addresses the needs of multiple senses.

I think it is this sensory deprivation that drives the value argument. eBooks are of less value because they provide less of a sensory experience. We pay $100 for an ebook reader without a great deal of thought because it appeals to multiple senses; we complain about a $14.99 ebook price because it appeals to a limited number of senses.

Think about a rose. Do we value the magazine photograph of a rose the same as we value the physical rose in our hand? The photograph will last longer than the physical rose, yet we value the physical rose more than the photograph rose because the physical rose provides a more complete (and better) sensory experience.

Or consider this. Many more ebookers are willing to pirate an ebook — regardless of the rationalization given for doing so — than are willing to steal a pbook from a bookstore. Why is that? If the value is the same, the willingness to pirate/steal should be the same, yet it isn’t. I think it is because ebooks are intangible and thus viewed as of little to no value — ebooks simply do not ignite the same sensory experiences as pbooks.

Of course all of this ignores the fact that real value of a book — p or e — lies in the writing, not in its physical structure or presence. Yet when we talk about the value of books, the value of the content is rarely addressed. There is good reason for this. If we were to address the content value, then ebooks and pbooks should be equivalently valued. After all, the word content is the same, only the physical wrapper is different.

Another problem with addressing the content value is that the content value is not altered one iota by production costs (excluding editorial). If we value the content, we should value the content identically whether it cost $1 or $100 to produce. The production (excluding editorial) costs are wrapper costs, not content value.

eBooks have upset the valuation process. Prior to ebooks, value was determined largely by content. With the rise of ebooks, the wrapper has come to dominate the valuation argument and there is little to no discussion of content value. And this has consequences for the pbook world. This is what lies, I think, at the heart of the fear of the publishing industry: the idea that content will have little to no value, only the wrapper will determine pricing.

This tension between content and wrapper valuations is further fueled by the rise of the indie author. Readers are unwilling to gamble large sums on indie-authored ebooks from authors with whom they have little to no familiarity. If an indie author publishes a pbook and prices it similarly to other pbooks in its genre, readers are willing to pay that price even if they do not know the author because the price is aligned with what they expect to pay.

Yet this does not translate to indie-authored ebooks, where there is resistance to paying the higher pricing found with traditionally published ebooks. Consequently, indie-authored ebooks tend to be drawn to the lower end of the pricing scale. With the large number of ebooks found at that lower price point, that lower price point becomes a standard for the ebook. Again, valuation is based on the wrapper, not the content.

The next few years will be interesting as regards ebook pricing. Will the valuation of ebooks change so that content is the decider or will the wrapper valuation continue to dominate and also make inroads in pbooks? Although it is often heard that content is king, ebooks appear to be the exception. For ebook valuation, the wrapper is king.

Why Aren’t Kindles Free-Marketed?

In all the hullaballoo over agency ebook pricing and how terrible it is to not allow ebooksellers like Amazon to discount ebooks and sell them at whatever price they want, even if it is at a loss, ebookers haven’t questioned the lack of dynamic pricing of ereaders themselves, especially that of Amazon’s Kindles.

Consider this: Every store that sells an Amazon Kindle sells it for exactly the same price as Amazon and every other retailer. And when one retailer has it on sale for $20 off, so does every other retailer. (This is also true of the Sony, Kobo, and Nook devices.)

Why aren’t ebookers complaining about this price-fixing? No, I’m not suggesting there is collusion between the companies to prohibit discounting of the devices. Rather, I find it disingenuous that agency pricing, which is a form of price-fixing, is so disliked among some ebookers that they complain about it and want it banned, yet no one has complained about the lack of price competition when it comes to the device to read the ebooks. Why is it OK for Amazon to price fix but not Macmillan?

I’m sure the immediate response will be that there is no complaint because the prices on these devices have dropped to where they are now half or less of the original cost. If that is the key to salvation, then all Macmillan needs to do is drop the price of an ebook from $12.99 to $10.99 and ebookers should be satisfied — after all a drop in price is a drop in price — but I know that would not satisfy. Why? Because the argument would be made that the ebook price would be even lower if true free-market competition were allowed.

