I’ve spent too many days this summer visiting this page on Amazon’s Kindle store, waiting for the price of the latest book from Charles Stross to drop to $9.99 (as of the date of this post, it’s $11.99). Clearly, it’s not going to happen until the publisher feels it’s notched as many $12 purchases as it can from eager fans who aren’t as price-conscious as I am.

But wait a minute! I too am an eager fan, and because of this pricing issue, I ended up reading the book for free. I’m still a fan but now I’m no longer a potential customer. The publisher lost the author an easy sale.

I bring this up not to post yet another gripe about agency pricing, but to suggest an alternative strategy, one that might help the publisher and author earn more money but that would also benefit casual fans like me.

Sometimes I get the sense that publishers think I’m looking at all formats at the same time, then making a decision about which one to buy. But that’s not the case at all; I’d say this is a more accurate profile of me as a book consumer:

• I buy >95% of my books digitally now, and save my print purchases for special items (e.g. art books, gifts, out of print and used).
   
• I’m never a superfan, hardcover collector, and general fan at the same time for the same title/author, so it’s unlikely the publisher can force me into a higher spending bracket by limiting purchasing options.
   
• When I decide to pay more than $10 for an ebook, it’s usually for emotional reasons, not simply because it’s a new release; scarcity has a weaker influence on me in the digital space.
   
• Publicity, marketing, and the social aspect of reading all help build up a desire in me to purchase a book as soon as it comes out, not in six months. However, due to the points listed above, I’m generally unwilling to pay a 20-40% “new release” premium for an ebook.

I think the publisher missed out on two things by pricing the book at $12. First, by not lowering the price to that magical $9.99, it lost at least one sale from an eager fan who was more than willing to buy the book immediately. That argument about cheap ebook prices eating into hardcover sales doesn’t apply to me, because I would have never bought the hardcover in the first place no matter what it cost–this isn’t the sort of book I want as an heirloom or physical object.

Second, I don’t think the publisher maximized its potential revenue from those superfans who can’t wait to read an author’s latest book, and who aren’t nearly as price sensitive as casual fans like me. I know from reading the author’s blog that he had a draft of this book turned in nearly a year ago, well before the original deadline, and that subsequently the publishing date for this title was pushed up by several months. This seems an easy win for the publisher: offer exclusive early access to the latest title in a series for a premium price. Instead, Penguin only priced the ebook $2 higher than “normal” Kindle prices and stuck with a traditional release window. I think superfans would have been willing to pay far more for immediate access–especially if the book wasn’t available anywhere else at the time.

Based simply on my own buying behaviors, here’s how I’d sell books these days:

First, I’d collect all those high-value sales up front by releasing an “exclusive preview” ebook edition for $20 or more before the hardcover comes out. I might include a special preface from the author, or deleted chapters, or editor’s notes–something to give it the stink of premium and further entice superfans.

I’d release the hardcover next, at least a month after that exclusive preview edition, at standard hardcover prices. I’d make sure it looks nice and is well made, because the people who buy this are buying it for its physical qualities as much as for what’s printed on its pages.

At the same time, I’d release the standard ebook at that magical $9.99 price point that makes readers like me hit the “Buy now with 1-Click” button without hesitation. I’d skip that $12-14 price point; it makes the publisher look greedy (yes, I know, publishers hate it when customers think that way, but it’s How Things Work), and it drives away easy sales from readers like me. That exclusive ebook edition would have already captured the superfans’ dollars, and casual fans would never buy the hardcover anyway.

Adding a $2 “new release tax” to an ebook just kills the sale–and in 2010, you’re not only losing customers to libraries but also to pirated versions of those ebooks. I checked: yes, the title in question is already available in pirated format as well as library format. It takes nearly the same amount of time to download a pirated copy as it does to buy a legitimate copy, which I think drastically reduces the ability of a publisher to use scarcity to force hardcover/”new release ebook” sales. Ebooks in general really wreak havoc on that whole scarcity thing.

Maybe I don’t fit the average consumer profile, I don’t know. But I do know that if publishers offered more targeted price points at the right time in the release cycle, they’d get me to spend a lot more on books.

(Photo: brewbooks)

Although the terms haven’t been disclosed, Penguin’s CEO announced yesterday that his company and Amazon have reached an agreement on ebook pricing on the Kindle Store, and that the 150 or so books they’ve kept off the store for the past two months will soon be made available again.

Since pretty much nobody buys a book based on who published it, it’s sort of hard to know whether to be excited or not. It all depends on whether an author you love under Penguin’s umbrella has a new release out.

For example, John Grisham’s latest book, Theodore Boone: Kid Lawyer, is currently unavailable on the Kindle Store. I imagine it will be one of the ones to reappear in the next week or so–but I wouldn’t expect it to fall under that $10 line if I were you.

