Oh, The Math Of It All

Okay, time to do some math again on this 99 cent thing.

Start from the premise that I am a professional writer.

Start from the premise that I want to make $100,000.00 per year with my fiction writing.

Start from the premise that I can write four novels a year. (About one hour of work per day…1,000 words per day total. 80,000-90,000 word novels.)

Start from the premise that I only want to indie publish. (Ignoring all other income from sales that will come an indie publisher’s way such as translation, movie, audio, and such.)

Start from the premise that I will make this money like I make it in traditional publishing advance and royalty system. (When I make $25,000 on a book in traditional publishing, it comes in three advance parts for a $20,000 advance and $5,000 more in royalties over a few years. About five years total time to earn a full $25,000 traditionally publishing a book.)

So to the math:

I want to make $25,000.00 per book paid out over a 5 year period.

$25,000 divided by 5 years = $5,000 per year per book.

$5,000 per book divided by 12 months = $416.67 cents per month per book.

$416.67 per book divided by $3.50 per sale = 120 books sold per month per book. ($4.99 cover x 70% = $3.50)

That means across all sites (iBookstore, Sony, Kobo, Smashwords, Diesel, B&N, Kindle, Createspace, bookstores, and all the overseas ebook sites) a book must sell 120 books in a month regularly, on average, to make the author $25,000 over five years.

That’s right! 120 books per month to make $25,000 per book over five years.

And if you keep writing books at the 4 per year pace, in the sixth year you will make more than that $100,000.00 per year when all your books average that sales number. And you will have made far more than that total income over the five years. (See below for the math on how that works.)

Only 120 books per month per title. Average.

Now, if you discount your work down to 99 cents, you make 35 cents per copy.

That means you must sell 10 times the number of books on average to make the same amount of money. (35 cents vs $3.50 income per sale)

So to make the $100,000.00 per year in five years, your books must average (each one) 1,200 sales per month. For five years at least.

More Math

So take those numbers in reverse.

Book Priced at $4.99

120 copies per book per month x 12 months = 1,440 books per year x five years = 7,200 book sales total to earn $25,000.00 total on the book after five years.

Book Priced at $.99

1,200 copies per book per month x 12 months = 14,400 books per year x five years = 72,000 book sales total to earn $25,000.00 on the book after five years.

7,200 copies is a low midlist sales number in traditional publishing.

72,000 books sold is a top list and sometimes bestseller number.

There are thousands of books published in the midlist for every book that hits the bestseller list.

Even More Math…5 Years of How It Works

Monthly/Yearly Breakout of How the Money Might Flow (On Average, assuming the same sales numbers at the start as at the end, which won’t happen of course, and that no book breaks out and does a ton better than 120 copies per month. Or if a book does a ton better, it pulls up others not doing so well.)

Year #1 (Start Writing January 1st, finish and publish a book every three months)

Book #1… 9 months x 120 sales per month x $3.50 = $3,780 for the year.

Book #2… 6 months x 120 x $3.50 =  $2,520.00 for the year.

Book #3… 3 months x 120 x $3.50 = $1,260.00 for the year.

Book #4… No sales, finished last day of December.

Year One Total Income = $7,560.00

Total Income to Date = $7,560.00

——-

Year #2 (Start Writing January 1st, finish and publish a book every three months)

Books #1-4… 12 months each x 120 sales per month each x $3.50 = $20,160.00

Book #5… 9 months x 120 sales per month x $3.50 = $3,780 for the year.

Book #6… 6 months x 120 x $3.50 =  $2,520.00 for the year.

Book #7… 3 months x 120 x $3.50 = $1,260.00 for the year.

Book #8… No sales, finished last day of December.

Year Two Total Income = $27,720.00

Total Income to Date = $35,280.00

Year #3 (Start Writing January 1st, finish and publish a book every three months)

Books #1-8… 12 months each x 120 sales per month each x $3.50 = $40,320.00

Book #9… 9 months x 120 sales per month x $3.50 = $3,780 for the year.

Book #10… 6 months x 120 x $3.50 =  $2,520.00 for the year.

Book #11… 3 months x 120 x $3.50 = $1,260.00 for the year.

Book #12… No sales, finished last day of December.

Year Three Total Income = $47,880.00

Total Income to Date = $83,160.00

Year #4 (Start Writing January 1st, finish and publish a book every three months)

Books #1-12… 12 months each x 120 sales per month each x $3.50 = $60,480.00

Book #13… 9 months x 120 sales per month x $3.50 = $3,780 for the year.

Book #14… 6 months x 120 x $3.50 =  $2,520.00 for the year.

Book #15… 3 months x 120 x $3.50 = $1,260.00 for the year.

Book #16… No sales, finished last day of December.

Year Four Total Income = $68,400.00

Total Income to Date = $151,560.00

——

Year #5 (Start Writing January 1st, finish and publish a book every three months)

Books #1-16… 12 months each x 120 sales per month each x $3.50 = $80,640.00

Book #17… 9 months x 120 sales per month x $3.50 = $3,780 for the year.

Book #18… 6 months x 120 x $3.50 =  $2,520.00 for the year.

Book #19… 3 months x 120 x $3.50 = $1,260.00 for the year.

Book #20… No sales, finished last day of December.

Year Five Total Income = $88,200.00

Total Income to Date = $239,760.00

Book 17-20 have less sales, so it would take it until year #6 before you cross over the $100,000.00 per year in income.

And, of course, this just goes on into the future. Year six would just have books keep selling and so on. Even if you stopped writing new books.

All that money at 120 books average per month per book over all sites around the world (not just Kindle).

One Last Jab at the 99 Cent Price Point

If you want to know how much you would make at 120 sales per month per book at 99 cent price, just move the decimal over one place to the left since you make about ten times less at that price point than at $4.99 price point.