So why isn’t that the ebooker argument when it comes to the devices? I could see, for example, Staples offering a free Kindle with the purchase of a $150 paper shredder, or Target offering a 50% discount on a Kindle with the purchase of Stephen King’s newest novel. But we don’t see those sales because Amazon is not ready to sell at those prices itself and no one is allowed to undersell Amazon.

If the argument against agency pricing is legitimately one against price-fixing, why doesn’t the argument carry over to the devices? What makes it OK in one category of product but not in a related category of product? When agency pricing is attacked, it is usually on the basis that it has caused ebook prices to rise.

There has been no comprehensive pricing study done, that I am aware of, to determine whether the cost of ebooks has risen, fallen, or stayed the same since the introduction of agency pricing across the entire spectrum of ebooks published by agency-pricing publishers. I know, for example, that many of the ebooks I buy cost less under agency pricing and I also know that the prices of bestsellers that Amazon sold at $9.99 have risen under agency pricing. What I don’t know is whether across the spectrum of agency-pricing publishers’ ebooks, as opposed to niches, prices have risen, fallen, or stayed the same. I think this is important information to have so that we can intelligently determine whether agency pricing is consequential or inconsequential.

It seems fairly clear to me that opponents to agency pricing fall into a few groups. There is a small group of ebookers who are free-marketers and believe everything should be priced elastically, based on demand — the libertarians of the marketplace who oppose agency pricing because it is controlled pricing. A second group of opponents are those whose reading now costs more because they only read/buy books that fall into the niches where agency pricing has caused prices to rise, such as the Amazon bestseller niche. It isn’t so much that they are opposed to agency pricing as they are opposed to the increase in pricing and assume that Amazon would, if it could, charge a lot less for the books they want to read and buy in the absence of agency pricing. The third group assumes that because prices in one niche increased under agency pricing that all prices increased and thus are opposed to agency pricing because it caused a rising tide of prices.

These same arguments can be made when it comes to the devices: In the absence of Amazon price-fixing its Kindles, WalMart would sell the Kindles for less; there would be a Kindle price war between WalMart and Target; Staples would offer package deals; and so on. On this, I would think all of the anti-agency-pricing ebookers would unite to lambast the device price-fixing. But here silence reigns.

I’m sure someone will point out to me how different these products are; how one doesn’t have to buy a Kindle to read an ebook bought from Amazon; how, instead, one could download a free app and read the ebook on one’s computer or tablet. I’m sure the point will be made that you don’t need the Kindle but you need the ebook in order to read it. It’s all true, but doesn’t change the fundamental points:

1. There are no objective data to demonstrate whether agency pricing overall has raised, lowered, or done nothing to ebook prices except in niches.
2. There are no objective data to demonstrate that in the absence of Amazon’s device price-fixing that the Kindle would not be available for less, even free.
3. Whether price-fixing is OK or not OK should not be dependant on who is doing the fixing; that is, OK if Amazon is doing it, not OK if the big publishers are doing it.

Never discussed are what obligations the price fixers have, if any, to the consumer. Do publishers have an obligation to sell ebooks at price points that consumers want? Does Amazon have an obligation to free-market its Kindles?

Isn’t it interesting that without meeting ebooker demands as regards agency pricing the sales of agency-priced ebooks steadily grow? Isn’t it interesting that the freedom Amazon wants to price ebooks as it wishes Amazon isn’t willing to give to retailers of its Kindles? Isn’t it interesting that ebookers see no conflict in their demand for the end of agency pricing and their willingness to accept Amazon’s control of Kindle pricing?

We live in fascinating times!

The Value of eBooks: Is $2.99 The New Value

One excuse the big publishers used for going to the agency model of pricing was that Amazon’s $9.99 price for certain bestsellers was undervaluing the books and would establish expectations in ebookers regarding maximum pricing. So, if that is true, how do these very same publishers justify putting certain ebooks on sale for $2.99 or less?

