Friday, December 2, 2011

What to charge for a book?

"But SF is different.  Science Fiction attracts author-driven readers....  It means simply that certain readers are given to paying attention to who wrote the book they last read and (if they liked the book) make at least modest efforts to find something else by the same author.  (And here let me pause to say that throughout this essay, unless I distinguish between them, I think of science fiction, or SF, as embracing fantasy as well.  Thought it might actually be more accurate to claim that fantasy embraces SF)"

-John W. Silbersack, "Editing the Science-Fiction and Fantasy Novel" in the classic Editors on Editing


I've commented obliquely on Rachel Gardner's blog before.  I make a point of reading her posts every single day because--well, because they're good, and they're useful.  She's a literary agent who's quite smart, by all evidence I can see, and who pays attention to trends not only within her area of expertise but also throughout the publishing world.  If you're a writer, and you want to be serious about being an author, then you, too, should be reading her blog.  Ninety percent of the time, roughly, she blogs on a topic I'm interested in.  Yesterday was in that ninety, and I got involved in a debate there.

Now, I made it clear early on that I think both ebooks and "real" (or "dead tree") books belong in the world.  But the topic turned to pricing and quickly got interesting.

It started when I made the comment that "As an author, I really don’t care about the price point of the book. I care about how much royalty I receive from each copy sold, and if I can get the same amount from a $4.99 self-pubbed or small-pubbed book as I can through a $14.99 traditionally-pubbed book, what does it matter to me?"  It's a true statement, at least to me, but hoo, boy....  I quickly heard from a fellow blog-reader that people value things based on how much they pay for them (a generally true comment, I think, but wait for what comes next) and so by pricing our books higher, we would get "better readers."

What the hell is a better reader?

I posted that question in a Facebook readers' group I'm in, and they came to the consensus that the guy on Rachel's blog took it somewhere crazy.  After, that is, a bit of drama between someone from Hungary (the country) and someone from Georgia (not the country).  I think the two of them forgot that they were speaking the same language for a while.  Still, it was an interesting discussion, drama discounted.

Fact is, pricing a novel is hard.  I remember when it was easy.  Novels in hardback cost $20 for a while, and then they cost $25, each number plus or minus a few pennies.  Paperbacks cost $5 or $6.  My mom got past the high cost--and yes, for poor people like us, those were high costs--by getting us library cards and providing frequent trips there.

The world has changed, hasn't it?  Back then, it took a sci-fi or fantasy writer several years to write short stories in magazines and build credibility, and finally a publisher would take on the writer's work and put them in the store for whatever the publisher thought appropriate, the author making ten percent (ish) of whatever the publisher decided to price it at, payable to the author as soon as the book had "earned out" the advance. Now, on the other hand, you have Indies doing everything for themselves, and once they've created a book, a cover, a title, etc., they can put their book up for sale for anything from free to--well, to whatever.

Then there's us "small press" authors.  I wasn't given the choice; my small publisher has a three-rung pricing system in place already.  Fact is, I appreciate his price structure; he's done a good job with it.  If I haven't mentioned this before, I'm quite happy where I am.

Let's think about pricing a bit, though.  First, for an author, there are a few different levels of effort.  I didn't "get" that when I started, but I do now.  A novel, the only level of effort I really knew of, is a monumental undertaking that requires thousands of hours and months to finish, especially if you have a day job.  Short stories, though, take a weekend of work.  More, if you revise them as you should, but revision of a short story can be measured in a relatively small number of hours.  A novella, on the other hand, takes a couple of weeks if you're serious about it, but 15-20K words takes far less effort than a full novel.

Now, here's the deal.  This isn't a pay-by-the-hour job.  Readers care a little, but not a lot, about effort.  Yes, I think they understand the distinction between the sizes, but most readers (including me, before I did it myself) really have no concept how much effort it takes to put a good novel out there.

But here's the other part of the deal.  To an author, it doesn't matter how much effort it takes, if, that is, the author is a businessman, which all should try to be if they want to be successful.  Caveat--all novelists who aren't already involved in traditional (Big 6) publishing.  If you're Stephen King (the other one) then you'll do just fine on the advances you will receive.  The rest of us need to know how to determine pricing.

In many businesses, selling prices are a complicated thing; not so much in writing.  See, most businesses have cost equations.  If a widgets manufacturing firm creates their widgets cheaply, they get them for a certain amount each, based on an initial price plus a per-unit (or per-batch) price.  If they create them with better parts, they get them for the same initial price plus a bigger per-batch price  They can sell their cheaper units for a certain amount per the demand curve, and the more expensive ones for a different amount per a different demand curve.  How many, then, do they make, and at what price point?

