Value by Nathan Lowell

Over the last couple of years there's been a lot of hand wringing in certain quarters. You've heard it, I'm sure.

"Race to the bottom."

"Devaluing the Arts."

I hear publishers talk about their inability to compete against "cheap" books and how authors won't "lower their standards" to release a title that's "undervalued."

Mostly I laugh and shrug it off. From my chair it's kinda silly really. I'm a full time author. I make my living from selling my stories. I had to turn down a six book deal from one of the Bigs because -- honestly? they couldn't match my current income and I had no faith that they understand the marketplace well enough to expand my reach. Others have different opinions and I say "Vive le difference!" (with apologies for lack of proper accent marks and all.)

But at a convention recently I heard a publisher say how difficult it was to turn a profit with low priced books. The costs to produce the work is the same, after all, whether it's delivered in paper or streams of electrons. Everybody nodded sagely, but that got me thinking.

Does it?

Really?

So I did a little back of the napkin estimating. I have a pretty good napkin because I produce my own books as well as publish through a small press. Here's what I get:

• Cover - $1000 - that's too much. I just commissioned some custom artwork for a three volume set for $900 but say you're going whole hog


• Editor - $10,000 - that's for an 80,000 word novel - again, too much but play along


• Layout - $1000 - seriously, if it's costing you that much? Call me. I'll do it for $500. It's two hours work.
  

You with me here? There's something special about these costs that's really important.

You have to spend them before you sell a book. They're fixed. You know how much they are. The only variable cost in book production has to do with printing and shipping. And the variable cost for ebooks is -- say it with me -- approaching zero. It's not exactly zero. More like half a cent. Round it up to fifteen cents because Amazon delivery costs based on file size start at fifteen cents per megabyte. Few properly formatted books are that big.

Marketing expenses are interesting because, again, it doesn't matter what channel you're selling on. What you spend for marketing is completely discretionary. You can substitute sweat equity there quite easily. If you've been paying attention to the growth of social media (and ignoring most of the social media marketing people), you know know just how valuable a ravenous fan base is -- and how much good word of mouth counts. If you're relying on mass market tools (like advertising) to work on micro market channels, you're probably frustrated by the whole marketing thing anyway, but again, that's probably another post.

So marketing is whatever you can afford, but it has nothing to do with the distribution. You'll do it, or not, depending on a lot of factors that are under your control and discretionary.

But this is where I choke on the arguments about pricing and the value of an artist's work.

As an artist selling my work, I don't really care about the sticker price. It's not that I'm altruistic, rather I have a healthy respect for how price controls the supply and demand curves for any given product. I don't care how much or how little you charge per unit (assuming you're covering the variable costs of producing that unit). What I care about is how many zeroes on my monthly royalty check.

Anybody in production can tell you that profit and loss is really a function of the "break even point." That's the number of widgets you have to sell in order to cover the fixed costs of production. With low price, each sale only nibbles at recovering the sunk costs. With a higher price, you can recover those costs quicker. The problem is that as the price goes up, the demand goes down. What every producer worth his or her balance sheet is looking for is the sweet spot where revenue is maximized. You don't necessarily want to sell a billion units if each unit costs you a buck to make. Alternatively, charging a billion dollars and hoping you'll sell one unit so you can retire is not really a viable strategy for most goods.

Which is where ebook pricing comes in.

The argument that publisher has to charge $10 or more (even $7.99 or more) for a book because they need to cover their costs is a bit disingenuous. The idea that it somehow devalues the artist's work to charge $2.99 or even 99-cents is perhaps more honest. The argument "I spent several months working on it and I'm going to charge you for that pain" has some merit perhaps, but as an author myself, what matters to me is covering my bills so I can continue to do the work that I love without having to get a day job to support my writing habit.

Here's the thing.

A sticker price of $10 or more on an ebook doesn't give me the message "This work has merit so I'm charging a lot for it." To me, it's not an expression of value, particularly when rendered by a publisher who "needs to charge that much to recover costs." To me, it's saying the publisher doesn't think they can sell many copies, so they have to recover as much of their sunk costs as they can. In effect, they're telling me they don't believe that the book has a market.

If the publisher doesn't believe in it, why should I?