Let’s talk a little about the price of books. Let’s say you just wrote a new novel, and you set the price at $10 per copy. At that price you will likely sell 10,000 books. Gross income will be $100,000. Now let’s say you raise the price to $20 per unit. Because of the higher price, maybe now you only sell 8,000 copies for a gross income of $160,000. This is good because not only do you make more money, but you don’t have to print, package, and ship as many books.
Ultimate, however, you reach a point where by raising the price you no longer get more money. For example, let’s say you raise the price of each book to $30, but now you only sell 5,000 copies, for a gross income of $150,000. In our simple example, it’s clear $20 is a good price per unit.
The reason I use this simplified example is to illustrate the idea that the more something costs, the less you will sell. Conversely if you lower the price, you’ll sell more. There are exceptions, but this is the general rule.
As a new author, you will likely sign a contract in which you will earn 5-10 percent for each print book sold. So let’s say you make 7.5% on a $12.50 book. Somebody check my math, but as an author you’ll be making roughly 88 cents per book.
Now let’s see how an author fares on the e-book model. Amazon pays 70% to authors. On a $12.50 book you’ll earn $8.75. But here is the kicker. You could lower the price to $2.99 and you’d still be making $2.10. At the lower price, you’ll likely sell more books, but you’re still making more than the 88 cents you’d make on a physical book.
Another added benefit is that once you’ve got the digital copy of your book online, you don’t have to worry about printing books, storing them, packaging them, and shipping them. You can sell 5 books as easy as you can sell 5 million. It makes sense to drop the price to where you’ll sell more books.
Does this mean publishers are pretty much worthless in this new model? Do they go extinct? No, but it does mean they have to adapt. There are several key things they must do in order to provide value to the process, and I may or may not talk about what those things are in a later post.