Marvel Comics Shows How Not To Price E-Books

Digital comic pricing? It feels about like that.

Digital comics are priced in a wide variety of ways. You can read Marvel digital comics online, via your web browser, for $10 per month (or $5 per month if you buy a whole year at once). 6,000 issues are available to read, with more being added regularly. This is in contrast to their iPad application, where each digital comic costs you $1.99. Meanwhile, they have digital comics collections on DVD for $50 each, where you might get (say) 500 issues of Amazing Spider-Man. Yet they stopped authorizing these years ago.

New comic books cost $2.99 in a retail store (mostly), or you can get the digital version for less... if you care to wait. Some companies (like Archie Comics) are making digital comics available the same day as the print version, for $1 less. This is, of course, pissing off comic book retailers (those who still exist).

What a mess. Not even counting the clumsiness of Marvel's digital comics reader.

Some have argued that Marvel has to have a consistent price for their comics, regardless of the age of the comic. Why?

Comics that were created decades ago were also paid for long ago, and all costs written off. The costs now are for digitization and for the bandwidth necessary to get the comics to the reading device. Perhaps non-trivial, but thousands of comics have already been digitized. Bandwidth is cheaper all the time.

What's wrong with how Marvel is pricing their digital comics? I see no sign that they are trying to optimize their revenue by experimenting with pricing. They have a marvelous (pun, as always, intended) opportunity because of the vast size of their catalog to try dynamic pricing experiments to find the optimal revenue point. Bundle groups of comics at different price points; you've got so many comics you can easily do A/B comparisons. Gather lots of data on how many you sell, and find the optimum price point to maximize revenue. Apply to your entire comic library, and sit back to watch the profits roll in. And not incidentally, revive comics as an art form.

OK, there are issues to be resolved with newer comics, especially if you're trying to keep retail stores going. But $1.99 for each comic on an iPad? I really doubt that's the optimal price. Tablets are poised to become a huge market in the space of the next year, and comics are a perfect fit for the medium. Yet the companies with vast libraries of comics, most of them never seen by prospective audience, are pricing them way beyond the buyer's desire. Wouldn't someone be interested in the early days of the X-Men or Spider-Man? Sure, but not at $2 for 20 pages of (let's be honest) rather lame artwork and story by today's standards. How about if you could read the first 100 issues of Spider-Man for $10? You'd probably jump at the chance if you're at all interested in the character, because that's a lot of content for the money. And not a lot of money to risk. Sure, it's not the $200 Marvel could have made... but how many people are they really going to make that from? Maybe 100 people? And how many would buy that for $10? Perhaps 10,000? The math isn't hard.

This is the same idiocy that's occurring in the music industry. Record companies have vast collections of music that was all bought and paid for decades ago. Yet they're trying to charge a uniform price for it. (OK, this one is primarily Apple's fault for enforcing a 99 cent standard... but the music business has gone along, when they weren't pushing to be able to charge even more for a track.) Is that really the optimal price? How would you know for sure without extensive price testing?

Book publishers are looking at the same issue, and stupidly making the same mistake. They're trying to price e-books near the price of physical books so they don't hurt those sales. At the same time they're trying to get everyone to believe that e-books cost nearly the same to produce as physical books, which is why they should be priced the same. Maybe the office overhead is the same... but for books created decades ago, that office overhead was long ago paid for or written off. So why should the e-book from 1963 be priced the same as the latest one? Shouldn't you be trying to find the price point that brings in the most revenue? Fortunately, authors who are reclaiming their e-rights and self-pubbing are quickly figuring out the right way to maximize their own revenue.

If Marvel could be smarter, I think they'd make a whole lot more money. And comics could be a lot more popular. If the audience was big enough, prices could drop to more reasonable levels while still paying a nice amount to artists and writers. The huge back catalog of Marvel and DC is the perfect way to revive interest in comics as a medium without spending a huge amount subsidizing new comics. Will they figure it out? I'm not hopeful they will.

E-Book Pricing Excites Discussion

E-book pricing is a hot issue among authors and publishers, because prices are all over the map. New York publishers would like you to pay somewhere between $7.99 and $15.99 for an e-book, the difference being in how new it is or how much in demand it is. Joe Konrath, a midlist mystery/horror writer, prices his e-books at $2.99. Who's right?

Many discussion revolve around "value", as in the proper value of an e-book should reflect the author's time and skill level. I think the more practical way to look at it is "How much will a customer pay for it?" Some publishers (and authors) think the pricing should be related to the length of an e-book. That certainly seems reasonable; the price I pay for a short story should be less than I pay for a long novel. But what should those prices be?

