Entries tagged with “consumers” from Tools of Change for Publishing
Inside Look at RAND's $9.95 Ebook Pricing Strategy
John Warren
June 9, 2009
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Recently, the RAND Corporation announced that it has revised the suggested retail pricing on all RAND ebooks to $9.95 each. RAND ebooks are available through a wide variety of wholesale and retail partners.
The press release provided some explanation for the decision, also discussed in Publishers Weekly. I have been asked by Tools of Change to provide some additional insight into our ebook pricing strategy.
There were several things that went into our thinking on, as one of my colleagues appropriately called it, this "new math." Some of these factors will generally not apply to other publishers, though I do believe some factors should, and eventually will, affect other publishers' pricing strategies as well.
- First of all, and this is important, RAND is not a traditional publisher. RAND is a nonprofit institution that helps improve policy and decision making through research and analysis. RAND research, which spans a broad base of subjects and is funded through hundreds of resources, is dedicated to serving the public interest. RAND's focus is on conducting objective, high-quality research, and every publication endures a rigorous review processes. These exacting standards are the foundation of RAND's impeccable reputation throughout the world. No consideration is made on whether a particular topic or book might be a good title for sales -- the emphasis is on quality of the research. In addition, RAND's revenue comes primarily from its research and philanthropic support, not from the sales of books and ebooks.
- Going along with the first point, a crucial component of RAND's mission is operating in the public interest. This was written into the our charter, in 1948: "To further and promote scientific, educational, and charitable purposes, all for the public welfare and security of the United States of America." This is one of the reasons why we post all of our publicly available books and reports online for free PDF download; we had ~4.3 million PDF downloads from our site last year. Dissemination is more important than sales. (I do believe there is a compelling argument, supported by many, that free electronic dissemination helps drive sales, instead of cannibalizing sales.) We have posted all new titles since 1998 on our Web site, and sales of book sales have still increased during that period.
- Book sales help support the marketing and publishing program, but the main consideration, as a nonprofit, is to break even, not recoup a huge profit. Book sales need to recoup the costs of printing, distribution, marketing, etc., and with ebooks, conversion costs.
- Previously, we had been pricing ebooks at the price of the printed book, which in our case is nearly always paperback; we publish few hardcovers. This seems to be the most common model for publishers, price the ebook at the print price. RAND prints nearly everything print on demand (POD), and sells the majority of our print titles through our distributor, NBN, so the price of the print book factors in POD and distribution costs. POD cost rises when the book is longer in length and/or has color charts or graphs. Thus one book may be priced at $44 because of color charts, another may be $25 because it is shorter in length and entirely black and white. These factors have nothing to do with an ebook, however. Ebooks are agnostic as to length (except as the length may affect the costs of editing) and color charts and graphs have no bearing compared to black and white in terms of ebook costs.
- We have no manufacturing, distribution, or warehouse costs with ebooks, nor do we have to deal with returns, so the back end is much cleaner.
- I believe firmly that customers have an expectation, which is only likely to grow, that ebooks should cost less than printed books. I believe this is being reinforced, but not driven by, Amazon's decision to make many Kindle ebooks $9.95, even when they must pay the publisher more. I don't believe they pulled that number out of thin air, though that is possible. At $9.95, RAND hopes to make up in volume what it may lose in profits from a higher price on each ebook.
- Library funding is tight. Increasingly, libraries want to buy ebooks on demand, when a patron asks for it, not before. Jobbers and wholesalers are now entering into relationships with ebook distributors to aggregate ebook purchases, and the library market is a key market for us to reach. Libraries may balk at $35 for a printed book, or lack the shelf space to store it, but they can afford and store a $9.95 ebook.
- Since we post PDFs for free download, two reasons we are able to sell ebooks on other sites such as Amazon.com, Books 24x7, EBL/ebooks.com, ebrary, Ingram Digital/ MyiLibrary, netLibrary and Questia, and soon Sony and Overdrive, is from a convenience standpoint (customer has a particular device and wants it seamlessly integrated, or a library subscribes to an ebook service and makes all titles available to their patrons) and/or ignorance (the customer may not be aware that we post PDFs for free). I don't want to bank on customer ignorance, but the convenience factor can hold up over time.
These are the main factors influencing our decision making on this new ebook strategy. It will be interesting to see if others follow.
John Warren is marketing director, publications, at the RAND Corporation. He contributes to the Publishing Frontier blog. He was recently selected as the winner of the International Award for Excellence in the development of the book for his paper, "Innovation and the Future of ebooks," which is available for free download on the RAND Web site.
One-Question Interview at BookNet Canada Tech Forum
Andrew Savikas
March 19, 2009
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Last week I had the pleasure of speaking at the 2009 BookNet Canada Technology Forum in Toronto (motto: Even colder than you expected!), and Mark Bertils caught up with me on my way out for a quick video interview:
Two follow ups on what I said, now that I have my del.icio.us feed handy:
- The Peter Drucker reference is from his 5 Deadly Business Sins: "Cost-driven Pricing. The only thing that works is price-driven costing. The only sound way to price is to start out with what the market is willing to pay--and thus what the competition will charge--and design to that price specification."
- It was Mike Shatzkin (referencing Michael Cader) who made the recent point about the relative low cost of experimentation for publishers around pricing digital products: "You can't get rich or go broke whether you price the ebook 50% too high or 50% too low. Try everything. You'll never have a cheaper opportunity to experiment."
