by Rebekah Hunt
According to Mark Coker, founder of Smashwords, the solution to the digital publishing issue is simple. “The day has come,” he says, “for publishers to offer a $4.00 book.” Has Mr. Coker lost his mind, or could this really be the future of ebook pricing? He goes on to elaborate, “Most books are too expensive. Compared to lower cost alternative media sources, books are becoming niche consumables like caviar. The high cost of books jeopardizes not only the future of books, but the future of the book publishing industry. Unless authors, publishers and booksellers cooperate to bring down the cost of books, book publishing faces a painful decline, much as we’re now witnessing with newspaper and magazine publishing.”
The low-cost book concept Coker proffers is not limited to what is good for publishers in the US market, however. “Here in the U.S.,” he explains, “most consumers already think twice before shelling out $7.50, $15.00 or $30.00 for a good read. If a book at the current prices represents a big purchase for citizens of the world’s most affluent economy, imagine the cost burden for the vast majority of the world’s literate people. The growth in worldwide literacy has created a massive affordability gap between those who want books, and those who can afford them. Therein lies both the threat and the opportunity facing publishers.”
There is precedent for the strategy as well, Coker says. “The publishing industry has successfully responded to the price issue in the past by releasing lower cost formats such as the mid-sized trade paperback and the small purse-sized mass-market paperback. Each lower cost format dropped the price 30-50 percent. By offering customers a cheaper, smaller and less expensive format, publishers expanded the available market for their books and enabled a larger number of readers to gain access to affordable reads. Imagine if books were only available in hard cover today. How many current readers would have long ago abandoned print books due to the high price and large size of hardcover? Ebooks are a lower cost format, and therefore may hold the key to the book industry’s salvation.”
But what about the danger that, by setting the price of ebooks too low, the publishing industry might suffer more than it benefits? “Many publishers view ebooks with a skeptical eye,” Coker says. “After all, won’t cheap ebooks cannibalize expensive print books? This is the wrong way to examine the situation. Lower cost ebooks help publishers retain customers who might otherwise abandon books altogether in favor of lower cost alternative media options. Ebooks also hold the promise to expand the worldwide market for books. Hundreds of millions of new middle class and literate consumers have come online outside the US, especially in developing countries.Ebooks offer significant economic advantages to authors and publishers as well. From a production perspective, publishers can convert print books into digital books at very little cost. Once a book is liberated as digital bits, the production, duplication and distribution of the book requires no ink, paper, fossil fuels, shipping boxes, physical bookstores or cash registers. The entire process becomes one of automated online self-serve transactions. Since it costs the author or publisher next to nil to ‘print’ each copy of an ebook, ebooks are extremely profitable on a per-unit basis, even at a low selling price.”
So, what would this type of pricing model really mean to the future of the market? According to Coker, “The advantages of ebook economics will become more apparent as ebooks grow to comprise a greater percentage of book industry sales. Some might fear that $4.00 books will eviscerate the earnings of mass-market authors and publishers. The likely outcome isn’t so simple. For the mass market, if publishers don’t quickly satisfy lower price points, they’ll continue losing customers. Customers who prefer ink on paper will continue purchasing more expensive formats. Not all books should be priced at $4.00. Publishers should segment their markets to ensure they’re delivering a range of products and formats that offer the target customer value that exceeds each price point.”
While the future of the publishing industry as we know it remains uncertain, this uncertainty is more the symptom of a massive evolution in the way books are distributed and consumed, rather than that of the industry’s inevitable collapse. “By offering consumers a low cost digital product,” Coker goes on to say, “the economics of ebooks create a virtuous, self-reinforcing cycle. The low price expands the available market by making it affordable to more consumers; low production and distribution expenses allow the publisher to earn a healthy margin; and the larger addressable market allows publishers to sell more units at greater profit margins.”
When Mr. Jovi accused Steve Jobs of “killing the music business,” whether demonstrating his age or his ignorance of the market, he meant that Mr. Jobs and the iTunes revolution had killed the business as he knew it. This is an important distinction, and one that the publishing industry would be wise to consider. Every few decades the traditional ways of distributing media undergo sweeping change and, despite the prophesies of doom, consumers and businesses have risen to the challenge and found innovative and exciting new ways to buy and sell the media they consume and produce. Yes, the publishing industry as we know it is marching into the tar pits along with the old record company dinosaurs, but it isn’t the end of the industry. It is an opportunity for the evolution and innovation that will allow us to rise to meet consumer expectations and succeed in the vital and rapidly expanding digital universe.