This question popped to mind when Little, Brown, a subsidiary of Hachette, put City of Veils by Zoe Ferraris on sale for $2.99. This is the second mystery book by Ferraris featuring the same Saudi Arabian investigative team. (Although this is not a review of the book, it is worth mentioning that it is a 5-star book that offers both a fascinating insight into Saudi culture and a great mystery.) City of Veils is neither the first nor the last ebook by one of the Agency 6 to be put on sale for $2.99 or less; such a sale seems to be a regular happening. (The first book in the series, Finding Nouf, is listed as discounted to $11.16 from the list price of $13.95, with neither price being a price I would pay for a fiction ebook.)

Which makes me wonder about the “value of ebooks” and whether we are seeing the erosion of price to where, eventually, Agency 6 fiction ebooks will be regularly priced at $7.99 or less and frequently on sale for $2.99 or less.

There has to be something magical about this $2.99 price point. Why $2.99 and not $4.99? Or $3.99? Both prices would be substantial discounts off the list price and even off the standard 20% to 25% discount price. I suspect the answer lies in what experience is rapidly showing as the price point for maximizing volume of sales. I also suspect that publishers are finding that ebookers are unwilling to pay more than $2.99 for an introduction to a previously unknown author. Yet, I don’t see any evidence that after the introduction to a new author, ebookers are running to spend $11+ for other ebooks by the same author — I know I am not.

But regardless of the motivation, isn’t this $2.99 price point setting an expectation among ebookers as to what the correct price for an ebook should be? I find that it cements my belief that ebooks should be both DRM-free (which Tor, a Macmillan subsidiary, will be doing shortly) and list priced at no more than $5.99 and frequently discounted to $2.99 (or less). These Agency 6 discounts are also cementing my belief that I will only rarely pay more than $2.99 for any ebook.

The price point problem is exacerbated by other steps publishers are taking. I recently preordered Spycatcher with a bonus excerpt by Matthew Dunn, published by HarperCollins, one of the Agency 6, for 99¢. (The bonus excerpt is from Dunn’s forthcoming new novel Sentinel, which can be preordered for a whopping $12.99!) At the same time, Spycatcher without the bonus excerpt is available for $9.99. This type of discounting with bonus material included happens regularly. My question to publishers is this: Why would I ever consider buying Sentinel for $12.99 or Spycatcher for $9.99 — neither book nor the author being previously familiar to me — when I expect that at some future date I will be able to buy them for significantly less?  Doesn’t your offering one of the books for 99¢ create an expectation in me, the ebooker? And even if I can’t buy them in the future for $2.99 or less, why would I buy them at all — regardless of how good a read the introductory book is — at a price that has already demonstrated as far too high?

If there is any validity to the complaint of Amazon’s $9.99 price point setting consumer expectations at a price that is unsustainable by the publishing industry, how are publishers fighting that expectation by offering ebooks for $2.99 or less? Why is the publisher’s tactic sustainable but not Amazon’s?

Valuing of ebooks is difficult. Yes, there are costs that can be objectively measured but those per-unit costs diminish with volume sales. I grant that each ebook cannot be looked at in isolation as best-selling ebooks need to subsidize those that do not sell well so that overall there is an industry profit. Yet, where previously the argument was that no ebook should be sold below a price that sustained the industry, which price was somewhere north of $9.99, Agency 6 publishers belie that argument by demonstrating that at least some ebooks can be sold for significantly less without damaging the industry. That action reraises the issue of what is an ebook worth?

The industry has put itself into a straitjacket of its own making. Originally publishers planned to window ebooks. Windowing of ebooks allegedly would let publishers subsequently publish the ebook version of a pbook at much reduced price, more in line with ebooker expectations. But after much protesting from ebookers, publishers ultimately went to simultaneous release. Unfortunately, with simultaneous release, publishers decided they could not price the ebook much lower than the pbook for fear of cannibalizing pbook sales, losing money, and devaluing the book.

Then to shore up the value of ebooks, agency pricing was instituted. It was touted as necessary for the health of the publishing industry — from author to publisher. Now, within the past year, these same publishers are regularly pricing some ebooks at $2.99 or less, shattering the justification for the higher agency pricing.