I don't think there is an easy answer. Some of the authors weighing in on the question feel the same way. Some take issue with the idea that their books should be $2.99, and argue for a higher price point. Author Dean Wesley Smith lays out a price structure that puts long novels at a higher price point of $4.99 to $5.99. One thing they all seem to agree on is that there isn't enough hard data to really answer the question of pricing.

A few things seem pretty obvious to me. New York publishers have their offices in Manhattan to pay for, an extensive staff, all sorts of expenses... while authors putting their own e-books online don't have to worry about those things. So prices those New York publishers choose for their e-books are rooted in their past, and their current situations... and should not be taken as gospel for an independent author.

Another good point is that a low price won't rescue a bad novel. The first thing an author has to do is make sure their work is good, because pricing and marketing won't transform it into a hit. Especially since, as barriers to entry lower, we're going to be seeing a lot more writing coming onto the market.

I think the most important thing about e-book (and other digital product) pricing is that you can easily experiment with pricing. There's no need to price-protect retailers, somehow notify all retail channels about the price change, make stickers to put over the price that's printed on the covers... you just change the price online. And change it back after a week and see if the sales have changed. Then see if it's made a difference after a month, or two. If you only sold 10 more copies by lowering the price $1, and you normally sell 100 copies, lowering the price doesn't help you enough. If you suddenly sold 500 more copies by lowering the price $1, then you should probably stick to the lower price point.

You can hold sales for any reason, and make the time period brief or long. The data you get will be invaluable. Especially because your data may not transfer to some other author. I would guess that Stephen King could charge more for a novel than I could because of his enormous brand value. But even King might want to have at least one book at a low price point in order to attract new readers.

The e-book market is still developing and changing, so don't look for a hard and fast answer on pricing. Look at the data; look at the deal you can land; take your best guess. Then, if you have control over pricing, experiment. See what works best for you. Don't just pick a price and never change it, because then you'll never know whether you were right or wrong.

E-Book Marketing Success Story

Yesterday the new e-book Draculas was released on Amazon, and the results of the marketing campaign they conducted are in. I interviewed one of the four authors in this post about their marketing efforts, and now we can see the results after one day. It's a smash hit, reaching #76 on the Paid Kindle bestseller list in one day, with over 120 reviews already posted. They've already sold over 800 copies at $2.99, which puts them in the black given their $1300 upfront costs (which includes formatting, cover art, interior art, the website, and some ads on Kindleboards and Kindle Nation). Everything from now on is gravy... and since they never have to worry about printing, the book will stay in print and keep generating revenue.

One of the authors, J.A. Konrath, details the marketing campaign they conducted in this post on his blog. I'd like to add some of my own comments about their marketing efforts.

First off, the level of success they've had does depend to some extent on their previous success as novelists. They have a fan base, or rather four fan bases. By collaborating on this book and on its marketing, they've successfully cross-marketed to all four fan bases, which not only helps the sales of this book but should have a nice boost to each author's e-book sales going forward. Point: Look to ways to expand whatever your current market is by tapping into another existing customer base.

Second Point: They mustered the power of bloggers among their fan base by getting them to post reviews. All they had to pay was a free copy of the e-book; they gave away 260 copies. Now, with a traditional book you'd have the expense of printing those copies and mailing them, and the time delay... with an e-book, costs were next to nothing. Did they lose 260 sales? Perhaps... and they've certainly gained far more than that in the added publicity and exposure for the novel.

Third Point: They didn't add in a cost for their time to do all of this marketing. I think they'd say it really didn't take that much time for them, but let's say it was some opportunity cost (meaning they could have been writing other novels) to them; perhaps as much as $10,000. Still, that should be made up in a few months of sales... and this should keep selling month after month, and the authors expect at least 1,000 units per month. Granted, Amazon takes 30% off the top. But you add together enough of those little revenue streams and you have a pretty nice living.

Fourth Point: The price is $2.99, which is far lower than traditional publishers charge... but it makes it an impulse buy for readers, and since you have no physical costs to cover, you still have a great margin. I think most e-books (particularly fiction) are overpriced; they could generate more revenue by pricing them lower. But there's no way to know for sure unless you try, and most publishers are afraid to try lest they damage sales of the physical books. If you're not a publisher of physical books, why not give it a go? You can always raise the price back up if it doesn't boost sales enough. Finding the sweet spot on digital pricing means finding the pricing that maximizes your profits, whether that's $100 or $1. What should matter is the size of the check you put into the bank, not the price on the product.

All without having to go through a New York publisher.

Ladies and gentlemen, the e-book era has officially arrived. You can make good money off of e-books without ever having to deal with the old infrastructure. I put the first e-book into a retail store, in Acrobat Reader 1.0 format, on a floppy disk about 15 years ago. It's taken a lot longer than I expected, but it's finally arrived as a viable format.

Now I have to get busy and write some books...