So instead of making $239,600 total in five years, your total would be $23,960.00.  And $88,200 income in year # 5 alone, you would make $8,820.00.

And if that math ain’t enough to convince you to believe in your own work and trust it and keep writing, nothing will do the trick.

I can average 120 copies per month sales of a novel across all sites around the world. And I routinely write more than four books a year.

But even after all these years, I can’t average 1,200 copies a month for very long.


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60 Responses to Oh, The Math Of It All

  1. Good math. Straight math. But I can pretty much guarantee the next five years will not be a straight line. Look how much publishing has changed since mid-2006. I would not assume 70 percent will be a standard royalty rate. These calculations are based on Amazon’s whim of the moment. Amazon is cool, but maybe they go back to 35 percent across the board. Or alter it in other ways. Or decide they want to cut to 25 percent. Or the market decides it only wants to pay $3 at most for an ebook. Or 99 cents becomes nearly universal, as it is creeping toward in game apps.

    Sure, there’s the argument that other markets will be happy to rush in and maintain the 70 percent to lure more authors. Maybe in five years Kindle is a minority device. And it’s also unlikely anyone would have flat, straight-line sales anywhere close to a monthly or yearly average, since most writers get their best sales right out of the gate. In other words, it’s rare for a book to be hot twice or three times.

    So, yes, it’s a good case to write more, value your work, and get out there and sell. But I wouldn’t bet on five years from now looking even remotely like today. Too many unknowns to map a business plan like this. But I totally agree on, no matter what: write more books. Thanks for sharing, Dean.

    • dwsmith says:

      Scott, I can guarantee that it won’t be a straight line. You are right. And I am not one of those people who only looks at Kindle and think it the world. In fact, for the most part, I don’t pay a lot of attention to Kindle. I am much more interested in how iBooks is selling my stuff all over the planet and how I’m selling in Australia and Europe. Kindle is fine and a top market, but I won’t lose that much if it vanished tomorrow to be honest. I am always puzzled how so many people only put things up on Kindle and think that’s everything. That’s leaving most of the planet off the table.

      But I agree, straight-line is not going to happen. Especially with electronic devices increasing. These numbers should increase with that as well and make selling 120 around the world easy in five years.

  2. But, but Dean! We’re writers! We don’t care about money! We just want to be read! Any money that comes along is just gravy!

    *snort*

    Or so I’ve read in a bunch of blog and forum posts. Poppycock, but there are a bunch of folks who think this way, more’s the pity.

    I completely concur with your thinking here. Of late, I’ve spent more time on the Kindleboards. No particular reason, except maybe that I’ll be putting my first book out next month, and I’m curious how the folks on there view things. I have mixed feelings about the end of month “How’re you doing in sales” posts. I see a bunch of people touting that they’ve sold 1,000 or 2,000 or more titles, and that’s pretty impressive. Then I read that some of them have their titles just priced at $.99, and I can’t help but thinking, “Wow. You made $700 this month. Impressive.” (insert sarcastic tone there) I know I’ve no real authority to criticize, being a newbie myself, but I just think about all the money these folks are leaving on the table by focusing on Amazon rank above cashflow, and I have to do a facepalm. Even guys like Locke. As you pointed out earlier, the money he left on the table is HUGE.

    I’m curious your opinion on one thing, though. You advocate $.99, $2.99 and $4.99. What do you think of a more sliding pricing scale based on word count? I was thinking $.99 for shorts, $1.99 for novelettes, $2.99 for novellas and collections, $3.99 for short novels 75k. That way the price would more accurately represent the amount of time spent to create each, and more readily signal to the customer what it is they’re buying. Not that the product description won’t do that too, but you know what I mean.

    I can guess at what you’ll say: there are no rules. But I’m still curious.

    • dwsmith says:

      Michael, I tend to do sliding scale as well, but under $2.99 with the Amazon cut-off has no value. So my sliding scale with length is this:

      Under 1,000 words: Free (non at the moment)
      Short story…99 cents
      Short novel 15,000-30,000 words… $2.99
      Collection (5 stories)…$2.99 (about 60 cents per story)
      10 plus story collection…$4.99
      Novel 30,000 words up ….$4.99

  3. Tiger Gray says:

    Thank you! Price your stuff like you believe in it, for god’s sake. There are enough people out there who will try and take shots at it. You don’t need to do it, too. Book is not a McDonald’s value menu hamburger!

  4. mikemckee says:

    Your math is compelling. I know that you understand that sales are never that linear, but you’ve sold me on the concept.

    And, having run a retail business, I also know that a portion of income has to go into marketing. Some people can get away with just working social media, but that isn’t going to be true for all of us.

    I can see starting books at five bucks. That sets a professional expectation. I can also see, after getting three or four out, dropping the price of one of the books to $.99 as a loss leader. If playing with price can attract new readers, that seems a reasonable marketing strategy.

    I’m willing to drop a buck on a flier. If the book’s bad, so what? 99 cents is highly attractive. It’s like a lottery ticket. We lose more often than not, yet I have found a couple of new authors to follow that way. I took a $.99 chance on Scott Sigler’s the Rookie and am willing to shell out the regular price for more Galactic Football League stories.

    When I pay $5 or $6(Baen), I expect a decent read. I recently bought a Kindle edition of Kris’ latest Retrieval novel. I would not have done that had I not already followed the series.

    • dwsmith says:

      MikeMcKee and everyone who are using the “drop the price” as a marketing tool, why not just use the credit card idea from back in the Think Like a Publisher series? Or how about listing a code on your web site for a free copy? Or…or….or…. So many ideas without lowering the price.

