Zero-Priced Content
The chapters you have been reading in this ebook have been all about various entirely legal ways of acquiring content at zero price, and we have already seen how free books have come increasingly to dominate the top Kindle Store bestsellers. When books are free, the content is free because either:
• it is no longer protected by copyright due to its publication date, and therefore in the "public domain", (although there is also a long and perfectly respectable history of publishers and retailers selling public domain books for a profit);
• it has been explicitly released by the author or rightsholder(s) to the public domain through a Creative Commons license or some similar device; or
• its price has been set at free or zero either temporarily or permanently by its author, publisher, or retailer in order to make it more widely available, as a promotional strategy for itself or other works, or as a "loss leader", or in order to sell ebook devices, or in order to generate ancillary revenue with an alternative model in which the content drives traffic, affiliate fees, or advertising revenue.
Issues related to free ebooks, music, and newspaper content have exploded over the past two decades with the explosive growth in popularity of the web. The Long Tail author Chris Anderson has been a leading herald of a downward price spiral toward free content, most recently in his book Free: The Future of a Radical Price, which at this writing is priced at $9.49 in the Kindle Store after an initial period as a free book:
Whether this "downward price spiral toward free content" is seen as a viral marketing strategy or as the inevitable consequence of the spread of new technologies, it is obviously unsustainable at its final, absolute level. Whether one thinks of Anderson or me or anyone else who writes a book entitled Free or Kindle Free for All as authors, as content providers, or as search engine and advertising magnets, either we must have ways of being paid for our work or we will have to find other work. Author Malcolm Gladwell has offered an uneven critique of the free content approach in his New Yorker review of Anderson's book at http://bit.ly/Gladwell-on-Free.
While controversies over the apparent death spiral of a newsprint-based newspaper industry and the rise, fall, and rise of Napster and various business ventures which followed it have made us all a little more knowledgeable and a lot more opinionated about free content and its attendant issues, it is important to remember that there are special issues in each category there that should keep us from lumping all forms of free content together. With some exceptions, ebooks do not suffer because they contain information that readers would otherwise get for free online, and with even fewer exceptions, ebooks cannot be seen as loss leaders to inspire readers to buy concert tickets for the next live show by Stephenie Meyer or James Patterson.
DRM and DRM-Free Content
We discussed Digital Rights Management (DRM) briefly in the context of digital music such as MP3 files back in Chapter 9, but it is an equally gnarly issue in the context of the Kindle specifically and ebooks in general. The much-ballyhooed and often confused July 2009 "the Kindle ate my homework" controversy over Amazon's removal of two copyright-violating George Orwell novels from customers' Kindles put a spotlight on our worst fears about DRM.
Amazon's motivation for its DRM policy may well be based on a business need to protect publishers' copyright interests as a necessary basis for their participating, but one does not need to sport a tinfoil hat to realize that DRM can become a more ominous restriction in a world where the Kindle's Whispernet wireless connectivity is a two-way street.
In essence, the fact that most Kindle editions currently come with DRM combined with Amazon's nearly constant wireless access to the Kindle hardware that we have purchased gave Amazon the power to go back into our Kindles to grab and delete not only the books that customers had purchased and downloaded, but also the annotations, highlights, and highlights that they had made in the text. To the shock and outrage of many, that is just the "Orwellian" step that Amazon took when it discovered that two of the Orwell novels being offered in the Kindle Store were in copyright violation. Even for those of us who understand and sympathize with the importance of protecting the Orwell copyright interest, there seemed little excuse for the fact that Amazon acted surreptitiously, without warning, and without providing customers with the chance to download an alternative copyright-compliant version and synch up annotations.
To his credit, Amazon founder and CEO Jeff Bezos offered an exemplary apology for the company's actions. That has not kept some customers from filing or contemplating class action lawsuits over the matter, and it will continue to fester as part of a broader set of concerns and campaigns around DRM until, at the very least, Amazon brings greater light and clarity to the DRM issue and guarantees that it will not repeat such actions in the future.
