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4/1 Price Breakdown on 480,238 Kindle Store eBook Titles: The Agency Model is Here, And Not Much Has Changed … Yet

It’s April 1, April Fool’s Day, and Day One of Steve Jobs’ grand “Agency Model” experiment to transform the book industry by raising ebooks prices 30 to 50 per cent.

Do you know where your Kindle Store prices are?

We do, and there may be a few surprised faces when we share what we have. Long story short: Prices are pretty much the same as they were a few weeks ago, but there have been tiny declines in the percentage of books at the price points to which Apple, the Apple 5 publishers, and the agency model were supposedly driving ebook prices:

  • the percentage of Kindle Store books priced from $10 to $12.99 has fallen from 1.25% to 1.24%
  • the percentage of Kindle Store books priced from $13 to 14.99 has fallen from 2.96% to 2.95%
  • the percentage of Kindle Store books priced at $15 and up has fallen from 19.31% to 18.64%

Meanwhile, (almost) everybody’s favorite tech critic, the New York Times’ David Pogue, has this to say about the iPad as an ebook reader:

There’s an e-book reader app, but it’s not going to rescue the newspaper and book industries (sorry, media pundits). The selection is puny (60,000 titles for now). You can’t read well in direct sunlight. At 1.5 pounds, the iPad gets heavy in your hand after awhile (the Kindle is 10 ounces). And you can’t read books from the Apple bookstore on any other machine — not even a Mac or iPhone. 


Here’s a price breakdown of the 480,238 book titles in the Kindle Store as of 6 a.m. EDT on April 1, 2010:

Here’s where we stood with about 463,000 Kindle Store titles on March 10:

  • 20,125 Kindle Books Priced “Free” (4.34%)
  • 2,588 Titles Priced from a Penny to 98 Cents (0.56%)
  • 39,095 Kindle Books Priced at 99 Cents (8.44%)
  • 64,105 Kindle Books Priced from $1 to $2.99 (13.84%)
  • 90,580 Kindle Books Priced from $3 to $4.99 (19.55%)
  • 84,055 Titles Priced from $5 to $9.98 (18.15%)
  • 53,697 Titles Priced at $9.99 (11.56%)
  • 5,793 Titles Priced from $10 to $12.99 (1.25%)
  • 13,731 Titles Priced from $13 to $14.99 (2.96%)
  • 89,448 Titles Priced at $15 and Up (19.31%)

And were’s where we stood with about 447,000 Kindle Store titles on February 25:

  • 19,795 Kindle Books Priced “Free” (4.42%) 
  • 3,023 Titles Priced from a Penny to 98 Cents (0.67%) 
  • 36,370 Kindle Books Priced at 99 Cents (8.12%) 
  • 62,275 Kindle Books Priced from $1 to $2.99 (13.9%) 
  • 87,722 Kindle Books Priced from $3 to $4.99 (19.58%) 
  • 81,230 Titles Priced from $5 to $9.98 (18.13%) 
  • 55,269 Titles Priced at $9.99 (12.34%) 
  • 5,139 Titles Priced from $10 to $12.99 (1.15%) 
  • 9,331 Titles Priced from $13 to $14.99 (2.08%) 
  • 87,771 Titles Priced at $15 and Up (19.59%)

How Should Independent Authors and Publishers Price eBooks?

Just a brief but, I hope, worthwhile follow-up my post earlier today about ebooks from the author’s perspective….

In Friday night’s conversation, and in an increasing number of other forums and conversations, I find that I am being asked for advice about how to price books in the Kindle Store. I generally share my thoughts on this topic quite freely, which is probably a good indicator of what they are worth, as advice.

But here are a few general observations.

Authors deserve to be paid well for their work, but it is a big mistake to equate the price that is set for that work blindly or simplistically with an author’s compensation. Instead, an author’s compensation is based on the following formula:

A x B x C
A=the book’s price (usually but not always the suggested retail list price), 
B=the royalty percentage paid to the author (as opposed to “to the publisher” on the book, and 
C=the number of copies sold.

I realize that many or most of us are English majors, but that really shouldn’t keep us from absorbing and understanding this formula and its significance.

In a highly discretionary market such as the ebook market, where consumers are showing signs of being increasingly savvy and price-conscious, pricing a book too high will impede its sales. Indeed, as a number of authors including J.A. Konrath have pointed out, price sensitivity in the Kindle Store is intense. Konrath and other authors, including my co-panelists on Friday evening’s BookChatter podcast, have been finding out pretty consistently that the lower they set the prices for their books, down to the current Kindle Store floor of 99 cents for most titles, the more money they end up with via the AxBxC formula noted above.