      That way when someone gets a copy of your book for free or for 99 cents, they know they are really getting a $4.99 or $6.99 book for a promotion. And that way you don’t cheapen your work by lowering the price. You give a copy away as promotion just like page proofs or review copies are done in traditional publishing.

      Just a thought.

  5. John Barnes says:

    As a guy that gets paid to do forecasts (and reminds people that forecasts are like sausage and democracy, the more you like them the less you should look at what goes into them), this is a nice, legit job, but as Dean and others rightly note, OF COURSE it is not a prediction for the next five years. It’s a statement of how the world is working right now and is apt to be out of date in 6 months. But this is like complaining that your headlights only show you the next few hundred yards at most and the road is bound to bend. As long as you see far enough to use your brake, accelerator, and steering wheel, what you do is steer based on what you can see, and stay the frack alert.

    The world does not have enough writers who are lerts. We have even fewer depts and stutes.

    Every few months, do some numbers, think a little, look at what’s moving up and down, ask what you didn’t pay attention to before. It is possible that we are all headed off the same currently invisible cliff, and then your effort will have been wasted. It is possible that all roads lead to paradise, and then ditto. But for everything in between, running those numbers, playing with the possibilities, and adjusting as you go is going to get you there, if anything will.

    • dwsmith says:

      Can’t tell John Barnes is a long time surviving professional writer in this business, can you? His attitude is how professional writers exist and I keep forgetting that so many who read this just don’t think like he and I do about looking out ahead. Of course we can’t see beyond our headlights. Of course I wasn’t trying to predict five years out. Duh. I wake up every morning these days and wonder what changed while I was asleep. That’s how fast things are changing.

      But wow are we long-term professional writers good at changing course, hitting brakes, jumping to a new road, and so on.

      Spot on, John. Thanks!

  6. Folks have been shocked by my tweets along the lines of: if you only publish for Kindle, I won’t ever buy your book. I have a Sony eReader, not a Kindle, and I’m not interested in fiddling with formatting a book to make it read on my device. I’ll just buy another book that’s available in epub format and be done with it.

    Michael – the obsession with sale rankings frustrates me. “OMG! I’m #100 Yay!” “OMG! I’m not selling! Time to make my stuff 99 cents!” “OMG! I haven’t sold anything in three hours!” I’m sure there are more things on the internet than sales rankings on Amazon.

    In the end, I’m not a discount buyer. So, really, I have no interest in being a discount seller either. True, my publisher sets some of my prices, but some are self-published. Those I set and those aren’t Taco Bell priced. I’m fine with taking a little longer to sell and make money. I’m confident in my work. I’m not in a hurry to be #1 on Amazon in my subcategory.

  7. Rick Saenz says:

    More math ….

    Back when I was a programmer in an industrial research lab, a friend of mine was offered a position in a startup that included stock options. He asked them how much the options would be worth if they made 100% of their goals; they told him 100 million dollars.

    He told me he didn’t expect them to make 100% of their goals. But if they only made 10% of their goals, he still stood to make 10 million dollars. And even if they only made 1% of their goals he would still walk away with a million.

    I asked him, “But what if they make ZERO percent of their goals?”

    He didn’t take the job, the company made zero percent of its goals (negative, actually, since there were lawsuits and personal liability at the end of the road), and he continued to earn his cushy corporate salary.

    We can argue about how much money John Locke MAY have left on the table. But we know with certainty what pricing his books at 99 cents allowed him to take–not just money, but heaps of press, the eighth spot on the Kindle million seller list, and a how-to book title that just about any of us would kill for.

    And all in less than a year. And all without locking himself into contracts, pricing schemes, or future directions. Nicely played.

    • dwsmith says:

      Rick, I agree, it was nicely played on his part. And I’ve heard nothing but good things about his books and I might buy one when ones comes out POD or traditional. And I want EVERYONE else who thinks the 99 cent plan will work to go do the same thing.

      I don’t write here for the outlier, but for us normal folks.

      So go to it at 99 cents and I honestly wish you well.

  8. Suzan Harden says:

    There’s something I’ve noticed, and I concede my measley two months of data is not a decent statistical sampling.

    I’ve done some free giveaways for my ebooks. I’ve only had one taker. But I put them up on Amazon, B&N, Smashwords, etc., and people are willing to pay for them.

    Maybe readers want some assurance we writers believe our stories are worth something.

  9. Tj says:

    I agree and I disagree.

    In brief..

    An established writer who’s built a fan-base…probably won’t be best served at the .99 price point. Sure we have the Hocking and Locke..but most of us won’t achieve that level of stellar sales.

    I do believe this is a good choice new writer, just starting out. Once things get rolling, it’s probably a good idea to change pricing strategies. (i.e. sell the first book in the series at .99 but rest at higher price…).

    Again I can’t argue with your math..you’re spot on. But there is something to be said for building critical mass with a lower price point. It’s a good way to get initial sales, a decent amazon ranking, and some momentum.

    • dwsmith says:

      Tj, and everyone who thinks a fan base is of value, go search my name on a e-bookstore. And discover what having a history will do to your indie published books. Trust me, the books I publish under my pen names and under Dee W. Schofield sell a ton more than the ones you have to wade through Star Trek books to find. In fact, if it wasn’t for Kris pushing me, I would just let the Dean Wesley Smith name die off into “whatever happened to” status. But I wouldn’t stop writing. Just let the name go, but Kris thinks that given ten plus years or more, I might be able to rebuild the name a little as a short story writer who used to write media. Time will tell. A LOT of time. (grin)

      Joe Konrath and Mike Stackpole and others have knocked down the silliness of having a name to make sales. Trust me, those of us who have been around long enough have made almost as many enemies as friends. (grin)

  10. I like your math, and I understand it! But I want to ask what you think in my case:

    I have an episodic YA series. Every month I release a 20k novella – the next episode. I do happen to price them at $.99. Down the road, I plan to bundle them, but the bundles will reflect they are $.99/each, just grouped together. It will take advantage of the 70% royalty.