As I have written elsewhere, I believe it is likely that Amazon will eventually follow in the footsteps of Apple, iTunes, and the iPod with respect to DRM by loosening DRM restrictions on Kindle editions in the future, perhaps at a pricing premium. But such predictions from me fall far short of a guarantee, and as technology blogger Mike Elgan pointed out in an interview with Len Edgerly on his The Kindle Chronicles 53 podcast, DRM is very much in Amazon's business interest now in exactly the same way it was, at first, in Apple's interest, because "the biggest buyers of books actually invest their time and money into a format which is Amazon's format…"
"The way [Apple] set up the iTunes store and the way they did DRM and all that stuff.… After a year or two went by and Apple became the number one player people had invested enormous amounts of money in buying songs, and to move to a competitive player was kind of out of the question for a lot of people because they couldn't just abandon a thousand dollars worth of investment in songs…. [So, since] the top five per cent of book buyers buy 20 per cent of the books … the biggest buyers of books … those heavy duty users .. those are the people who Amazon has essentially captured into its format [with the Kindle]."
The reality, of course, is that we'll have to wait and see. The practices and initiatives of readers, authors, publishers, retailers and perhaps even courts and government agencies will play out in ways that are probably too complex to predict at the present time, and even Amazon itself will have to share the tiller as we navigate these rapids. Meanwhile, for an excellent introduction to DRM issues as they relate to ebooks, I strongly recommend DRM: A TeleRead Primer, posted on December 6, 2008 by Chris Meadows.
Between the Chapters, and Just Between Us: The Future of Free in the Kindle Store
Do you like free books? I thought so.
Did you know that there are hundreds of Kindle authors who want to make more Kindle books free but are -- as of late 2010 -- prohibited from doing so?
That's right. Large publishers use free Kindle books -- often with one book in an author's series, or that sort of thing -- to help market authors' other books. There's a good chance that your Kindle library already contains some of these books or, if you are new to the Kindle, that it soon will.
Unfortunately, while Amazon has done great things to level the playing field for indie authors in other ways, it is still impossible for the authors and publishers who use the Kindle Digital Text Platform to help connect with readers by occasionally offering free Kindle titles.
Don't get me wrong. The last thing I want to see is a great cluttering of the Kindle Store. But it would be easy for Amazon to establish clear and consistent limitations on zero-priced book promotions and then to allow such promotions across the board. It would mean more free books for customers, but if handled properly it would also lead to more paid book sales for authors, for publishers, and for Amazon.
For instance, an author or publisher with anywhere from 3 to 200 titles might be allowed one free promotion at any given time, and at higher levels no more than 1% of their active catalog could be offered free. The other titles would have to be enrolled in the Kindle Store's 70% royalty program, and other appropriate requirements
could be added.
If you'd like to see that kind of innovation to give small presses and indie authors a fair chance to compete with the agency model publishers, I hope you'll consider sending an email message to [email protected], with a cc to [email protected] and [email protected]. Maybe it will result in a real free for all!
Ch 12: The Myth of the Kindle's "Standard" $9.99 Price, the Agency Model, and the ABCs of Kindle Store Pricing
If you were to rely strictly on the mainstream media coverage of Kindle-related news for your information, you could not be faulted for believing that most Kindle books are priced at $9.99.
In fact, fewer than one out of every ten Kindle Store books -- 9.5% as of December 2010 -- are priced at $9.99. The vast majority of the rest -- 75% of all 785,000 Kindle editions -- are priced below $9.99, including over 99,000 titles that are priced anywhere from 99 cents down to "Free."
Part of the cause of this confusion comes from Amazon itself, since the company's marketing efforts for the Kindle have sometimes focused on the $9.99 price point as if it were a standard price. But as some "agency model" publishers have formed an alliance of questionable legality with Apple mogul Steve Jobs to try to drive ebook prices higher, Amazon itself has countered by bringing a wide array of authors and publishers directly into the Kindle Store and by adjusting its royalty structure to allow authors to earn better royalties on ebooks priced from $2.99 to $4.99 than they previously earned on paperbacks priced in the $7.99 to $15 range.