The 2010 Book Expo is in full swing, and that means tons of publisher news is being churned out by the press. I’m trying to resist the urge to junk up the site with every little press release or announcement, so I’ll probably try to just recap major issues in some digest posts over the coming days.

(Photo: Aidan Jones)

Amazon posted a strongly worded announcement on its own forums to let customers know what went down, and to make it clear that it disagrees:

Macmillan, one of the “big six” publishers, has clearly communicated to us that, regardless of our viewpoint, they are committed to switching to an agency model and charging $12.99 to $14.99 for e-book versions of bestsellers and most hardcover releases.

We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles. We want you to know that ultimately, however, we will have to capitulate and accept Macmillan’s terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books. Amazon customers will at that point decide for themselves whether they believe it’s reasonable to pay $14.99 for a bestselling e-book. We don’t believe that all of the major publishers will take the same route as Macmillan. And we know for sure that many independent presses and self-published authors will see this as an opportunity to provide attractively priced e-books as an alternative.

Kindle is a business for Amazon, and it is also a mission. We never expected it to be easy!.

I don’t know that anyone is surprised that a publisher wants to have the final say over the price of the books it sells. And to be honest, I don’t think $12 or $15 is a bad price for a new book, provided that the ebook version is released at the same time as the hardcover. If Macmillan delays release dates and tries to charge a premium, *shrug*, I can just go buy something else.

But–and I write this as someone who thinks the Kindle is awesome in a lot of ways–Amazon needs to drop the sanctimonious act. From the beginning of the Kindle, the company has strong-armed publishers on prices and profit agreements, and it’s screwed over readers like you and me by telling us that we’re “buying” ebooks when in reality we’re just licensing them. (Check the fine print of the agreement–you’ll see that you never actually own your digital copy of the book you “buy” on Amazon.)

I can put it even more plainly. Amazon calls its Kindle endeavor a “mission,” but it uses a locked-down format that prevents customers from buying ebooks from other stores, or from reading Amazon ebooks on other devices. The whole ecosystem, while fairly pleasant for consumers to participate in provided nothing ever goes wrong, is deliberately designed to give all the power to Amazon and keep publishers, authors, and customers powerless. And when Macmillan put up a fight, Amazon pulled all Macmillan titles, digital and print, off its website as a negative incentive to get Macmillan to cave. That’s the sort of dirty trick you pull when you’re a business, not when you’re on some sort of higher mission.

Okay, end of rant! My point is, this is bad news mainly for Amazon, because higher prices tarnish its expensive marketing campaign that promises $10 books, and because this means it might lose a competitive edge when it comes to pricing for Macmillan books in the future. In other words, from now on you’ll probably pay the same price for a Macmillan book whether it’s from Amazon, Barnes & Noble, or Apple.

But this isn’t the end of the world for customers. $15 for a new release is still a good price. And as Amazon points out, there are dozens–no, probably hundreds–of independent publishers and authors out there who would love to sell you an entertaining novel for $10 or less. (Edit: or you can just wait a few months for the ebook price to drop.) You shouldn’t worry too much about what two giants are fighting over when there’s so much great stuff waiting for you everywhere else.

(Photo: mikebaird)

A Stephen King ebook fan on November 9th, 2009. (Photo: Robert Couse-Baker)

I sort of get why they did it, or at least I think I do. Scribner wants consumers to understand that the hardcover retains pride of place in the world of release dates, and if you really want a new book you’ll have to pay a premium by choosing the hardcover. They also want to send a message (to Amazon? surely not to consumers, who have no say over the matter) that the $10 price point for new releases is unacceptable.

I also think I understand why they chose King’s new novel, which is the publishing world’s equivalent to an AT-AT walker. They want to ensure that the experiment works.

But did Scribner choose the wrong battle by trying to reinforce this false hierarchy of print over digital? I think they wasted an opportunity to reset ebook pricing expectations with consumers, and they’re wasting marketing dollars too.

Consumers, like publishers, are still figuring out ebook pricing

Before I say why I think Scribner chose the wrong battle, I want to look at consumer expectations. Here is my own evolution in my attitude toward ebook pricing, as an average consumer with what I believe to be a fair-minded attitude about the publishing marketplace.

So that’s where I’m at today regarding pricing of ebooks, at least as a consumer. I don’t think every reader has followed this path–some probably started out at stage 3 because they have a strong identification with the idea that writers should make a living from writing, while others will never leave stage 1 because getting the best deal as a consumer is the most important goal to them. But I think in general, as consumers get more used to buying books digitally and we begin to equalize the trade-offs between digital and print so that one format no longer seems better than the other, there will be less resistance to a more flexible pricing scheme.