In the end, I think publishers will find that $2.99 is the magic price point for ebooks. The combination of the self-publishing phenomenon that ebooks have produced, the use of the $2.99-or-less price point by self-publishers, and the apparent willingness of at least some of the Big 6 publishers to discount ebooks — even if for just a limited time — to that price point, will create an expectation in ebookers that publishers will be unable to combat. We may be a few years away from seeing that magic price point, but I suspect it is coming on fast.

The eBook Effect: Buying and Reading More

I have been reading ebooks for only a few years, yet there has been a steady shift in both how I read books (a shift away from pbooks toward ebooks) and the number of books I buy and read (I buy and read more books than when I was buying just pbooks) since I entered the world of ebooks.

Recently, I started a trilogy by indie author Joseph Lallo, The Book of Deacon. As was true for many of the ebooks I have bought and read, the first book in the trilogy, also called The Book of Deacon, was free. And like other books that I have enjoyed, I have purchased the subsequent books in the series, The Great Convergence and The Battle of Verril. I do not intend to review the books in this article, other than to say that this is a 4-star epic fantasy series, well worth trying.

I mention the trilogy, because it got me thinking about my reading habits and about numbers. The first book in the trilogy, I “bought” at Smashwords. I read it on my Nook Tablet, and when I came to the last page, immediately went online via the Tablet to the B&N ebookstore and purchased book 2. Book 3 was purchased the same way. What surprised me was that my Nook library, after purchasing The Battle of Verril, had 186 ebooks in it — and I have had my Nook Tablet for only two months! I wondered, how many ebooks have I purchased over the years?

From just three ebookstores — Smashwords, B&N, and Sony — I have purchased 722 ebooks (again, “purchase” includes ebooks gotten for free and ebooks that I have paid for). Add in the ebooks I purchased at Kobo, Baen, and several other ebookstores, the quantity rises above 900; add in ebooks obtained from places like Feedbooks and MobileRead, and the number climbs above 1,100.

I haven’t yet read all of the ebooks I purchased, but I am working away at the backlog, even as I increase the backlog by buying more ebooks. Since receiving my first Sony Reader as a holiday gift in December 2007 (the Sony 505), both my buying and reading habits have gradually, but dramatically, changed.

Before ebooks, I rarely bought indie-authored books. I also rarely bought novels. Nearly all my book purchases (at least 90%) were nonfiction, mainly biography, history, critical thinking, language, ethics, philosophy, and religion. I never cared much for the self-help books; I always felt that the only real self-help going on was the author helping him-/herself to my money. Books that I did buy either caught my eye on the bookshelf at a local bookstore, were reviewed in the New York Review of Books, The Atlantic, Smithsonian, The Economist, American Heritage, or other magazine to which I subscribed, or advertised in one of the magazines to which I subscribed. But the two primary sources for finding pbooks to buy were browsing the local bookstore and the New York Review of Books, including ads in the Review.

I didn’t buy indie-authored books because the authors were unknown and the books were expensive, especially as I only bought hardcover pbooks. Yet I did buy a lot of pbooks, rarely fewer than 125 pbooks a year (not including the pbooks my wife bought).

The advent of ebooks caused my reading and buying habits to shift. In the beginning of my personal ebook era, I continued to buy a large number of hardcover pbooks supplemented with a few ebooks. In the beginning, I was neither ready nor willing to simply move completely away from pbooks (which is still true). Nor was I ready nor willing to shift my focus from known authors and nonfiction to indie authors and fiction (which is no longer true). But as each month passed and I became more enamored with reading on my Sony Reader, I began to explore ebooks and with that exploration, came indie-authored fiction ebooks.