Steam May Offer Trade-Ins; Publishers Likely To Be Steamed

This one's hot off the intertubes... seems that Michael Pachter, noted industry analyst, is on the record as saying Steam will soon allow gamers to trade in their Steam purchases for other purchases, levying a fee on the transaction of course. Basically, pulling a GameStop with your Steam games. You're tired of it? Trade it in for a new one.

I expect publishers would be more than a little annoyed at this, unless Steam cuts them in for a piece of the action. Which they'd better consider, or else publishers will be loading up their BFGs and looking to put Gabe Newell's head on their wall.

This would, I think, accelerate the move to digital downloads for many people, and give Steam a leg up on other digital distributors (until they duplicate it). GameStop has to be watching this one closely. The interesting, unstated part, is exactly who gets to keep how much of that extra money that Steam will be making from a game... or who gets dinged. If I pay $40 for a Steam game, then a couple of months later I trade it back to get (I'm making this amount up because there's no data yet) $25 in Steam credit... what happens to the money that was paid to the publisher of that game? If I then buy a new game from another publisher with that credit, does that publisher get less cash than they normally would from a Steam purchase?

I can envision different answers to these questions, and some of them would not make publishers happy. Unhappy publishers might stop allowing their games on Steam... so it will be interesting to watch how this unfolds. Stay tuned.

Pricing Digital Products

The strategy of pricing a product has fundamentally changed in the digital era. Pricing has become a powerful marketing tool with many options, and your choices can dramatically affect your bottom line. Pricing old products is no longer the same as pricing new products. The issue deserves attention as one of the most basic and important decisions you'll make about your business.

Pricing in the analog era was a fairly straightforward operation, and the goal was clear: You had to price your product so that you would cover all of your development costs, your production costs, your distribution costs, and your sales and marketing costs, and some portion of your overhead, and then have enough left over for some profit. Rules of thumb were often used to make things easier; we used to look for at least 7 times the printing cost of a book for the retail price, and felt good if we could achieve 10 times. (For RPG book distribution, we'd have to give at least a 55% discount off the retail price to sell the books to distributors, and usually it was closer to 60% with various added discounts.)

How is it different with digital products? Production and distribution costs have been minimized. You don't have to create a massive print run of books or discs; you just upload a file. And you no longer have to give up any margin to distributors or retailers, if you retail it yourself on your web site; or you may give up a certain percentage to Apple or some other platform. Still, it will most likely be less than 55%. You're left with the cost of developing the product and getting it ready to upload (which, for small businesses, may be mostly your own time) and the transaction costs (PayPal, for example, would be 30 cents plus about 3% of the price).

How does that affect pricing? Your customers certainly get understand that digital products should be cheaper than equivalent analog products, even if they don't know specific numbers. You can also use this to your advantage by driving sales higher with a lower price point. The key thing is this: You don't have to pay off a print run. What's important is overall profit, not your profit percentage. For some reason, this principle seems hard to grasp for publishers who have been around a long time.

Really, it should be immaterial if you're making a $1 profit on every unit sold or $10 profit or $100 profit; what matters is how many you sell of each. If you only sell one copy of a $100 product, you're not making more than $100. If you sell 100 copies of a $10 product, that's $1,000. If you can sell 10,000 copies of a $1 product, that's $10,000. Personally, if given a choice, I'd rather take the $10,000 than the $1,000 or the $100. Perhaps some people might sniff that I'm selling a cheap $1 product, but I probably won't worry about that as I'm depositing my $10,000.

Best of all, with a digital product pricing can be easily changed. Analog pricing is much more difficult to change; you have to price-protect those retailers and distributors who already have your product, you have to send out the information to the channel, and tell the customers too. With digital products you could change the price daily. Steam has made a mint by holding weekend sales of products... then they go right back to the regular price on Monday. So you can test out the effects of a lower price point, and if sales don't increase enough to cover the reduced income, then you can just raise it back up again.

I haven't yet mentioned one of the most important things about digital pricing: Pricing older products is completely open. If you have an older product that has already brought in enough money to pay for all of its costs, then you have completely free reign to price it however you wish. Give it away free to bring in new users. Bundle it with other digital products to improve their sales. Or just try dropping the price by 80% and see what kind of PR impact you can make, and how sales can skyrocket. If sales don't skyrocket, no problem. Just move the price back up.

The power of pricing can be seen with iPhone games. Many use a free product day as a marketing tool to get mentioned on various web sites that promote free titles. Every day, for instance, Kotaku.com promotes free iPhone games. Just because they are free. The next day or so the games are back to $1.99 or $0.99 or $2.99... but in the meantime they've gained many new users, gotten their name out their, and perhaps sold some other games for the publisher.

I'll have more to say on digital pricing in a future post.