Every few weeks we do a statistical analysis of prices in the Kindle Store with a view toward answering the following questions and seeing where the trendlines emerge:
1. What's the overall size of the Kindle catalog and how does it compare with that of other ebook retailers?
2. How successful has Amazon been in herding prices into its preferred corral between $2.99 and $9.99, inclusive?
3. How successful have the big agency model publishers and their Black Knight, Apple anti-reading crusader Steve Jobs, been in raising Kindle Store prices above $10?
4. Has there been a significant change in the title count for Kindle books priced under $2.99 since Amazon began paying a 70 percent royalty for books in the $2.99 to $9.99 range?
5. Overall, are ebook prices going up or down or staying about the same?
6. Are their changes in the price composition of the Kindle Store's key bestseller list, the Top 100 Paid Books?
7. Are there any noteworthy trends with respect to free books in the Kindle Store?
As of early December 2010, here's what we found:
1. Overall Catalog Count. There are currently 769,766 books in the Kindle Store, which means that the count has grown by about 12,000 books a month since we last checked in in early September. It also means that the Kindle Store catalog has almost doubled from its level of about 410,000 books when Apple announced the iPad and the iBooks Store in late January. The iBooks Store launched with 60,000 titles in early April and has grown to something in the range of 70,000 titles in the seven intermittent months. We'd ask "what's up with that," but we don't want to do anything to distract Steve Jobs or interfere with his sense of balance as he stands on Amazon's shoulders and holds onto the iBooks Store's reported 6 percent market share.
2. Titles in the $2.99-$9.99 Range. You'd have to say that Amazon is doing reasonably well at herding prices into its preferred price range of $2.99 to $9.99, but it could do a lot better. The number of titles priced in that range is at 65 percent, the highest it has been at any time this year. It hovered around 51 percent early this year, then jumped to 57 percent in the Spring after Amazon announced that books in that range would qualify for an increase from 35 to 70 percent royalties (net of delivery costs). The percentage grew to 64 percent once the royalty change took effect in early Summer, and has grown by less than 1 percent since. However, it is worth pointing out that titles priced at exactly $2.99 have seen the most significant overall increase of any Kindle Store price point, growing from 18,804 to 29,042 since September 5.
3. Agency Model Pricing Above $10. The Agency Model, if you've come a little late to this party, is a baldly anti-consumer price-fixing conspiracy (I wish I didn't have to use that word, but sometimes a conspiracy is just that, a conspiracy) that was hatched at the beginning of 2010 by some combination of Steve Jobs and executives of five of the Big Six publishers, with Random House abstaining. The stated goal was to mandate retail prices for Kindle books, and all other ebooks under the agency model publishers' control, at levels that would be 30 to 50 percent higher than the $9.99 price that Amazon had previously set for Kindle Store new releases. The only slightly less obvious unstated goal was to slow the migration of readers from print books to ebooks. (Retailers had always had the freedom to discount as they saw fit from the publishers' suggested retail prices in the past, and Amazon had in fact been selling many Kindle titles as loss leaders.) Since the Agency Model went into effect on April Fool's Day, the percentage of the Kindle Store catalog priced in agency-model heaven at $10 and up has fallen from 21.7% to 19.2% on May 22, 18.8% on June 14, 18.1% on July 18, 16% on September 5, and 15.3% today. So what's really going on? Clearly, some agency model publishers are breaking ranks whenever they can in order to actually sell some books. Too many books that readers actually want to buy, of course, are still being priced at silly levels, including many at levels that are within a few cents of print editions, or even higher than print editions. But it is also clear from anecdotal evidence that the large traditional dinosaur publishers' overall share of the ebook market -- both in terms of share-of-catalog and share-of-sales -- is declining as growing numbers of authors go direct-to-Kindle or publish through more innovative companies like RosettaBooks, Open Road Media, AmazonEncore, and hundreds (at least) of other indie publishers.
