Reuters is reporting that Random House is getting into the ebook business with a pilot program offering downloadable books at $2.99 per chapter.
No, that isn’t a typo. $2.99 per chapter.
Not per book. Per chapter. WTF?
For a model that requires almost zero distribution costs and no printing costs. That would be $60 for a twenty chapter novel.
So here’s what I’m thinking:
1. There’s going to be a different scale for longer works, because $2.99 per chapter would be stupid in most cases. The pilot book is only six chapters, so that’s $18. Set aside the fact that this price point is stupid and unreasonable for now and let’s just assume that RH didn’t get the memo from iTunes that download versions of complete works should be a snorch cheaper than the physical artifact.
That’s the optimistic me.
2. Random House doesn’t believe that the download model is viable, but they need to demonstrate it definitively so they can turn their nose up at it. By setting a ludicrous price point, they’re insuring that the pilot will fail, then they can point to it’s dismal sales and say, “See? Nobody wants downloadable books.”
I’m trying not to read too much into this, because the article is too short to really tell us anything definitive. Random House has some history behind them, and they’ve had a successful business model for a long time, so I’m willing to give them the benefit of the doubt (for now) that this little tidbit isn’t telling us the full story (i.e., the bit that makes sense).
The economic reality, at least according to one survey, is that ebook users expect to pay less for digital text.
One surprising conclusion you found is that over half of people surveyed expected e-book prices to be $5 or less and 1 out of every 5 expected the price to be $2.50 or less. But most publishers are used to setting sticker prices (and profit margins) that are double that. What will publishers today need to do to adapt to this business model?
We believe that the Publishing Industry will very quickly discover that they’re blessed with ELASTICITY. That is, the lower the prices of e-books up to a point, the more net revenue they drive (thus the cannibalization effect on traditional book sales will be overcome). E-books may start around $10.00 each, but come down in the 2008-09 timeframe and approach $5.00.
With great resources for free books like Wowio and manybooks.net really starting to hit their stride, Random House and other traditional publishers are going to have to do better than $2.99 per chapter.
If they need a better model, and want to use their chapters as teasers to tempt readers into buying a physical product, they could do worse than to look at Baen’s Webscriptions. I’m not a huge fan of subscription services for digital text, either, but it’s better than what Random House appears to be offering here.
Of course, I’m giving away shit for free, so maybe I’m just going to be too hard to please.
Filed under: Blooks and Blognovel Analysis | Tagged: ebooks, lead balloons, Random House
Thanks for linking. (Btw, I’ll try to check out your other links + novel).
Random House’s strategy has been to maximize profit and then do heavy discounts later. Unfortunately, that idea (which works with print books and physical bookstores) doesn’t translate well to ebooks and online content. I expect ebook prices to settle at a fairly low price point (maybe $10) and then never be discounted.
That said, i can think of reasons why some kinds of books would command premium kind of prices. In the high tech industry, having access to latest information about technology improves your market value. And Random House is pretty good at picking authors who are likely to arouse strong interest. Like (ahem,) Ann Coulter.
Your point about some books commanding premium prices is dead on, and one I hadn’t considered. I know that in my office, we’d be thrilled to have downloadable, searchable tech books rather than the blocks of pulp currently sitting on our desks, and we wouldn’t care about the price point (largely because, you know, the department would be picking up the tab).
Come to think of it, O’Reilly is already doing this, and their price point isn’t what I would call low.
And given that I dropped $250 on one text last time I bought a college textbook, it isn’t like seemingly outrageous price points for highly specialized texts is something new.
Deep down, I’m pretty sure that the folks at Random House aren’t idiots. There has to be a great deal more to this program than the micro-article Reuters reported is telling us.
(And maybe it’s just me, but $10 for a non-specialized ebook *still* feels too high. I think we’d see more buy in and better distribution mechanisms at the $5 level. But as I’ve said previously on this blog, I don’t buy ebooks for casual reading…which is why I won’t charge for them, either.)
I think you’re right on the money. They’re running the test to show that they are on the “cutting edge” of ebook publishing, but in their hearts they really don’t want it to work.
Or, they are starting high with their pricing so that a few months later they can start “cutting prices” and make readers believe that they are getting a much better deal. On the flipside, if they start out low they don’t have as big of a profit margin.
Addition: to even further support your point, Robert, check out this link to O’Reilly’s pricing scheme for Core Java II.
http://safari.oreilly.com/9780137144488
They’re charging the same price for the print version as the PDF…and even selling both editions in a bundle.
Now, I’m not sure what I think about that model. It feels way too much like the RIAA’s stance on formats (i.e., you pay for the physical artifact & you should also pay for the mp3 encoding).
As a fiction writer, I understand clearly that digital rights and print rights are separate, but as a reader, I feel like I’m buying the *story* rather than a format. Charge me for the story, then give me all the formats I want for free. Again, Baen made the right choice here, in my opinion, when they started including promotional CD’s with digital text with their hardcover editions.
The other thing is that literary books can be around for a LONG time before I get around to them. I just finished a book I bought 15 years ago. Gosh, what were people using 15 years ago–Word Perfect?
Readers need to have some guarantee that this format wil be available for reading 20 years from now. Does that imply that there can never be proprietary formats? I don’t know.