If there is one thing that continues to perplex the publishing industry, it's ebook pricing. How do you structure your pricing in a way that is fair to both the reader and the author and still make enough money to continue publishing operations? Many larger publishers want to keep the ebook price structure high, especially at the beginning, to keep from cannibalizing more profitable hardcover sales. (Until the New York Times started its ebook bestseller list earlier this year, publishers also wanted to keep ebook sales from robbing hardcover numbers from the reporting stores.)
Pricing is one of the major deciding factors for ebook buyers, particularly when it comes to works by new authors. Readers are much more willing to take a chance on a book or author they're not familiar with if the price is low. Many authors are finding this out and adjusting accordingly. However, going too low can shrink a profit margin down to nearly nothing. (Always do a profit and loss statement beforehand to see just how low you can go and still be profitable.) And going free, well, that has its plusses and minuses too. It can give a negative impression in the reader's mind about its worth, and that may follow the author to their next book, but a short term giveaway may increase readership and provide a quick jump in "sales."
The Wall Street Journal reported in December that ebook prices are rising as compared to print editions. However, the WSJ also cites research firm Yankee Group's research data which shows that average ebook prices fell to $8.19 in 2011 from $9.23 in 2009. Many of the largest publishers are pricing ebooks at the same or even higher price point as hardcovers and paperbacks. Some believe agency pricing (short definition: an ebook price is set by the publisher and must be priced the same by all retailers) is keeping prices artificially inflated. Apple, Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster are all being sued for alleged price-fixing. The US Justice department is also investigating the allegations.
Pricing electronic content has been an issue since the internet began-I mention the Wall Street Journal article above, an institution famous for making a paywall work in the digital realm. There needs to be a balance in the consumer's mind between perceived value and actual price for a sale to be carried through. A lot of readers don't realize the costs that are involved in the creation of an ebook. True, there's no paper, printing, binding, or distribution costs, however all the other costs associated with a paper book are still there. Editing, cover art and design, copyediting/proofreading, marketing, overhead, and much more must still be paid by the publisher/author. If you give your product away for free or priced too low, no one is going to win for very long.
Ereader prices have dropped dramatically but will higher-priced ebooks put a halt to the increase in ereader sales? Well, if ebook prices climb too high, there's always Project Gutenberg...