    How do you feel about offering them singly, and later in bundles? If I release 10 a year, plus bundles (totaling about 13~15), do you think the $.99 makes more sense for me? (10x.99 vs 3x.99 releases)

    Love your posts, thanks Dean!

    • dwsmith says:

      J.E., you’re doing basically what I am doing with my short story challenge. I write a story and put it up for 99 cents knowing I will make only a few bucks a month off of each story. Adds up slowly, but not by much. But I am also putting them in collections for $2.99 and larger collections for $4.99 and those sales add up nicely. So I see nothing wrong with what you are doing because it’s basically what I am doing. (grin)

  11. Camille says:

    The other thing to remember, for folks who are too math phobic to run the numbers for themselves, is that if you don’t need to make 100k a year, you have CHIOCES if you don’t discount.

    You could decide you can’t keep up the pace of that many books — either because you take 3-4 hours to write 1000 words, or because you really do want to spend more time rewriting. Or you don’t have to be as nervous about getting those 120 books a month.

    Pricing properly gives you breathing space.

  12. Okay, I like your math, but if 99 cents is a strategy, rather than a policy, I think you can look at it a bit differently.

    If you have one book priced at 99 cents, the first in a trilogy, and you sell 1200 of them in a month, you might sell 800 of the second book at 2.99 and say, 400 of the 3rd, also priced at 2.99 . You make a total of $2820.

    Raise the price of that first book to 2.99, and you sell 500 of them in a month, but only 300 of the second book and 150 of the third. That gives you $1900.

    In that scenario, the 99 cent price point doesn’t look half bad.

    Just sayin’.

    Especially if an author has only had her books up for 6 months, has never been traditionally published, and is in it for the long haul :)

  13. David Barron says:

    The great thing about this math is that it encourages one to write MORE than 4 books a year if you’re not confident that you can make 120 sales per month worldwide regularly (even if you totally can).

    If a writer is going to be inconfident anyways, he might as well channel it into making more money…

  14. John Barnes says:

    It’s a good thought in traditional marketing, anyway. Never ever let them forget what you once charged for it. It makes them feel so smart for buying it, and then once they read it, they find out they’re even smarter than that.

  15. K. W. Jeter says:

    I realize I’m late to the party as far as this discussion is concerned, but for what they’re worth, here are my two cents:

    Consider real estate. You can value your property at whatever price you wish and you can calculate what your profit would be if you were to get that price — but the price you’re actually able to get doesn’t depend upon your valuation but upon the comps in your property’s neighborhood. You might think it’s worth $200,00 but if properties just like it are going for $100,000, guess what price you’re actually going to be able to sell at.

    So in that sense, you are I are not going to be setting the price at which we’ll be able to sell our ebooks. Somebody like James Patterson and other writers at his level will be setting the price. If James Patterson calculates that with his readership, he can make more money selling a certain amount of his books at 99 cents rather than a lesser amount of his books at $4.99, then that’s what the comps are. You’re going to have a hard time making the case to a potential reader who’s not already a dedicated fan of yours, that he should buy your latest book at five bucks rather than James Patterson’s latest at 99 cents. Yes, you’ll be able to sell *some* books at $4.99, but you’ll have to recalculate all your numbers to determine whether you’d actually make more money selling more books at a lower price.

    My prediction is that the downward pressure on ebook prices is just beginning and is going to accelerate. I’m confident that midlist writers are still going to be able to make good money with self-published ebooks, but their business model is going to revolve around a much lower price point.

  16. John Barnes says:

    We also have no idea howthe proliferation of emedia is going to affect levels of reading. With a quarter of our population the French read almost 3x as much per year; South Koreans read much less for pleasure than we do; culture matters a lot. And what e-readers will do to the culture of reading is anyone’s guess. (The printing press triggered a 150-year-long explosion of pleasure reading … and this is at least that revolutionary). I’ve ranted and railed too much in the past about it, but it’s still true: publisher “market research” has never, NEVER, NO NOT EVER been what “market research” is in any other industry, so we know practically nothing about who reads what and why compared to what we know about who buys canned vegetables, or cameras, or deodorant. But the changing tools are also putting market research projects that used to be big-boy only in reach of diligent writers with desktops. That too is going to tip things in all directions.

    At a guess, maybe two full generations before things settle into any sort of stability?

    Or in short, laddie, they issued you that chin strap for a reason, and you’ll want to keep it tight.

  17. Camille says:

    Just remember that ebooks are not real estate, and they’re not commodities. They’re artisanal goods.

    The price has nothing to do with what other items in the same class are going for, but is a negotiation between customer and artisan. The customer doesn’t just want any book — the customer buys a book because she decided she wanted THAT book.

    Remember, people can sample, so you don’t necessarily need a cheap price to sway those who are on the fence. (And those who have tested at multiple prices find that the response bears this out — a cheap price doesn’t work all THAT well, for most books.)

    • dwsmith says:

      Agree, Camille. Sampling is everything. Just as it has always been with customers standing in stores picking up books and looking at the back cover and the first few pages before buying. Nothing has changed much there. People still buy books because they want that book. As a friend of mine says about buying a book. “Have I developed an emotional attachment to needing to read the book? If not, I don’t buy it. At any price.”