To illustrate the concept, let’s take a hypothetical, fairly popular book with the title The Value of Nothing. It doesn’t matter whether it is a Buddhist spiritual tome, an inquiry into the price elasticity of demand, or a steamy erotic novel. (I made up the title, but of course I found afterward that there are two other books out there now with the same title, so apologies to Raj Patel and Julian Roche). Assuming that the book gets sufficient marketing attention and that there are no special forces at play such as pent up demand or early-adopter frenzy or the kind of impatience premium that is activated, say, with some bestselling sequels, my experience and observations say that the price that is set for the same book will have a dramatic effect on sales and ultimate author receipts along lines like these over, say, the course of a month:

Price    Units Sold    Author Receipts
$14.99    60               $314.79
$12.99    90               $409.19
$9.99    150               $524.48
$6.99    300               $733.95
$4.99    600             $1,047.90
$2.99    1500            $1,569.75
$1.99    3000            $2,089.50
$0.99    7500            $2,598.75
$0.00    30000               $0.00

So, no promises that it will be replicated in any other author’s experience, but I just think it is important to share this rough model that I have seen work again and again. And I am sharing it in spite of the fact that I would rather, personally, see most author and publishers price Kindle books generally at $2.99 and up.

I’m sure there are plenty of other reasons why an author or publisher might wish to charge more for a book, and I am not going to extend this post unduly by trying to evaluate them. If you are concerned about saturating your market at too low a price, one thing that makes the Kindle Store — and the aggregate of all ebook venues — stand out right now is the rate at which the “installed base” of Kindles is growing. Even if an author has sold 50,000 copies of a Kindle book up to now, there are still 3 million other Kindle owners who have not bought that book yet, and that base is expected to grow by an average of a quarter of a million new Kindles a month this year, even before we count iPads, BlackBerry phones, and all the other devices that will be able to read Kindle books or other ebook formats.

One thing to keep in mind is that Amazon has promised that by June 30 it will double its Kindle royalties from 35 percent to 70 percent for authors and publishers who price their Kindle editions anywhere from $2.99 to $9.99 and participate in other Kindle feature offerings such as the text-to-speech offering. That’s a powerful lure: it would mean a per-unit royalty increase from 35 cents (on a 99-cent offering) to $1.99 (on a $2.99 offering). It could well be that, when this new royalty structure kicks in, Amazon will succeed as herding all the “cats” who currently have Kindle books priced from 99 cents up to $2.98 into the $2.99-$9.99 corral.

Why is Wiley Trying to Suffocate Kindle Sales of "No One Would Listen"?

By Stephen Windwalker
Originally posted March 5, 2010 – © Kindle Nation Daily 2010

John Wiley & Sons is not owned by any of the Apple Five or Big Six publishers. It is not owned by some global corporation based in Germany. It’s a very successful publicly traded US publishing company that has been around for over two hundred years and is based in humble Hoboken. Wiley is known primarily as a publisher of academic, business, and technical books, many of which have traditionally brought prices that are higher than the usual trade book prices for bestselling hardcovers or new releases generally whether in hardcover or paperback. Many of these titles sell briskly, but it is fairly uncommon for a Wiley title to crack the top 100 titles in the Amazon sales rankings.

But now Wiley has a tiger by the tail in Harry Markopolos’ new book No One Would Listen: A True Financial Thriller, the story of the whistle-blower who five times delivered the goods to the SEC on Bernard Madoff in an unsuccessful effort to get the regulators to shut down the $50 billion plus Ponzi scheme. The book is likely to sit high on the financial besteller lists for months, and just three days after its release it is currently sitting at #31 on the overall Amazon bestseller list. Amazon is discounting the hardcover by a pretty standard rate of 42% from $27.95 to $16.34, and the result of the discount and the fact that Wiley has brought out a timely, well-told true story is that the publisher probably has its most successful book of 2010.

But the Kindle edition is not doing anywhere near as well. It’s sitting right now at #156 in the Kindle Store. Why?

It’s pretty simple. Wiley is apparently marching in step with other big publishers by setting the book’s Kindle list price at $27.95. For the first couple of days after it was released the actual Kindle price was $13.83, which made it one of the most expensive new releases in the Kindle Store and dramatically chilled initial sales that might help to create buzz for a new release. But apparently that $13.83 price wasn’t high enough, because as of this morning the actual “discounted” Kindle price has been raised 88 cents to $14.71. The book is being highlighted as “New and Noteworthy” in prime Kindle Store real estate, but, well, Kindle owners are very resistant to being charged hardcover prices for a license to read an ebook.

You would think, at Wiley, there would be a few executives sitting around who had read enough of Wiley’s own books that they would understand the economic laws of price elasticity and demand.

