Game Marketing Tips, Analysis, and News

Thursday, February 18, 2010

Digital Pricing

Seems like there's some data to suggest that, shockingly, raising prices results in lower sales. Who would have ever thought?

It's amazing to me that music and book publishers are apparently making pricing decisions based on gut feelings rather than experimenting, generating sales data for different price points, and using math. I guess they haven't realized that (unlike hard goods) they don't have to worry about the cost of inventory, which means they have more freedom in pricing. Look, if a book cost you $10 to print, and you made thousands of them and they're sitting in boxes in your warehouse, you have to price the book at well more than $10 apiece (perhaps $20 or $30) to make any money. (After all, you did spend some money on editorial, and perhaps even plan on paying the author something.) The converse is, if you don't pay anything for inventory, you could price the book at $30 just like the physical book... and maybe sell 10 digital copies. Perhaps you'd find if you priced the digital book at $10 you'd sell 100 copies... with no change in your upfront costs (transaction costs would be a little different, and the author's royalty would be different, I hope). And what if you found that at $5 you sold 1000 copies? Any sane person would want to make the most money, which would mean pricing the book at $5. (Unless they really hated to see an author make more money, even if it meant they were also making money.)

So watching music publishers trying to raise download prices on iTunes, and book publishers scrambling to strongarm Amazon so they can charge higher prices for e-books, strikes me as insane. I agree Amazon's restrictions are draconian... but I'd like to see a bigger cut for authors and publishers, real freedom in file formats, and publishers competing to sell their books for lower prices (especially older titles who have long since stopped generating significant revenue).


  1. Experimenting is good advice, but the funny thing is that when its the retailer controlling the price rather than the publisher you don't get to experiment you just get stuck with someone elses business plan.

    As a small publisher price point i have products that range from .99 cents to $120.00 and the higher price point always works better for me, because of the small number of dedicated fans that I have. I am better off doing the deluxe product, with direct sales rather than a mass market approach of the .99 cent things.

    Steve Russell
    Rite Publishing

  2. You have done the right thing by trying out different prices and finding out what works for your products. I think the answers may vary for each publisher, depending on the nature of their books and their audience. Each publisher should get actual data to base their pricing decisions on -- otherwise they risk leaving money on the table, either by pricing too high or too low.