  18. K. W. Jeter says:

    I’m not saying that you won’t have some people who will pay an “artisanal” price for a particular ebook. What I’m saying is that there will likely be an accelerating downward pressure on average ebook prices. That will have a knock-on effect on what constitutes a so-called “artisanal” price. Is it five times the average 99-cent price point, or only two or three times the average price? There is no way that the market for a particular ebook at an “artisanal” price of five times the average ebook price is going to be as large as the market at two times the average ebook price. Again, writers will have to calculate whether they can make more money selling more copies at a lower price, or selling fewer copies at a higher price. This is a calculation that’s done for all products, and to believe that it won’t apply to ebooks as well strikes me as wishful thinking.

  19. Hey, Dean! You know how much I love your math posts. ;)

    Followed the math in here, and (given the caveat you and John so eloquently gave – I enjoyed the “lert” comments) completely agree.

    In fact, the math looks great. Assuming you can tell good stories and keep writing them down.

    I’ve been thinking about the whole 99 cent thing, reading Dean’s back to back posts on it this evening. Thinking about where he said “the more I read and the more I see writers like John Locke hurt the rest of us, the more I am going to shout about this I’m afraid” a couple of posts ago… How big a threat are these 99 cent books, I wonder? Is this a downward spiraling trend in price that is certain to happen?

    I find a big chunk of me hoping Konrath is wrong about traditional publishers. His theory is they’re in a “death spiral”, and all on their way out. But so long as they exist, ebook royalties will never drop too low (because they won’t allow it). And so long as they exist, ebook prices won’t ever totally bottom out at a 99 cent standard (because they know they can’t make money at that price).

    On some level, those publishers are a shield whose business sense will help keep indies in good shape too, I think; their best interests and ours coincide here.

    (Was that sacrilege to the Indie Mantra?)

    Anyway, rooting for Kris’s view of the future on this one (some may fall, but others will rise to replace them, life and publishing will go on).

    • dwsmith says:

      Kevin, no doubt in my mind that traditional publishers (legacy publishers, whatever) will continue. Will some fail in this mess? Yup. Will new ones grow into those places? Yup. Will there be new models coming in to replace old ways of doing things? Yup.

      But you are right, the downward pressure that K.W. is talking about is happening, but will level at a certain point (My crystal ball sees all (grin)). $15.99 ebooks just aren’t going to fly, but traditional publishers, who publish the vast majority of all electronic books, must keep the prices in a decent range from $4.99-$12.99 depending on all sorts of factors. And as an author who still sells books through traditional publishers, I want them to hold prices in those ranges otherwise I get even less for any sale. Most of my thrillers sell at the $6.99 ebook price after a time. Assuming my publisher is reporting numbers correctly, and since I don’t have an agent, I get 25% of the 70% they get from Kindle. Math alert: I get $6.99 x .7= $4.89 x .25 = $1.22 per sale. Not as much by a long ways from me selling the books through WMG Publishing, but a hell of a lot more than 35 cents. (grin)

      So no worries on traditional publishing going away. They are already learning new ways and starting to mine the indie publishing authors. Indie publishing = the new slush pile.

  20. camille says:

    K.W. – When I talk about “artisanal” I’m not saying “premium.” I know everybody thinks artisanal means extemely high prices that people pay for snob appeal, but that is not the _economic_ model I’m talking about.

    Artisanal prices may also be LOWER than regular prices. Go to a small town where people don’t have much money and you may find the very best artisanal donuts and pie that you’ve ever had in your life — and they will be very cheap.

    “Artisanal” simply refers to the difference in relationship between the buyer and the goods. Unlike commodities, people buy artisanal goods because they want THAT exacct one, and others won’t do.

    The kind of “artisanal pricing” you’re talking about is not even on the table here – Dean is not proposing that anybody here raise prices higher than the traditional publishers are charging to get snob appeal. We’re all talking about prices which are discount prices.

    • dwsmith says:

      Camille, got that right. $4.99 is a discounted price compared to most traditional published ebooks. I keep forgetting that as well. Thanks.

  21. yeah I know you were not making predictions, Dean, I just like to throw you a little bait now and then.

    My strategy (and it is one that worked once, for me only, and just like John Locke’s, its irreproducible) is,”Hey, why not move prices around and see what works best for ME?” and not only that, “What works best for my READERS?” My sense is my readers are working-class people like me to whom even $6 is a serious consideration. That’s like nearly three school lunches for my kid. And we’re in the worst recession of our lifetimes.

    I’m less concerned about the “value of art” and more concerned about the real price real people are willing to pay. My bestselling book ever and the book I’ve earned the most off is 99 cents. Today. I will probably raise it to $2.99 Friday. And I bet it will make less money after that. That’s been my experience. It’s taken a lot of titles and 15 years, but I am now living the only goal I ever had in this gig–to write what I want and make a living. And I’ll do whatever it takes to stay there, whether it’s 99 cents or $4.99.

    BTW Kindle is gradually sweeping the globe–I am making almost as much on German Kindle as on BN. The iPad is flashy but crap for book sales, no matter how international. But it’s stupid to miss any market. Get in Overdrive, Smashwords, AuthorDirect in Australia. I got a $35 check for a month of Overdrive. Not much, but that’s half a light bill.

    I like your numbers, and your ideas, but I trust my own data more. Then again, I have some books that only sell six copies a month. I may as well price them at $100.

  22. mikemckee says:

    DW Smith said:
    That way when someone gets a copy of your book for free or for 99 cents, they know they are really getting a $4.99 or $6.99 book for a promotion. And that way you don’t cheapen your work by lowering the price. You give a copy away as promotion just like page proofs or review copies are done in traditional publishing.

    Just a thought.

    There are whole websites devoted to pointing out recent price reductions on Kindle books. Selling a discounted book at my website requires getting people there first. Amazon does have that little feature that recommends similar titles. For an experience author it’s a different game than for someone trying to break in. Building a name is a cost of doing business. If that requires sacrificing a book to the alter of almost free, so be it. Many of us are willing to try a cheap sample where we wouldn’t try a $5 book. If you like my promotion priced story are you likely to look me up?