I am still unwilling to buy indie-authored nonfiction ebooks. I look at nonfiction books as both entertainment and sources of knowledge. Consequently, an author’s reputation and background remain important, and I still look to my magazines for guidance. However, where previously I rarely bought fiction and what fiction I did buy was not indie-authored, today I buy hundreds of indie-authored fiction ebooks. With the exception of perhaps a dozen nonfiction ebooks that I have purchased over the years (I bought the pbook first then decided to also buy the ebook version) and a handful of well-known fiction authors’ novels, every one of the more than 1,100 ebooks I have purchased are indie-authored fiction.

eBooks have had another impact on my reading in addition to the number and type of ebook purchases I make: I am reading more books than ever. Prior to ebooks, I would read 1 to 1.5 hardcover nonfiction pbooks each week (on average) over the course of a year. (I find that it takes me longer to read a nonfiction book than to read a fiction book; I tend to linger over facts and try to absorb them, whereas I consider fiction books to be generally a read-once-then-giveaway books.) Over my 4.5-year history with ebooks, the number of nonfiction pbooks that I purchase each year has steadily declined and it is taking me longer to read a nonfiction pbook, whereas the number of fiction ebooks I purchase has steadily increased and I read them faster than ever; I now read an average of two to three fiction ebooks a week — again, nearly all indie authored — in addition to my nonfiction reading.

Alas, not all is rosy in indie-authored ebookland. Sometimes I have to discard (delete) a goodly number of indie-authored ebooks before I find one that I think is worth reading from “cover-to-cover.” It is this experience that causes me to be unwilling to pay for the first ebook I read by an indie author. As those of you who are regular readers of An American Editor know, once I find an indie author who I think writes well, I am willing to pay for all of their ebooks that interest me. Indie authors that I have discovered and whose books I think are worth reading and buying include Rebecca Forster, Shayne Parkinson, Vicki Tyley, Michael Hicks, and L.J. Sellers. But finding these worthwhile authors is the difficult part, and ebooks have made the finding more difficult than ever.

The problem of ebooks, as the number of ebooks I have purchased attests, is that there are so many of them, which makes it hard to weed among them. I’ve lamented before that there is no gatekeeper for fiction ebooks. As poor as the gatekeeper system might be, it at least has the virtue of doing some preliminary weeding. True, sometimes gatekeepers do not distinguish between the wheat and the chaff, but at least with gatekeeping there would be some reduction in the number of ebooks that a reader would have to wade through to find the worthwhile indie-authored book. Under the current system, readers need to apply their own filters and hope for the best.

The ebook effect has altered the reading world by making more indie-authored books available to consumers, making gatekeeping a relic of the past, and making price a more important part of the reading-purchasing equation. eBooks change how readers relate to books. Whether ultimately this is for the better or not, remains to be seen.

To Design or Not to Design in the Age of eBooks

Whenever a discussion arises about how an indie author can increase sales, two things generally occur: First, regardless of the merits of the suggestion, the indie author defends by saying he or she cannot afford to spend the money to hire the professional (fill-in-the-blank) and second, with limited funds available for hiring a professional, it is hard to prioritize where to spend the money. There isn’t a lot that can be done about the first matter, but tackling the second matter, every indie author can do.

Years ago, when I ran a small publishing company, we worked under very tight budget restraints. As an editor, rather than a designer or artist, I believed that it was better to spend the money on editorial matters, even at the neglect of design. I quickly learned a valuable lesson: Aside from the story and quality of the storyline and writing, the most important facet of the production process was not editorial but cover design. If the cover design didn’t entice a reader to pick the book off the shelf, it mattered not at all how well written or edited the book was — there would be no sale.

The Age of eBooks raises this question yet again: Which is more important: professional cover design or editorial help?

Some ebookers dismiss the covers as being unimportant under the guise of content is king. I think that ignores how we buy products. Consider Apple products. If we look at the content, that is the inner works, of its devices, we find good — not outstanding, just good — components that will not win awards for being high quality; Apple products are basically, component-wise, middle-of-road. Apple’s real genius has been in design — the “cool factor.” People line up to buy Apple products because of the design; if they were interested in high quality components rather than design, they would consider alternatives. They don’t because design is what drives sales.

The same is true of an ebook. Look at how many ebooks of middling content are sold and read (or at least started). There is no consumer clamor for something to indicate that the content has been professionally edited; professional editing doesn’t drive sales although it can maintain sales momentum. Sales are generally visually driven.