Can a blockbuster help educate consumers?

That’s why I wish Scribner had used the release of Under the Dome to push harder for flexible ebook pricing. It’s one of the few titles that might have carried enough weight to be used as a weapon against Amazon in negotiations over ebook pricing.

I wish they had offered the ebook edition to major digital distributors (like Amazon) on the following two conditions:

[Disclosure: I have only an amateur's understanding of anti-trust laws, but my current reading is that it is usually possible to demand that retailers follow minimum pricing guidelines.]

Here’s how it would work with Under the Dome:

Amazon would sell Under the Dome as a Kindle edition on the same day the hardcover goes on sale, but it would be priced at $24.50, which is a discount of approximately 30% from the hardcover price.

On the same page, Scribner would print a statement that explains that because the book is a new release, it is priced accordingly, and that over time as other print editions are released, the price will be reduced.

In other words, Scribner would use the moment of sticker shock to educate ebook consumers that a new release of a blockbuster title should be priced higher than one already out in trade or mass market paperback.

Most shoppers will angrily refuse to buy the ebook at the higher price, and instead opt for Amazon’s loss-leading $9 hardcover version. But what’s important is this: they will have encountered the concept of variable pricing.

The next time it happens, they won’t be as shocked. By the tenth time, they may even come to realize that it’s not unfair to pay a premium for a newly published novel from a known brand.

Variable pricing over time lets readers decide how much they’re willing to pay, but in a manner that remains fair to publishers. If you don’t want to spend more than $10, you can always wait until the ebook version drops in price, which should happen around the same time the trade cover version comes out. If you will pay the higher price because you want the book on the first day it’s released, here ya go.

If no retailer would agree to such an arrangement, Scribner could have sold ePub versions using Adobe’s Digital Editions DRM directly from their website, bypassing retailers entirely for the first month and charging a premium to diehard King fans.

(And hey, creating a stand-alone iPhone edition to sell at a premium price wouldn’t have hurt, either!)

A quick side note: Nick Cave’s digital release of Bunny Munro proves that you can successfully package and sell ebooks at hardcover price points without the infrastructure of Amazon or Barnes & Noble. Scribner could have used a stand-alone app of Under the Dome as a bargaining chip in negotiations with ebook retailers, and made a little profit as well.

Wasting marketing dollars

Finally, there’s another reason to not stagger the release date, and that’s because it’s wasting resources used to promote the book.

One way to look at staggered release dates is to compare what Scribner is doing with how Hollywood promotes and releases new movies. Scribner is following the model of theatrical release followed by DVD release. That’s an inaccurate model to use when comparing hardcovers to ebooks.

A theatrical release provides an experience that still can’t be fully replicated at home, no matter how big we grow our TVs. A hardcover book, by contrast, does not provide any sort of significantly different experience to the reader over a digital copy. Splitting their release dates is more like splitting the release dates of DVD and Blu-ray formats of a movie.

Lets look at Hollywood again. That industry has perfected the art of marketing a new release–the precision with which their marketing campaigns can create not just a need but a group of consumers, then deliver that group to the marketplace on a specific 2-3 day period to maximize revenue, is pretty astounding. Scribner’s campaign for Under the Dome has been similarly aggressive, and I’ve noticed that in the past couple of weeks anticipation for the release date is approaching that felt from a Hollywood campaign.

And yet, when “opening day” comes, ebook buyers will be just as primed to spend money but told to wait a month.

Again, look at how Hollywood has begun to move toward same-day releases of blockbuster films globally, partially to avoid piracy but also to maximize marketing dollars. Why would a publisher want to squander resources by having to launch a second, much smaller campaign for the ebook launch a month later? And how much ill will does the marketing campaign create by priming consumers to buy the book, then denying them the opportunity?

The amazing thing about digital publishing is its flexibility–not just with distribution models, or manipulating content, or adding and removing value, but also with pricing; an ebook can be equivalent to a hardcover or a mass market edition of a book, because it has no physical quality of its own. Treating it like just another physical format that must be scheduled appropriately is a waste of its potential to generate revenue.

I know the publishing industry has hated Amazon’s one-size-fits-all approach since it was first released, but they conceded that first battle to the mega-retailer when they refused to independently price ebooks low enough that consumers didn’t feel cheated.

Now, I think, publishers need to start working directly with consumers to educate them on what fair pricing means. The best way to do this is with blockbuster authors who carry the marketplace power to drive a flexible pricing scheme. I hope another A-list publisher/author combo tries again, and soon.

In the meantime, I’ll wait until the ebook version of Under the Dome comes out, and–especially since it wasn’t available when the hardcover was–I probably won’t be willing to pay more than $12-14 dollars for it.

(Photo: Robert Couse-Baker)