The What and Why of Pricing

In the process of releasing Barry Dean's latest book In L.I.E.U. (due out 2 April 2019), Barry asked the excellent question as to how we set the price of the ebook against its paperback companion. While a simple question the answer is more than a little complicated.

Ebook pricing

Hague Publishing initially started as an exclusively ebook publisher and set the price of its books on what I believed an ebook should sell for, which was $5.00 Australian. This was at a time (way back in in 2011) when the Australian dollar enjoyed relative price parity with the US dollar. Basically I set a price which I believed set sufficient value on the author's time and effort in writing the book. This was also in the early days of ebook publishing when those releasing the ebook (e.g. publishers and self-published authors) were still experimenting in price.

When the Australian dollar fell we were able to drop the price to $3.99 US without affecting our author's earnings (as $3.99 US equated to $5 AU and most of our ebook sales come from the US). More recently we have continued the trend and dropped the price to $3.50US. This is slightly higher than the $3-a-book price point independent publishers appear to have settled on (Forbes), but in my view is within shooting distance. The $3 price point is actually a result of Amazon, and Barnes and Noble adopting $2.99 as the point where the royalties paid increase from 35% to 70% for Amazon, and 40% to 65% for B&N. Adopting a general rule of $3.99 also allows us to lower the price we sell the first book in series at while retaining access to the higher royalty rate.

Others have pointed out to me that many ebooks are selling for $8 US or more. However, Adam Rowe (writing for Forbes) pointed out in December 2018 that this pricing was the result of the Big Five publishing houses raising their prices and as a result suffering a 10% drop in epub sale in 2017 (i.e. pricing themselves out of the market).

Paperback pricing (print on demand)

Paperback pricing is a little more difficult as instead of just the 'fair' value to recompense an author you need to consider :

  • the cost of printing, packaging, and postage, and boy is this a killer! Bottom line is that while POD is a wonderful thing you don't really start turning a reasonable profit on anything less than an order of ten books.
  • the cost of the bookseller's discount (somewhere between 45% and 55%)
  • the cost of holding stock, and
  • the cost of posting books to purchasers ($5 for postage within Australia if you can meet the printed matter criteria)

One thing that is worth pointing out is the advice that I received from one bookseller which was: that if no-one wants to buy your book you won't be able to sell it regardless of price. Against that is anecdotal feedback that pricing a book at more than $30 is going to reduce the number of people interested in buying it.

Until recently Hague Publishing has been selling its paperback at between $18 and $21. After reviewing our pricing structure we will be moving to setting an initial list price of around $25. This will permit us to increase the standard booksellers discount from 45% to 55%. It won't affect the price books are provided to our authors (which is set at cost plus 20%), and will allow them more flexibility in what they set their own sale price at.

Profit margins compared

Before finishing a quick aside. Our royalty rates are generally:

  • 45% on ebook net sales
  • 15% on paperback net sales

So for 10 ebooks, selling on Amazon.com at $5AU the author might expect to receive $15.75.

For the same 10 paperbacks, selling at $25 each the author might only receive $11.50.

Based on the above you can see why I prefer ebooks!

Ingram Spark's calculators

For those of you interested you can then use this link to IngramSpark's website to calculate:

  • The amount of compensation from sales to booksellers (you will want to set the wholesale discount level at between 45 and 55% if you actually want a bookseller to stock your book.
  • The cost of actually printing and shipping books.
  • The weight and spine width. To be able to post a book at the letter rate of $5 it must weight less than 500 gm and be thinner (including the packaging) than 20mm.
  • To create a cover template.

I hope this has proved helpful.

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