Over the past few months, I have been consciously tracking how I make a decision to buy a particular ebook. I also have been tracking how my wife and a few of our friends decide to buy an ebook. I thought my discoveries would be earth-moving, but they aren’t; in fact, they mirror how pbooks are sold.

The two primary factors in the decision-making process (once we get past the genre/subject-matter obstacle) appear to be the blurb and the cover. Secondary factors appear to be reviews, price (especially the price-to-length ratio), and sample pages.

The higher the quality of the cover design, the higher the likelihood that the book will be looked at; the more informative and better written the blurb is, the higher the likelihood, when combined with a professionally designed cover, that the ebook will be bought.

After the initial sales, word of mouth becomes important, but not so important, in most cases, as to override the value of the cover and the blurb. My experience and my recent observations confirm to my satisfaction that a professionally designed cover is, after the quality of the writing and storyline, the most important investment an indie author can make in his or her book. This is not to suggest that this investment can be in lieu of investing in professional editorial help; just that it is an investment that is too often neglected and shouldn’t be.

A good author knows the value of professional editorial help. But it is fairly clear that ebookers are quite forgiving of editorial mistakes (or perhaps are unaware of the mistakes themselves), which means that if you can afford to invest in only one thing, that investment probably should be in the cover.

Remember that the very first thing an ebooker sees when scanning Amazon, Barnes & Noble, Smashwords, or any of the other ebooksellers, is the cover image. A great cover image can cause an ebooker to pause and read the blurb; a well-written blurb, combined with a great cover, can result in a sale.

Do not think that it is easy to create a great cover — it isn’t. Even the big publishers have troubles in this regard. Not only must the image be right and convey the story (remember that a picture is worth a thousand words) to the observer, but the choice of typeface is also important, as is its placement. Much too often it is impossible to read the type on an indie cover because the wrong typeface was chosen or because the image-typeface combination is simply wrong.

I agree that even the poorest cover-designed ebooks may still sell; the question is how many more copies would it sell if the cover were professionally designed and eye-catching? If you cannot capture a reader’s attention using the cover of your book, how much hope do you have that the reader will pause to read your blurb? There is just so much time and effort that a reader is willing to expend to find an ebook to read, and the most common sorting method that readers use is to scan cover images, pausing only on those ebooks whose cover has caught their eye.

And Then There Was One: Barnes & Noble’s Lack of Customer Service

For a long time I have advocated buying ebooks from Barnes & Noble. Not because B&N was the cheapest or had the very largest selection (although I admit that I consider the argument that Amazon has more titles than B&N to be a specious one; after all, does it truly matter that one has 1.3 million titles and the other has 1.1 million titles, as long as the store where I shop has the title I want to buy? How likely is it that I will read even 10% of the available titles — or, more importantly, even have an interest in 90% of the titles that make up those numbers?), but because I do not want to see a retail ebook world that is essentially Amazon only.

Alas, B&N seems to be doing its darndest to give the ebook world to Amazon on a silver platter.

In recent weeks, I was given a Nook Tablet as a gift. It is an excellent device and works smoothly with the B&N ebookstore. I think B&N’s hardware is excellent and even many of the critics rate the B&N devices as the better devices.

Between the Amazon and B&N ebookstores, I prefer the layout of the B&N store. Whenever I visit the Amazon store, I feel like I am being assaulted by an infomercial for some unneeded and undesired product that shows at 2 a.m. on local TV. I know that Amazoners praise the one-click buying system at Amazon, but I don’t find the two-click system at B&N overtaxing.

The bottom line is that I think B&N has a lot going for it, yet it is handing over to Amazon a little bit more of the ebook world daily. B&N has a significant flaw, one that it appears unwilling to address, or perhaps it is simply unable to address. That flaw is customer service.