    I offered weekly specials at my restaurant. Sure, there were people who came in only to order the cheaper food. There were more that came in, liked their meal, then came back as regulars. Even when the restaurant developed a predictable waiting line, I still offered the specials. It’s a proven business practice. I made a good living with the place for as long as I was physically able to do the work. Then I sold the place for a good profit.

    The new owner tried to be cheap and squeeze every penny from his customers. He told me that he no longer had to offer specials because he had enough already. Within four years my baby closed.

    Don’t get so caught up in the idea of “value” that you forget marketing opportunities.

  23. K. W. Jeter says:

    Okay, Dean & Camille — so “artisanal” doesn’t mean higher than average price unless you want it to, and “artisanal” doesn’t mean the same as average price unless you want it to, and “artisanal” doesn’t mean lower than average price unless you want it to. So really, the way you’re using the word doesn’t mean anything at all except as a way to rag on somebody like John Locke, not because he’s charging a low price for his ebooks, but because he’s not doing it for the correct “artisanal” reasons. Personally, this seems like a meaningless distinction, but suit yourself. You should price your books the way you feel an artisan would, and obviously Locke will price his books the way he feels a businessman would. He might or might not be correct as to what constitutes the most profitable business model — though I’d really like to see a photograph of this two million dollars he supposedly walked away from — but he’s already made it pretty clear that he doesn’t really care whether people consider him to be sufficiently noble and high-minded. And frankly, in a discussion about what is the most profitable business model, I don’t really see where that point enters into it at all.

  24. Hey Dean. I just wanted to chime in and say I also love your numbers posts.

    You had a similar math-type post several months ago, and it inspired me to really sit down and crunch numbers myself. Before your post, I really was feeling a little lost and confused in the big world of ebook publishing. I had an idea of where I wanted to be, but it was so ephemeral, I felt a sort of terrified despair of ever getting there.

    After playing with numbers in the way you demonstrate here, I suddenly felt relieved and confident. I felt like I knew what I was working toward. I think knowing that has helped me take more effective steps toward getting there.

    Anyway, thanks again for showing me that I could take the reins myself. And thanks for being the kind of writer who’s smart and challenges other writers to be as intelligent and savvy as you are.

  25. camille says:

    K.W. – I think you are willfully not getting it.

    You are right that Artisanal doesn’t mean “high” or “low” – it means that the concepts of “high” and “low” are completely irrelevant. It means that your goods are not in competition with others. They sink or swim on their own.

    People tend to understand the commodities model, so they try to apply it, but it’s a completely different market. Get the commodities model out of your head.

  26. Camille says:

    K.W. -

    On thinking about it, I wonder if it’s a little confusing because Dean and I have two slightly different points of view here. He’s talking about running a business and recommending a price point.

    I don’t recommend a price point at all. My prices are a little below Dean’s, and I give some books away.

    The bee in my bonnet is ignorance about marketing. People are marketing based on stuff they learned in grade school and it doesn’t apply.

    Lower price does not equal higher sales. It only works that way on a portion of the overall economy/market. When you get down to the microeconomics level, there is a whole lot more to it.

    Books are in a portion of the market where price is less important. But price is the only thing most writers understand about marketing — and it’s the easiest thing to do — so they blindly lower prices, and dream of success based on some illusions.

  27. Mark says:

    I agree that we will see increased downward pressure on pricing. It’s only beginning.

    As the big publishers see more and more of their sales coming from ebooks, they will attack the ebook market with more force. Already we are seeing a lot of books from the big publishers sale-priced at $0.99 and a lot of them permanently priced at the under $5 mark.

    Harlequin is set to release hundreds of titles from the ’90′s in July at, I believe, $4.79. I don’t think $4.99 will look like a discount price one year from now.

    What will happen, I believe, is that readers will be more and more conditioned to be accepting of lower prices and will begin to seek them out more aggressively. We already have a market segment that looks for $0.99 books. I expect that market segment to expand as the stigma is removed from that price.

    And as Scott points out, the market is likely to radically change. So good for John Locke making a lot of money NOW because next year the market may be different. In fact, I think it’s different now and someone like Locke starting out might not experience the level of success he had.

  28. Sariah Wilson says:

    I certainly understand the logic behind this post.

    The question for me though is starting out – can I get 120 sales per book per month? I hang out on Kindle Boards and see other newbie authors who are lucky to sell 15 in a month (and may have two or three books already). And that’s at a lower selling price.

    I have thought about doing $2.99 (after having a .99 as a loss leader). But as someone who is not established, would a reader be willing to take a chance at $4.99?

  29. Ravis says:

    How am I the only one here who thinks that $100k per year for an hour a day of work is perhaps a little… Unrealistic? No other job would expect to make that wage for that amount of work, why would you? So when you say “books have to be priced at X or they’re not profitable” I find it hard to agree.

    • dwsmith says:

      Been off running errands for most of the day and come back to all these great comments. I’ll work through them as the evening goes on.

      But Ravis, first off, trust me, a ton of writers make a ton more than $100,000 per year working less than one hour a day on average. That was my point. I think you sort of missed it. (grin)

  30. Ravis says:

    So… Your point is authors should drop their prices? Maybe I did miss it, but it seems you’re arguing that 99 cents is too low. Perhaps you’re also arguing that a 4.99 cover price is too high?

    …confused? :)

    • dwsmith says:

      Ravis, go back and read a few posts ahead of this one and you’ll see what I am talking about. But to be blunt, I think 99 cents is just a silly price for full novels, but fine for short fiction. (Unless you are doing it as a loss leader, which means first book in a series and you already have five or six of the series books up and priced at $4.99.)