4. Books Priced Under $2.99. This may just be some kind of minor blip that could involve books from a particular publisher being allowed in through a crack under the door, but while there hasn't been any major sea change in the total number of books priced under $2.99 (20.8 percent, up from 20.6 percent three months ago), there is a noticeable bump in the percentage of books priced between a penny and 98 cents. That group, at price points which are not accessible to authors and publishers who use the Kindle Digital Text Platform, has more than doubled from 6,914 to 14,688 since September 5. There may not be much money in it for the rightsholders given the low prices, and there has not been any corresponding increase in the number of books priced at exactly 99 cents, but it is clear that books at these prices continue to have a strong impulse attraction for Kindle Store buyers. And this is as good a place as any for me to acknowledge that I was wrong to scoff, earlier this year, at any author or publisher who would price a book below $2.99 under the new royalty structure. Although it is true that a 99-cent book would have to sell six times as many "copies" as a $2.99 book to achieve the same royalty earnings, it is clear to me that there are a significant number of books like L.J. Sellers' The Sex Club and Scott Nicholson's Disintegration whose sales are getting an extra boost in something like that 6:1 range because, in addition to being very good, highly rated reads, they also stand out due to their low prices.
5. Overall eBook Prices Are Falling. As much as we may be frustrated with the occasionally ridiculous individual price, and despite the last-gasp efforts of publishers who may be ensuring their own demise between the agency model scam and various other evidences of institutional cluelessness, there is a continuing trend toward reasonable ebook pricing that is evident in the Kindle Store prices. It is not a relentless downward spiral to zero, which would not serve any us well in the long run: the percentage of books priced below $2.99 has fallen dramatically since Amazon announced its new royalty structure. But the overall percentage of books priced under $10, which was never over 80 percent prior to the agency model, grew to 84 percent by September 5 and stands at 85 percent today.
6. Bestseller Prices are Also Falling Gradually. While some big-name authors have
been able to sustain high sales levels with prices at $12.99, $14.99 and even, in the case of Ken Follett, $19.99, the overall composition of the Top 100 Paid bestsellers in the Kindle Store continues to show a downward drift, with a high likelihood that even those books that hold on to Top 100 rankings at the higher agency model prices are leaving a lot of money on the table due to price resistance among price-conscious Kindle owners. As of this afternoon, only 26 of the top 100 were priced at $10 and up -- down from 30 in July and 28 in September -- and only three of those were priced above $12.99. Even the number of Top 100 bestsellers priced at $9.99 has taken a dive -- from 29 in September to 24 today -- so that for the first time since Amazon began bifurcating its bestseller list to separate free listings from paid listings, fully half of the titles in the Top 100 Paid bestsellers are priced below $9.99.
7. Free Books are Still Getting the Love. The number of free public domain books in the Kindle Store, which had held at just over 20,000 for over a year, dropped to about 16,550 when Amazon performed a bit of a housecleaning this Summer, and has held steady at the level for several months. There has been a gradual increase in the number of free contemporary or promotional titles in recent months, so that this figure as of this afternoon stood at 183, close to its highest level ever. Some of the promises of earlier this year, such as the one involving Amazon's collaboration with the British Library to release Kindle editions of over 60,000 free 19th century titles including the popular "penny dreadful" novels of that era, remain as far from being fulfilled as Google's monthly promise that it will launch Google Editions with a few months. And our hope that Amazon would level the playing field for indie authors be allowing the occasional indie-author freebie has, thus far at least, come to naught.
That's our story, and we're sticking to it. Here's a link that should bring up some of our past posts on pricing in the Kindle Store catalog.
Kindle Free For All: How to Get Millions of Free Kindle Books and Other Free Content With or Without an Amazon Kindle Page 8