Thinking about eBooks!! What kind of pricing strategies are being followed for eBooks? Everyone is converting their backlists and new work into eBooks. But the challenge is – How to price your eBook aptly? eBooks sales is developing in terms of trends and stats and have surpassed the sales of print books on amazon.com. But still Authors and publishers find it challenging to find a right price for their eBook. Lets try to figure out the right pricing policy for our eBooks!!

If we compare eBooks with Print books, their cost of production is much lower than print production. eBooks require no printing and warehousing. There is no cost of paper also. Consumer also understands the difference and expects eBook prices to be much lower than printed books. But eBooks like  print books involve author royalties, cost of editing, typesetting, formatting and marketing. Some people charge the same price for eBooks as they charge for paperback. Is that  a right strategy?

Publishers may base their pricing on fixed cost involved like salaries, rent , marketing cost etc. These cost don’t vary with the number of books produced, whether one or million. eBook production involves a one time cost only and is economical. Optimal eBook pricing should be based on marginal costing.  Since producing and delivering an eBook doesn’t involve a big cost, so the marginal cost of producing another copy of eBook is negligible. This basic microeconomic principle advocates that eBooks should be cheaper. There are lots of evidences that price mean a lot for eBook readers. As The New York Times once reported, most of the books on the Kindle bestseller list are being given away for free!!

The prominent eBook pricing models are: –

1. Competition Based pricing:- Here publisher can perform a market and price research and can find out what is the price of the competition and can set the price accordingly.  If the content is new and fresh, it can be priced higher than the competition. But sometimes the publishers under price their books as compared to competition hoping more sales. But in my opinion it actually devaluates the book and readers perceive the content to be of lesser value.

• Market Penetration: – Here the Publisher plays with the volume by charging a low price for the eBook as compared to the competition. So one can expect a higher sales and hence generate as many as possible new readers, and can make a good revenue.
• Market skimming: – It involves selling the eBook at a high price, sacrificing the high sales to gain high profit at the cost of less number of customers. The high price must be justifiable and the content must of that value or your eBook must have some exceptional features like the ones in an Enhanced eBook.

2.  The Kindle pricing model:- One can earn a phenomenal royalty of 70% if the author self publishes the book through Kindle, provided he prices the eBook between $2.99 to $9.99. For any price outside this range, Amazon pays only 35%. Apple pays 70% regardless of the price. But all eBook retail price has to be same on all the eBookstores. This means that you can’t set your retail price at $14.99 for the iBookstore and $2.99 for Amazon.

The table below shows the royality paid by different eBookstores to the author based the list price of the eBook.

Finally, I would say that success of any product depends upon a number of factors, price being one of the crucial ones. Before pricing an eBook, one should consider a number of factors like length and  content of the book, interactivity offered by the book, Bookseller’s margin , competition pricing, popularity of the author and should indulge in research accordingly. According to Mark Coker , CEO of Smashwords , “There’s not a single secret magic price point that’s most effective for ebooks.  Some authors fixate on price alone, but it’s important to consider price as only one of several factors that influence a reader’s purchase decision.  We have many free ebooks that earn few downloads, and many priced books that get more paid downloads than some of the freebies.  In the end, if a book doesn’t honor the reader with a great read, you can’t pay a reader to read it.”

The recent announcement by The US Justice department and The European Commission regarding an antitrust proceedings to investigate any type of improper collusion by Apple Inc. and Publishers, may bring lots of surprises to  the eBook world.