      I think $4.99 is the best discount price for a full novel. Still way under traditional publishers, but not discount bin levels.

  31. Camille says:

    Sariah -

    The point is not the exact numbers, but rather the scale.

    Here is something to contemplate for folks who think price is the way to sell books when you’re unknown.

    This morning I had an experience that would seem to support the idea of discounting as a way of building audience. Amazon made one of my books free. The day is not over, and I’ve given away about 7000 books, and my book is at the top of the free list for Mysteries and for short fiction, and at #6 for all Kindle free books.

    This is great. That book, at 99 cents had only sold three copies for all of June up until this morning. And I’ve seen a little boost in the sales of my other books today.

    So price is it, right? If price makes that kind of difference, I gotta do it, right?

    Except that I’ve had books free at Amazon before. The first book sold maybe half the amount in 30 days that this book sold in one day. The second freebie sold a quarter of the total in 60 days.

    These, of course, were short stories and novelettes. And we’re talking about “free” which is a different thing in terms of marketing than 99 cents.

    Still, I have also tested cheaper prices on my novels, and I’ve found only a tiny bit of difference between 99 cents, 1.99, 2.99 and 3.95. My books sell pretty much the same no matter what. They’re quirky. People decide if they are interested based on completely different criteria.

    I haven’t tried above 3.95 because that’s what I, as a customer, consider to be the ideal price for a paperback. (I stopped buying new paperbacks when they rose above that price.) It may not be great business sense, but it makes sense to me.

    IMHO, discount pricing is not a way to overcome being an unknown. (I like freebies because it’s clearly a “sale” and not just a cheap price for a cheap product.) I think it can be a way to boost your visibility once you have a number of books out there and are no longer unknown.

    But that’s not the way to get over being unknown. The way to get past that is to get more and more of your work out there. Post it on blogs, submit to magazines. In other words, get known.

  32. Mark says:

    $4.99 is “way under” new releases from big publishers, but it’s not really way under backlist from those same publishers now. It’s a few dollars under right now, but I bet in a year (or less) it won’t be.

    And as I said in a previous post the big publishers are running sales on their backlist at $0.99 now and permanently pricing some of it under $5. Prices are coming down. If you’re counting on selling at $4.99 because it’s a discount price, that advantage is probably disappearing.

    • dwsmith says:

      Mark, not going to argue with you about the future because my crystal ball is in the shop for cleaning. Just keeps getting all milky. But I chose, and that is a choice on my part, to not price lower without a good reason. If you believe in the future you predict and that makes you feel better about discounting, I have zero issue with that. A belief, either mine or yours, is still just a belief. Only years will tell. And which company survives and which doesn’t.

  33. Great math!

    Just goes to show how a free market works and the importance of impulse buying. The latter doesn’t work beyond the $4 level – and in Europe the €2 level – alas, for books sold at 99 cents in the US, Amazon charges $2 for “whispernet” a copy across the Atlantic plus taxes – bringing the total price to $3.44…a bit on the high side to trigger impulse purchases…

    As one of your readers said, who knows what will happen when e-readers go truly global (the way they’ve done in the US), considering how much Europeans read, in particular the French. So good days are ahead of us…except for piracy! Amazon is full of spam and there’s one guy (a marketing expert called Parker) who’s developed an algorithm to cobble together books with public domain content: so far he is said to have produced 100,000 to 200,000 titles. It is also said that he is about to use his algorithm to produce romance novels – presumably pulling love scenes from across the ether! All sold at 99 cents…

    I do hope Amazon does something to clean out its store of such people…or we might as well all start playing golf!

  34. Probably too late to the party, but I did this, too. Except my numbers are for a part-time writer, writing 2 books a year, and pricing at $2.99.

    http://eawestwriting.blogspot.com/2011/05/self-published-author-deadlines-making.html

    It might help people see the compromise you REALLY make on pricing over the long haul, with just the difference of a few dollars.

    THANK YOU, DEAN WESLEY SMITH for your passion, and willingness to help those of us coming up after you. Your posting about percentages made me hire my cover artist at a flat fee, and she was even understanding on my situation, and we negotiated a graduated fee over three novels. :) I would have tried to offer percentages before because I mistakenly thought that was how fiction worked.

    • dwsmith says:

      Elizabeth, great post. I liked how you are thinking that ten year plan through. Nice! Keep having fun.

  35. K. W. Jeter says:

    Camille — You’re setting your price points using some criteria that suits you, just as you should feel free to do, and John Locke is setting his price point using some criteria that suits him, as he’s free to do. And people are talking about how much money he’s made, not how much money you’ve made. Could he have made even more? Maybe. The only point I’ve been making is that writers can set their price points however they wish, but the market, not the writers, will determine what the most profitable price point is.

  36. Camille says:

    The problem, K.W., is that regardless of what John Locke is doing, people are setting prices which are not at all what suits them — they’re setting the price they think is “smart” using a completely ignorant interpretation of the data.

    That’s important.

    I’ll repeat that: the problem is not what people choose the 99 cent price point, it’s that people think they DON’T HAVE A CHOICE.

    The fact is, most people who price at 99 cents are not doing very well either. Most of the people who test different prices find that they make less money at 99 cents. Some find that they actually sell fewer books.

    There are many reasons to price so low, but it’s almost always a bad business choice, and yet people don’t choose it in spite of it being a bad choice, but purely because they think it is, somehow, a magically good business choice.

    Dean is giving good advice (except perhaps that he said not to experiment — imho, in a changing environment, you should). If you don’t want to follow it, that’s great. I don’t follow it myself. But I don’t try to justify myself by claiming he’s wrong. Because he’s not wrong.

