Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.
At Digital Book World Conference + Expo next week, I will be on stage with Dan Lubart, senior vice president of sales analytics at HarperCollins and principal at Iobyte Solutions, the data provider for the Digital Book World Ebook Best-Seller list from which the insights below are derived. We’ll be sharing more insights on what’s happening right now with ebook pricing and ebook sales.
The average price of a top-25 ebook best-seller has plummeted in the past several months, dropping from a high of $11.37 in last Oct. to $8.23 this week (see chart below).
Since gaining control of the power to discount titles from some of the largest publishers, Amazon, Barnes & Noble and others have been dropping the prices of best-selling titles from $14.99 and $12.99 to points much lower — sometimes to below $5.
A good example is last week’s No. 1 best-selling ebook, Safe Haven by Nicholas Sparks (Hachette). It was discounted by its retailers to $3.99 on Dec. 20 after several graduated discounts throughout the fall that saw its price decrease from $9.99, the last price its publisher set. It had been priced at $12.99 when it was new in late 2010 and early 2011.
Another good example is the No. 7 best-selling ebook last week, The Forgotten by David Baldacci (Hachette). It was discounted last week to $9.20 after being priced at $11.04 for most of Dec. The last time its publisher set its price it was $12.99.
In the four-and-a-half months since we started tracking ebook best-sellers and their prices, there has been fairly wide fluctuation in the average price of a best-seller — more than $3 between the high and the low over that period. Because our list is only 25 titles long, a $0.99 book hitting the list or a higher-priced title dropping off can have a marked effect on the average. For instance, when the $29.99 Fifty Shades of Grey bundle dropped off the list in early Oct., the average price dropped nearly $1.
Despite the small sample size, the trend is clear: prices for the most popular ebooks are decreasing. And, no wonder, as publishers like Simon & Schuster and Hachette often publish most of the books found on our list and retailers have only recently gained the ability to discount their books. Other publishers were already being discounted by retailers and most self-published titles found on our list are at comparatively low prices. Even Macmillan, which did not settle with the Department of Justice over the matter of ebook price fixing, has signed new contracts with its retailers, allowing limited discounting.
Soon, Penguin and, if their merger is approved and consummated, Random House will join the ranks of publishers subject to ebook discounting, which will likely help lower the average price of an ebook on our list further.
In the next nine months or so, the year for the beginning of ebook discounting for HarperCollins, Hachette and Simon & Schuster will end. At that time, retailers will likely be scrambling to make sure that they haven’t broken the terms of their new agreements with publishers by losing money on their complete book of business with them (read: over-discounting). Which retailers will have the ability to continue discounting books at that time and by how much? Depending on the answer to that question, we may see ebook prices rise temporarily. Until then, it’s hard to predict that ebook prices will rise again any time soon.
At Digital Book World Conference + Expo next week, I will be on stage with Dan Lubart, senior vice president of sales analytics at HarperCollins and principal at Iobyte Solutions, the data provider for the Digital Book World Ebook Best-Seller list from which the insights above are derived. We’ll be sharing more insights on what’s happening right now with ebook pricing and ebook sales.
Any retailer who ends up scrambling to make sure they haven’t broken their agreements with publishers is doing wrong. Assuming that overdiscounting is a real possibility (which I don’t, but I know everyone in the publishing business has convinced themselves that Amazon is selling ebooks at loss) how is a publisher going to enforce this? Remember, the settlement doesn’t bind the retailers, it binds the publishers. The DoJ doesn’t care if Barnes & Nobles sells Hachette ebooks at a loss. For your scenario to come into play, the following elements have to be achieved:
1. The settling publisher has to negotiate a contract with a retailer that limits the total amount of discounting on that publishers entire line of ebooks to the difference between the total retail value of that business and the total amount paid by the retailer to the publisher.
2. The settling publisher has to negotiate a mechanism for getting that data from the retailer.
3. The settling publisher has to figure out how to validate and verify the data.
4. The settling publisher has to negotiate some sort of enforcement or penalty mechanism to enforce the provision.
Do you really think that all that happened? I think the chances of a settling publisher effectively implementing this provision is indistinguishable from zero. I think the settling publishers negotiated this into the settlement strictly as PR move. I’ve implemented data exchange systems between big corporations that want to work together and it’s not easy. When the entities hate each other, it’s essentially impossible.
Great points (as always), William.
So, I’ve thought about this. First off, I have some pretty good intel from sources familiar at the publishers that No. 1 is absolutely true. The limits are built into the new contracts (at least at some publishers).
From the same sources of knowledge, I have heard that Nos. 2, 3 and 4 are unclear. So, you’re right — in practice, it could happen that this “breaking even” stipulation in the settlement won’t take effect.
Further, consider this: Each individual publisher has incentive for their ebooks to be discounted the most. So, let’s say that Amazon runs out of room for the last month of the year (would be Nov.-Dec. based on when the new contract started) for discounting Hachette ebooks. Would Hachette want Amazon to cease discounting? No way. Hachette makes the same amount of money on each purchase, regardless of the price Amazon sets for the book. So, if Hachette could choose, it might choose to have all its titles priced at $0, to accelerate “sales”. That $0 scenario is extremely unlikely of course, but my point is that the publishers themselves have incentive NOT to enforce that stipulation in their contracts.
As a group, they would have incentive to enforce that stipulation, hewing to the idea that they want to preserve strong pricing for ebooks and a dynamic ebook marketplace — ie, they don’t want Amazon to discount Nook out of business.
Will individual publishers act against their own short term financial interests to do what they likely believe is good for the industry as a whole? Well, they did it when they had the chance to (allegedly) do it together (agency pricing with Apple in 2010).
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I believe people are reluctant to pay for what they don’t read, but feel OK to pay decently for what they do read.
The tailspin in book prices reflects the risk people take when buying a book. The risk that they may be paying for content they will never consume.
The solution is to give people free access to books, and ask them to pay just for what they actually read. It is doable. This is what we do at Total Boox.
The ‘buy first – read later’ model was essential in the world of printed books, and is harmful in the world of ebooks. The compelling decision should be what to read rather than what to buy, and this will cause the publishing indusrty to reorganize itself in a far more logical and efficient way.
Unfortunately, that price reduction isn’t reflected in sales to libraries — when the big publishers deign to sell to libraries at all.