Such a problem has haunted many an MBA student.

Writers, though, don't have a cost equation.  Yes, our hours are worth something.  Mine are worth a certain amount when I'm at work, and I presume they're worth the same when I'm not.  Yours are worth a different amount.  How much?  I don't know.  Really, you have to calculate that based not on what you make in your "day job" but instead based on opportunity cost, if there is any.  In other words, it's not what you make in your other hours, but what you would be making otherwise in the hours you're "investing" in writing.  But hey, relax.  It really doesn't matter, anyway.  Why?  Because all costs for the author are sunk.  Not fixed (regular) costs, nor variable costs, but sunk costs.  As in they're sunk in the project, done, neither to be increased nor decreased, merely (hopefully) to be earned against. 

Example:  My first novel has cost me $1500 editing, $200 printing (including a new printer), and probably $300 incidentals (including shopping agents and the conference).  I'm billing the writers' conference against the first novel because it was the primary recipient for everything I learned at the conference and--well, because I can, and it needs to be billed against something, and a loss this year is fine with me for tax purposes.  So, $2000, ish.  If I add the cost per hour for each hour I worked--no, I don't want to think about it.  Let's just stick with $2000.  If I sell one copy of the novel, then, that copy costs me $2000 minus the revenue I get from it.  If I sell ten copies of the novel, that novel costs me $2000 minus the revenue from ten copies.

If I'd been an Indie, add to the sunk cost the cost of hiring a professional cover designer, and possibly even hiring my way into a marketing team's heart.  The radio spot I got yesterday?  I couldn't have done that if I'd been on my own without some sort of promotional or marketing dude on my side.  And, hey, those are all figures that go against the bottom line.

See the point of sunk costs?  Once a cost is "sunk," it's gone.  It's different from fixed, where there's an ongoing cost, or variable, where there's a cost per unit.  It's just--well, it's just sunk.  You either recover it, or you don't.

There's no other costs for authors, currently.  You may think that your cost for bookmarks is a variable cost, but there's no clear relationship between bookmarks passed out and copies sold, so--sorry.  Sunk cost.  Wanna go on a book tour?  Okay, you may sell a few copies of your book on your tour, and you certainly generate awareness of your identity as an author, but--identity as an author isn't a billable item.  Sunk cost. The point of sunk costs, from a business perspective, is to recover them as quickly as possible.  THAT is the return on investment, and the lower the ratio there, the better it is.   

Bottom line: Get the money back.

So, the requirement to "get the money back" quickly leads to the question of maximizing revenues.  How do you do that?  That's the $64,000 question, honestly, or in J.K. Rowling's case, the billion dollar question.  It leads to a discussion, in business terms, of a demand function.  Specifically, how much demand is generated for each price point?  If you can sell, say, 10,000 units at $5 each, and 12,000 units at $4 each, and 6,000 units at $6 each, which price should you sell them at?  Clearly, $5 each, because that generates $50,000 versus $48,000 or $36,000.

Problem is, nobody knows the demand curve for novels.  People are experimenting now, and there's a certain amount of interest shown in the results of those experiments, but I'm not sure the interest is deserved.  For one thing, there are a lot of variables.  I've had a lot of people tell me that they would pay higher prices for novelists they know, but not over $5 for a novelist they didn't know.  Frankly, I'm kind of the same way; I happily download works at the $1, $2, and $3 price points, but I shy away from double-digit prices unless I really want the book, these days.  At the same time, Stephen King (the other one) successfully charged a dollar per chapter on a text download book he did back before we knew what a Kindle was.  Brandon Sanderson's demand curve, then, is very different from Stephen King's, which in turn is very different from Stephen H. King's.  

Then there's genre.  See, I'm a fantasy author. Per the quote at the beginning of the article, I'm in an author-driven genre.  What that means is that I could easily price my book below that of, say, Piers Anthony, and yet I wouldn't change his or my sales figures at all.  Once/if I have as big a following as he does, my demand curve will change quite substantially, but the ultimate meaning behind the quote at the beginning of this post is that fantasy authors have a fairly flat demand curve.  If you're a typical fantasy reader, then when a fantasy author you want to read puts a new work out, you are going to buy it at a wide range of prices. Thus, at some point, it's really not going to matter what I charge for my books (within reason). 

Bottom line, then, is that I really don't know yet what to charge for a book, other than the price my publisher is setting seems to be working.  And hey, that's good enough.


No comments:

Post a Comment