    On the other hand, those who say that a beginner must price at 99 cents (whether it suits them or not) ARE wrong. They are using flawed arguments based on a myth. But it’s a powerful myth, and so a lot of people fall for it as a ‘cure all.’

  37. K. W. Jeter says:

    Camille — Who are these people saying that writers MUST price their ebooks at 99 cents? I haven’t encountered them. The gist I took away from John Locke’s “how I did it book” is “This is what I did, these are the results, and if you believe you’ve got a better idea how to do it, go for it.” If you’ve got an argument to make about what is the most profitable price point for ebooks, then make it and back it up with whatever evidence you have. But right now, Mr. Locke has some bragging rights that some other people, with differing opinions, don’t. Personally, am I totally convinced by John Locke’s arguments? Jury’s still out. But it’s a straw man that he’s telling anyone they MUST publish their ebooks at 99 cents. And to maintain that somehow Locke is misleading people by his simply presenting the facts of what he did and what were the results, or that he’s somehow hurting writers by making his arguments about what he believes the most profitable ebook price point is — hey, those writers are all adults and they’re free to listen to Locke, listen to Dean, listen to you, listen to whomever they wish — and then make up their own minds. I can’t see where Locke or anyone else is saying otherwise.

    • dwsmith says:

      K.W., I’ll answer that one. The Kindle boards, which seems to have a lot of indie writers who get into feedback loops, are the ones shouting over and over that the 99 cent price is the right price. It’s a developing myth and the reason I have done numbers of posts about it here. There really is a wave, or a side in this current fight between writers, about the 99 cent price point. Those who think that price point is the only price point think the rest of us are just sell-outs to traditional publishing enemy and to be honest, I think a person like Locke who priced all his books at 99 cents is just silly no matter what his rational or success. He wrote some great books and thus they sold. That’s my opinion.

      It is quality storytelling that sells books, now, in the past, and in the future. Period.

      So Camille is right, there are a ton of people saying books MUST be priced at 99 cents. And just like Joe Konrath plays at telling us all to go get an agent to screw us, Locke is not helping sanity either by telling us 99 cents is a good price for a novel. I do my best to keep some middle ground, steer people away from giving away their copyright to scammers, and price their books at a discount price of $3.99 or $4.99. But I have discovered that middle ground just gets me yelled at from both sides. (grin)

  38. K. W. Jeter says:

    Dean, thanks for clearing that up. But that’s more of a comment about Kindleboards — which I looked at once and figured it wasn’t worth bothering with — than it is about what’s the most profitable price-point strategy. If people are having a problem with what they’re hearing on Kindleboards, then maybe they should log in elsewhere. Such as here .

    • dwsmith says:

      Agreed, K.W., a discussion, logical and fact-based as much as possible, about pricing is a thing I try to do as much as possible. A discussion about killing the myth that “99 cent books are the only way” is what I try to do as well. Two different discussions. (grin)

  39. Camille says:

    Absolutely. Kindleboards has a LOT of overlap with this blog. (Dean, you may feel like you’re shouting into the wind, but your voice is being heard.)

    But it’s more than just that one forum. KB is just the reflection of a culture — mainly of “new blood” indie writers who have no experience of publishing before reading Joe Konrath’s blog, other than maybe some critique groups where people passed around myths like candy.

    I recently was talking about something (don’t remember which myth it was) and pointed out that when a guru like Locke, or Konrath, or even Dean himself, says something like “Don’t do X because everybody does that, so maybe you should try Y” the reaction among some people is this:

    “NEVER EVER EVER do X ever in life or you will die! And so will 18 random puppies! And YOU will be a puppy-killer, you evil SOB!”

    And many of the people they are talking to haven’t heard the original bit of advice, don’t now why it’s so important, but golly it’s scary and they don’t want to be puppy killers, so they warn each other about it… and pretty soon it’s a full blown myth, and the guru who originally said it is labeled an Evil Puppy Killer for later saying that’s not a hard and fast rule.

    So it is worth repeating: pricing at 99 cents will not turn you into John Locke or Amanda Hocking, and maybe you should leave yourself a little more leeway and leverage because it’s going to be longer, harder haul for you.

    That’s, imho, what Dean’s numbers posts are all about. It isn’t that these exact numbers will apply to everyone. It’s about how much leeway you give yourself by not cutting to the rock bottom. Give yourself some margin for heaven’s sake.

  40. K. W. Jeter says:

    One man’s “leeway” is another man’s profit margin.

  41. Love the math.

    I’ve been trying the 99 cent price to entice extra readers. Frankly, it’s not working for me. Sure, I’m getting a few extra, but not enough to make up for slashing the price. I’ll raise it the first of August.

    I think if you’ve spent the time to write a compelling, good story, have crit and beta readers go over it, spend the money on professional editing and cover art, then I think a book is worth more than 99 cents.

    As Konrath points out, this is a marathon, not a race. Readers will find good work and continue to buy from those authors.

    Best promotion? Write the next book. That’s not to say you shouldn’t lower prices now and then as incentives, especially if you have other books out.

  42. Neil Mc says:

    Great discussion!
    I come at this from a different angle. As someone who has one – count it, one – self-published book to my name, I don’t know much about the business, nor do I have a background in marketing. However, as a former stand-up comedian I remember well that audiences who paid more for a show were less likely to heckle or make trouble and much more likely to laugh. Free or low-cost shows, such as open mics, were the absolute worst; since the attendees had invested little or nothing in admission, they had little or nothing invested in the outcome. I can’t help but wonder if the same holds for someone who paid less than $1 for a book.

    Also, I think lower prices can entice purchases only to a point, after which the consumer starts to wonder if they’re buying crap. Some people are extremely price-sensitive, of course, but others heed the truism that you get what you pay for.

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