As I reported in an earlier post (see The Tablet and Me: The Nook Tablet), the impetus for giving me the Nook Tablet was the deal combining a New York Times subscription with a discounted Tablet. Those of us who read the Times know that it is a morning newspaper — it is meant to be read at the start of the day, not at the end. When I had the print subscription, the paper was usually delivered by 4 a.m. and no later than 5:30 a.m., allowing me to read the Times at breakfast (I am an early riser). This delivery schedule was met day after day, year after year, the exceptions generally being when Mother Nature intervened and prevented timely delivery. If the Times was not delivered on time, a quick telephone call resulted in a credit to my account. No-hassle customer service.

What I get now from B&N is the electronic version — bits and bytes sent over the Internet — that is, when I get it. Some days it arrives by 5:30 a.m., but never earlier; some days it arrives by noon or later; some days, it doesn’t arrive in a timely way at all. So when it doesn’t arrive by 5:30 a.m., which is already late as far as I am concerned, what can I do? Turns out: nothing.

You can’t contact B&N customer service because it isn’t open; it has banker’s hours. When it does open and you do get someone, as helpful as the initial reps may want to be, they are hamstrung by B&N policies, at least as communicated by the customer service representatives.

On one occasion, when the Times hadn’t arrived by noon, I called and asked for a credit. The customer service rep tried to give me one but couldn’t, and so very politely passed me to a supervisor. At first, the supervisor told me I’d have to take the matter up with the Times. I replied that it was B&N that sold me the Times, it is B&N that I pay every month for the subscription, and it is B&N that delivers the Times to me, so why would I contact the Times?

The supervisor then told me that it was my problem, not B&N’s; that B&N doesn’t give refunds even when it doesn’t deliver the purchased item; that there would be no credit of any kind; and I “had to eat it.” I suggested that not only was this theft, but more importantly to B&N, it was giving paying customers another reason to abandon B&N for its arch-rival Amazon.

I understand that we are not talking a lot of money — about 40¢ — but it is the idea that B&N simply doesn’t care that matters (and I’d be less concerned if this happened once rather than several times over the course of a few weeks). After the incident, B&N sent me a satisfaction survey. I wrote of my dissatisfaction and even gave my telephone number so B&N could followup. I’m still waiting for that followup. In my business, if I get a hint of dissatisfaction, I’m on the telephone trying to do damage control. It doesn’t always work, but I try. B&N seems impervious to the idea of customer satisfaction.

(This disinterest in customer satisfaction goes back to the beginning of B&N’s latest foray into ebooks. You may remember my complaints about how B&N treated its club members when it introduced the original Nook. B&N refused to give members the 10% discount on the Nook, claiming that, even at $250 per Nook, it was losing money. Not long thereafter, the price dropped to $150 before going even lower. I had wanted to buy two Nooks and ended up buying none.)

Is Amazon better? I only know what I read and what I read is that had I had the same problem with Amazon, something would have been done. I also suspect that Amazon would deliver the newspaper on time. But it really begs the question to ask if Amazon’s customer service is better — it can’t be worse! And this is what B&N doesn’t seem to understand. Customers will put up with a lot if they think they are being fairly treated; if they think they are not being fairly treated, they will put up with little to nothing — and will let others know of their dissatisfaction.

The point is that it is these little slights to customers that build into major frustrations, and it is these little things that should be taken care of immediately. You are better off putting out the fire while it is still in the BBQ than waiting for it to ignite the forest — a lesson that B&N sorely needs to learn.

I am happy with my Nook Tablet; I really cannot say enough good things about the device to express my pleasure with it (I like it so much that it has been a month since I last used my Sony 950). I enjoy shopping at B&N’s ebookstore (although I dread what customer service I will get should I buy the wrong ebook or an ebook that is missing material). I especially like that I can automatically download ebook purchases to my Nook Tablet, as well as download those purchases to my desktop computer for storage (and that it is easy to strip the DRM from B&N ebooks so they can also be read on my Sony 505 or 950). All of this is to the positive.

Yet the problems with customer service, the limited hours of operation, and the attitude that the customer is to blame is irritating. I’m gradually getting closer to leaving B&N in the dust; each time I call customer service and am told I need to “deal with it,” and am displayed B&N’s indifference to customer satisfaction, I get closer to saying “Enough already!” What holds me back is my unwillingness to give the ebook market over to a single gorilla ebookstore. But what I want may be of no matter as B&N seems to be working diligently to turn another customer into an ex-customer.