But without getting too academic or theoretical here ourselves, three things seems relatively clear:

  1. If the Kindle edition of No One Would Listen: A True Financial Thriller were priced at $9.99, it would be selling more than twice as many Kindle copies as it is selling at the current price of $14.71.
  2. Rather than cannibalizing sales of the hardcover edition, the Kindle edition sales would actually fuel strong hardcover sales by creating more buzz and a higher overall position on various Amazon bestseller lists.
  3. Markopolos, who never received anything but stress for his efforts to blow the whistle on Madoff, would be doing far better with regard to royalties if Wiley weren’t trying so hard to suppress sales of the Kindle edition of his book.

About eBook Prices and Author Royalties: Price Elasticity and the Demand for Books

By Stephen Windwalker
Originally posted March 2, 2010 – © Kindle Nation Daily 2010

Chris B, a reader from the Dallas area, got right to the heart of one of the challenges of thinking about the effects of the ebook pricing controversy on authors in this comment left yesterday on my post The Math of Publishing a Book in Print or Electronic Format:

When you put the “author royalties” of the 9.99 version as 2.50, realize that few authors ever make more than a few thousand dollars on a book. A $3 difference in sale price is not going to decide whether a book hits the NYT bestseller list (and makes some real money), but it might make a difference in feeding the author’s kids for another month.

I don’t want to see Kindle books go up in price, but we have to be realistic about it. We’ve always known Amazon was selling books at an artificially low price to do that.

Believe me, I do not want any authors’ kids, including my own, to miss their three squares a day. In fact, I think it’s important to save some authors from themselves here. While Motoko Rich’s New York Times piece and my post drill down on the pricing and costs of an individual book as they might play out for a hardcover print run of 15,000 copies, it’s impossible to think intelligently about the effects of these economics on an author without serious contemplation of the number of copies sold.

So, fair warning:

 Discussion of Price Elasticity Ahead

The economic law of demand states basically that “if the price of a product increases, the quantity demanded decreases, while if price of the product decreases, its quantity demanded increases.” This price elasticity of demand is most pronounced when it is accompanied by three conditions:

  • the product represents a discretionary purchase rather than a necessity;
  • the product is one out of many choices available to consumers to meet a particular interest or want; and 
  • the product is available to consumers without much marketplace friction, i.e., it can be purchased without significant outlay of travel, shipping, time, or other accompanying expenditure.

With millions of titles available in multiple formats, it is obvious that books meet these conditions about as well as any type of product, for most consumers. And all marketplace friction vanishes completely once a consumer has access to ebooks either through ownership of a Kindle or competitor’s ebook reader or by being able to run a Kindle App on a PC, BlackBerry, iPhone, iPod Touch, or other device.

The result is that readers pay close attention to what they have to pay for books. Many wait for paperback availability of their favorite authors’ titles rather than pay a premium for the opportunity to read those books in hardcover a few months earlier. For those trade paperback copies, the author’s royalty is usually little more than a dollar per copy, far less than half of the average hardcover royalty of $3.90 referenced in the Motoko Rich piece. So that’s one form of price elasticity of demand.

Another kind of price elasticity of demand comes into play where ebook prices are concerned.

The recent Winter 2010 Kindle Nation Citizen Survey showed evidence that Kindle owners have become more price-conscious as a result of the recent ebook pricing controversy and are very resistant to paying more than $9.99 for an ebook: 75 percent of the 1,892 respondents identified with the statement that “I’ll pay over $9.99, but only rarely when I simply must have an ebook.”

As of this morning there are 102,160 titles priced at $10 and up in the U.S. Kindle Store, or about 22 percent of the overall total of 451,317 ebooks in the store. None of those $10-and-up titles are currently ranked among the top 40 Kindle bestsellers, and only four are ranked between 41 and 100. 13 of the top 100 are priced at $9.99.

So, if an author’s royalty is $2.50 for a Kindle book priced at $9.99, and $3.25 for a Kindle book priced at $12.99, let’s do the math. If the book sells 30 percent more copies when priced at $9.99 than it sells when priced at $12.99, the author’s royalties are at break-even and her readership — people might buy her other books — is significantly larger. Indeed, from what I have seen, the sales differential is probably more like 50 to 100 percent, and some of the most successful Kindle authors are making far more than the “few thousand dollars” referenced in Chris’ comment by pricing their books below $9.99.

Of course, the same percentages and competitive-pricing benefits that are available to authors ought to apply to publishers, were it not for the likelihood — evident from the industry sources quoted in Rich’s article and in numerous comments by publishing insiders throughout the recent ebook pricing controversy — that publishers are trying to reverse the Kindle Revolution. As publishing consultant Mike Shatzkin told Rich: “The simplest way to slow down e-books is not to make them too cheap.”

If that’s the case, it also seems likely that an increasing number of those midlist authors — those of us who have to pay close attention to “feeding [our] kids for another month” — will be forced to consider another offer that Amazon has put on the table for us: the possibility of receiving direct royalties of 70% by going “around” the publisher and dealing directly with the Kindle platform for ebooks priced between $2.99 and $9.99.