Expectation of Fair Pricing, Not Free
Peter Brantley
February 23, 2009
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At Dear Author, a post stating that not all content should be expected to be free; rather it must be provided, free or not, in a realistic understanding of consumer needs and expectations, which might mean changing the way you do business.
What content providers must realize is that a changing business model wherein revenues are no longer captured in the same way does not mean that content is not without value or that people will not pay, in some way, to use that content. I think many people recognize that in order to have worthwhile content, we must pay in some way for it. Consumers have reduced the value of the album, but have not determined that music itself is without value. Consumers might believe that digital books have reduced cost given the costs of production, distribution and warehousing; but it is not our belief that books are without value altogether or that all books must be provided for free. I think what consumers are looking for is a fair trade. Content creators provide the best content they possibly can and for a fair price allow the consumers to utilize it in the way that it fits into their lives.
10 Things Ebook Merchants Should Offer
Peter Brantley
September 29, 2008
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Jane at Dear Author has a wonderful list of 10 things ebook merchants should be providing as a matter of course. Here's just one example, but read the whole list:
Buy a for a friend. The only site that offers this feature is Fictionwise. Amazon does not even offer this for Kindle which makes no sense. When a reader wants to buy a book for a friend, she wants to buy a specific book. She doesn't want to send a generic gift certificate and hope her friend uses it for said book.
TOC Recommended Reading
Mac Slocum
August 28, 2008
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Transforming American Newspapers (Part 1) (Vin Crosby, Digital Deliverance)
Contrary to myopia of many newspaper executives, advertisers aren't newspapers' primary customers. Although advertising revenues may be sunshine for newspaper executives, the roots of their business are readers. A newspaper with readers will attract advertisers but a newspaper without readers will not. Readers ultimately support and sustain the newspaper business.
(Via E-Media Tidbits)
The Customer is Always Wrong (Richard Nash, Ecstatic Days)
... there is a real tendency in our business to treat the customer as this perverse, mysterious, gullible, arrogant, narrow-minded, slightly thick, imperceptive lug. We largely talk down to him, dumb down for her, expect the least, fear the worst, and generally leave it up to the retailer to figure out how to reach him or her -- we'll get the book onto their shelves, we'll pay them some payola, and then it's their problem. Of course it's not, and not just because we're in the only business where 100% of the product can be returned for full credit. It's because fundamentally a publisher's job is to connect the writer to the reader. Not the book to the retailer, but the writer to the reader. (Via Jose Alonso Furtado's Twitter stream)
On Writing For "Free" (John Scalzi, Whatever)
... the point to make, again, is that "free to the reader" is not the same as "unpaid to the writer." I have gotten paid for the fiction I've put online. I do get paid for it. And, barring a sudden windfall of cash that obviates the need of me having to worry about money ever again, I will continue to make sure I get paid for it. And naturally I encourage other writers to make sure their own economic interests are served when they have stuff put online that is free for readers to view.
(Via TechDirt)
A Broad View of Amazon's Influence
Mac Slocum
August 8, 2008
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Neil Denny looks at Amazon's positive and negative influences on book publishing's constituencies. From The Bookseller:
The web, if not Amazon, can't be uninvented: retailers and publishers need to find ways to make it work for them or they will face an increasingly difficult future.
Content Owners and Consumers Need Digital Quid Pro Quo
Mac Slocum
May 28, 2008
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Recent comments from Jeff Gaspin, president and chief operating officer of NBC Universal Television Group, illustrate the one-step-forward / one-step-back mindset plaguing mainstream media organizations.
First, the step forward:
On-demand viewing is a key component of the increase in viewers, Gaspin asserted. "I believe the ability for consumers to sample content elsewhere, whether it's VOD [video on demand], DVD or [online] streaming, helps build a new fan base. So when hit shows come back, I believe more people come back than in prior seasons. That has all contributed to growth in cable."
Using VOD and other technologies to increase awareness and woo viewers to an established platform -- such as a TV show -- is a progressive perspective. Incorporation of VOD and online access also builds good will with consumers because it works with their usage patterns, rather them forcing them into specific programming at specific times.
But then there's the step back:
"I think it's [VOD] a smart offering for the [cable] operators and for us," Gaspin said. "But a couple of things have to happen: Fast-forward has to be disabled, we have to have dynamic ad insertion, and we have to have legitimate measurement of the viewership."
Flexible advertising and reliable measurement tools are reasonable requests, but disabling the fast-forward button contradicts the consumer-friendly perspective in the first quote (hence, "step back"). Granted, the same article containing the Gaspin quotes also notes a VOD pilot program that disabled fast-forward and was still well received among consumers, but the overall inconsistency in these messages is what's troubling. Gaspin seems to understand the value of consumer empowerment to an extent, but the old command-and-control mindset creeps back in when it comes to the details.
That said, the success of digital efforts -- whether it's video-on-demand, online access, or distribution of free ebooks -- does require concessions from content owners and consumers. But these concessions need to be marked by consistency. If a content owner, such as NBC, wants to use VOD to drive viewers back to its primary platform, then the VOD material should have all the functionality consumers have grown to expect (i.e. keep your paws off my remote ... and my computer ... and my e-reader). But in exchange for easy access and availability, consumers shouldn't be offended by in-episode advertising, visible sponsorship branding, or requests for demographic data (with opt-out options, of course). Ultimately, a reasonable amount of quid pro quo -- defined by consistency -- allows both sides to take advantage of digital platforms.
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