Ultimately, whether B&N survives the ebook wars will rest on its customer service. So far, it is losing.

Should Editors Certify That an eBook has Been Edited?

I’ve been toying with this idea for some time now. I haven’t gotten very far with it because of resistance from editorial colleagues, but I’m wondering if professional editors should certify that a book has been professionally edited as a way to assure the author’s customers that the book was edited?

I know it is impossible to certify an ebook as error-free, especially as editorial decisions are rarely black or white, instead often being shades of gray. Besides, it is the rare book — e or p — that I have bought or read that doesn’t have at least a few errors. The idea is to minimize the number of indisputable errors and to help move a manuscript from the kitchen sink to a more sharply focused story. More importantly, the idea is to encourage authors to make use of professional editors by giving them something of tangible value, something they can use to help sell their ebooks.

There are some gaping problems with the implementation of such an idea. For example, what good is the certification if there is no “penalty” for not meeting the standard? What standards does an editor need to meet to grant the certification? Who will decide whether certification is appropriate? What happens if the author makes changes on his or her own after the ebook has been certified? Who will promote the value of the certification to the reading public? Can the author demand that an ebook be certified if the author rejects the editor’s suggestions? What fee schedule is reasonable for a certification process? And the list goes on…

In reality, few of the problems cannot be overcome, except that manuscripts are not like manufactured goods that are churned out by the thousands in identical form so that there is a single standard that is easily defined. Certification of ebooks requires more individualization than do mass-produced goods.

Yet I suspect that reasonable criteria can be established if what is sought is a uniform standard. I am not, however, convinced that a uniform standard that a manuscript must meet is required; rather, I think the standard needs to be more focused on what constitutes professional editing (as opposed to editing by anyone who claims to be an editor) and what certification means, as well as how the standards are enforced.

This raises the bottom-line problem of identifying a professional editor. I’ve discussed this before and, although I can say that a professional editor has certain characteristics, I cannot say that a lack of one or more of these characteristics makes for a nonprofessional editor. Our industry is too hazy for such clarity — at least as currently configured.

What is needed is a national standards organization for editors. I know I’ve suggested this before, too. Unfortunately, such an organization is unlikely to come about; too few independent editors would be willing to create such an organization and abide by its standards.

So, instead, why can’t individual editors offer their own certification? It is an author’s responsibility to find a professional editor and have their work edited. There is little reason why such an editor couldn’t issue a “seal of good editing” to an ebook that indicates to the consumer that the proffered ebook has been professionally edited so the reader will find few of the errors that plague too many ebooks, such as you’re for your, where for were, and a character with blue eyes and blond hair on page 10 but green eyes and light brown hair on page 55.

Ultimately, the question for the consumer is, “How can I be certain that the ebook really was professionally edited?” The answer is another question: What does the editor “pay” to the consumer should the consumer find a goodly number of these errors? (Which raises another issue: How many errors are acceptable?) Should it be a refund of the purchase price? Twice the purchase price? Some other multiple of the purchase price? Something else?

A lot of matters would have to be addressed when setting up a certification scheme, but it seems to me that it may well be worthwhile for editors, authors, and consumers. For editors, it could be a way to stand out from the crowd and gain more business. For authors, it could be a marketing tool that sets their ebooks apart from the crowd of ebooks. For consumers, it would provide a method for weeding out some ebooks.

Cost is a difficult issue, but one that needs tackling upfront. In exchange for the certification, the editor should be paid a premium fee for the editing work. Yet authors have no assurance that certification will boost sales sufficiently to justify paying a premium, let alone hiring an editor to begin with.

Unfortunately, each day sees hundreds more ebooks become available, all fighting to capture the imagination of the same limited audience. In the absence of quality assurances, how does one ebook get distinguished from the myriad other available ebooks such that it entices consumers to give it a second look? Price is one answer, but price alone has not proven to be a sufficient answer.

Perhaps the combination of price and quality assurance will do the trick. It certainly can’t hurt to try.