When Amazon released their latest statement in their contract dispute with Hachette a couple days ago, one point they raised was that $9.99 ebooks sold more copies than $14.99 (1.74 times as many, in fact). This tied in with basic market economic theory, and it also fits with past data from Smashwords.
And now I can report that the data used for the Author Earnings Report shows similar sales and pricing trends. Late Wednesday night Data Guy, the numbers person behind the AE Report, left a comment over on The Passive Voice with details.
DG crunched the numbers from the July report and found that $10 ebooks not only sell more copies than $15 ebooks, the lower price point also generates a higher average revenue. As you can see in the graph below, ebooks at the $10 price point generated nearly 5 times as much revenue as those at the $15. point.
As you can see in the above chart, Amazon may have been a little too conservative in their call for lower ebook prices. Not only does the $9.99 price point generate more gross revenue than the $14.99 point, cutting the price of that $10 ebook in half might just boost revenues again.
The data shared by Data Guy shows that ebooks priced at $4.99 generate two thirds again the revenue of ebooks which cost $9.99. Smashwords has been making similar statements about the $2.99 and $3.99 price points for several years now, so the new info from Data Guy doesn’t come as a huge surprise.
But I was surprised to see that the two data sets don’t quite reach the same conclusion. I wonder if the difference could be reflected in the Smashwords data not including as many traditionally published ebooks as the data set which Data Guy scraped from the Kindle Store. But whatever the cause, the new data confirms that lower priced ebooks generate more ebook sales.
To be honest, no one has ever disputed that point, which is why there has been little disagreement with the facts of Amazon’s statement of two days ago. But what Amazon has left out, and which isn’t reflected in the above chart, is that ebooks are not priced and sold in a vacuum.
I’ve been following a couple discussions on Twitter and elsewhere, and several people have pointed out that the lower priced ebook might boost ebook sales but it could also drastically undercut print sales. I think John Scalzi said it best:
If you entertain the notion that Amazon is just 30% of the market and that publishers have other retailers to consider — and that authors have other income streams than Amazon — then the math falls apart. Amazon’s assumptions don’t include, for example, that publishers and authors might have a legitimate reason for not wanting the gulf between eBook and physical hardcover pricing to be so large that brick and mortar retailers suffer, narrowing the number of venues into which books can sell. Killing off Amazon’s competitors is good for Amazon; there’s rather less of an argument that it’s good for anyone else.
(Thanks for the link, Felipe!)
I can see where Scalzi is coming from, but I’m not sure that he’s right on this point. Given that Amazon accounts for a sizable share of the US print book market, I think that they already took into account the effect lower ebook prices might have on print sales.
Amazon is more than capable of making the kind of meta-analysis of how one part of the book market affects another, so I think they would know if higher ebook sales would have a positive effect on print sales.
Of course, just because Amazon might come out ahead when ebooks cannibalize print sales doesn’t mean that Amazon’s competitors will as well (which is really the point Scalzi was trying to make). Physical bookstores don’t benefit from an increase in ebook sales to the same degree as Amazon, so the corresponding drop in print sales would hurt them.
But is that Amazon’s problem? And more importantly, is Scalzi’s point necessarily true?
I’m not so sure. I am an advocate of booksellers moving online in pursuit of customers, and if you consider an indie bookseller as an online entity and not a physical bookstore then yes they could well benefit from the increase in ebook sales.
But I also can’t answer that with any certainty. As with everything, the actual situation with ebook prices is not only more complicated than Amazon would describe it, it’s also more complicated than the naysayers and pundits might realize.
With that said, I am happy to stay a low-price ebook advocate.