Oct 20, 2010

eBook eConomics: 3 Tier Pricing

I'm starting the eBook eConomics series off with a rather simple strategy, not that different than the traditional model. I'll save the crazier stuff for later.

eBook eConomics 1: The 3 Tier Pricing Model

The Proposal: Create 3 tiers of pricing.

Tier 1 corresponds to the HC edition, marked down 50% from the cover price, between $10-$15. Be honest, when was the last time you bought a HC for list price?

Tier 2 is the Paperback edition, marked down to 50% from the inevitable $10 MMPB price to $5 flat. This would be available when the PB edition is released.

Tier 3 is the end-state version. Price drops again, this time to $2.  You could determine the Tier 3 event in several ways. You could wait until the MMPB run goes out of print. Or you could wait the same time between HC and PB releases. Or wait until the book sold X number of copies. Or keep a set number of books at each pricing level before moving them to the Tier 3 price.

  • High starting price will allow publishers to recoup the editing, marketing, and formatting costs.
  • Low final price shares the reduced distribution cost with readers
  • Low "long-tail" price will keep readers buying older books
  • Readers will be more likely join longer series due to low buy-in costs
  • High initial eBook prices don't subsidize the buy-in price for eReaders.
  • This approach could negatively impact backlist sales of paperback editions
  • Final price point would necessitate additional negotiation for royalty distribution.
  • Doesn't deviate from the traditional pricing model much
Verdict: Probably one of the most realistic approaches, especially if publishers are willing to trade high prices for more backlist sales. I know I would buy a lot of backlist books (particulary Hugo and Nebula award winners) if they were more affordable.

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