In my previous blog post I ran a little informal survey of the Amazon's top 100 kindle ebooks. One of the things I noted was that 41 of the books on the list were priced at $3.00 or less.
It also lines up with what I've been seeing with my own purchase history for my Nook. I do have a tendency to buy a lot of books priced at $2.99 or less.
A writer friend pointed me in the direction of JA Konrath's blog, where he goes into extraordinary detail about pricing and publishing and royalty rates etc. One of the points he makes is royalty rates. The average royalty ebook rate from a publisher is 25% of net. So on a $12.99 ebook, the retailer will take 30% or roughly $3.90, leaving a net of $9.09 to the publisher. The author then makes 25% of that or $2.27. The agent then takes a 15% cut from that, leaving just $1.93 for the author. (All numbers are from Konrath. Well except the retailer 30%, that's public knowledge on the whole agency model.) On Amazon, a self-published author makes 35% if the book is less than $2.99 or 70% if it's priced at $2.99 higher. On Barnes and Noble, an author makes slightly less, just 65% at the $2.99 price point up to $9.99, and 40% if it's higher or lower than that. So basically at a $2.99 price point, an author will net $2.09 from the sale.
Which brings us to the staggering conclusion, an author will make more from the sale of a self-published book priced at $2.99 than they will from a publishing house that prices an ebook at $12.99.
What does that mean for me as a reader? Not much. Most of my book recommendations come from book blogs, goodreads users, friends and family. I actually find the math interesting, but I mainly peruse Konrath's blog because there's a lot of self-published authors on there and it gives me ideas about new books.
I'm a 36 year old male. My shelves are mostly full of science books, science fiction, fantasy and urban fantasy books with a healthy dose of classics and the occasional literary fiction book club-type book. I do have a large amount of science fiction and fantasy books on my nook. In the $2.99 category, I do have B.V. Larson and Jon Merz. The interesting thing is, I also have 3 Amanda Hocking books, 2 JA Konrath books and 1 John Locke book. Why is that interesting? When I go to Barnes and Noble, I don't give a second glance to the young adult section, let alone young adult paranormal romances. I've also seen Konrath's print books and passed them by. I usually don't read too many thrillers either. (Sorry Joe if you ever read this).
So what makes the $2.99 price tag special? It's a complete impulse buy. It costs more in gas to go to the library to check out a book. It costs more to drive to the bookstore to browse. It costs the same amount to have Amazon ship a book to me. It's significantly less than the price of a value meal at your favorite fast food chain.
I've seen a lot about Amanda Hocking signing a seven figure deal with a major publisher. I've also read about Barry Eisler turning down a $500,000 deal to self publish. What does this mean to me as a reader? Will I be one of the people that goes out and buys Amanda Hocking's books in print at $10 or more? Nope. Will I buy her ebooks at $7.99, $9.99 or $12.99? Nope. She was never my primary genre to begin with. I will probably work my way through her backlist of self-published items at that magical prices of $0.99 and $2.99. I haven't read Konrath's yet (it's next on my TBR list). As long as I don't think he's awful, I'll probably work my way through his backlist of cheap titles as well.
So what does this mean for the rest of my book buying habits? Well I only have a finite amount of money to spend on books. If the ebook costs as much (or nearly as much) as print, it goes on my to-buy list from the bookstore or Amazon. The problem is, there's a lot of books on that list now. I'm more selective about what I buy in print. But, if I'm bored and browsing titles on my nook, and that $2.99 book catches my eye, it'll probably still get bought.