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The rise of the 99-cent Kindle e-book

With 20 percent of the top-selling books on the Kindle priced at a dollar or less, should traditional publishers be concerned about price erosion? You betcha, says CNET's David Carnoy.

David Carnoy Executive Editor / Reviews
Executive Editor David Carnoy has been a leading member of CNET's Reviews team since 2000. He covers the gamut of gadgets and is a notable reviewer of mobile accessories and portable audio products, including headphones and speakers. He's also an e-reader and e-publishing expert as well as the author of the novels Knife Music, The Big Exit and Lucidity. All the titles are available as Kindle, iBooks, Nook e-books and audiobooks.
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  • Maggie Award for Best Regularly Featured Web Column/Consumer
David Carnoy
7 min read
Around 20 percent of the 100 best-selling Kindle books cost a dollar or less. mixandmatchrecords.info

Not long ago I did a story about how e-book piracy was accelerating and that publishers should be concerned. But while piracy is certainly an issue, there's something else lurking out there that may be a bigger problem: e-book price erosion. Or put another way, the blogification of the book industry.

Now, I know what you're saying: that's great news. These publishers have been gouging us with ridiculous pricing for digital files that cost next to nothing to produce (in terms of material costs) and finally we're starting to see lots of deals out there. But it's a bit more complicated than that.

How we got here
First, a little history. Just last year, the magic price point for a lot of indie (self-published) authors was $2.99. Why $2.99? Well, if you price your e-book at $2.99 or higher, you get a 70 percent royalty from Amazon when using its Kindle Direct system, or 65 percent from Barnes & Noble when using its PubIt self-publishing platform. That means that if you set your price to $2.99, you make around $2 on each copy you sell, which is damn good, especially if you sell a lot of copies, which certain indie authors do.

But if you drop below $2.99, you end up with a 35 percent royalty. That's a big difference, but it's still better than what you get on an e-book from a traditional publisher (25 percent of the net sale, which comes out to around 17.5 percent of the price of the book). Still, you'd think that most people would choose to go for the 70 percent royalty.

Most of them used to. But then something happened on the the way to the check-out cart. Some authors started saying, "Screw it, I'm not selling that much at $2.99, I'll just go to 99 cents and see what happens." And bam, some of these books took off. And some really took off.

Case study: "Fifth Avenue"
Christopher Smith, who wrote the novel ""="">"Fifth Avenue," priced his novel at $2.99 when he launched it last October. He says that with some social media outreach--he did an iPad and a Kindle giveaway for those who tweeted about the book--and little else, the book quickly reached the Amazon Top 100 and peaked at No. 4. After the initial rise, Smith then decided to drop the price of the book to 99 cents to maintain his ranking in the top 100, which is key to generating sales.

Thanks to some controversy over gay sex scenes in the book that touched off heated discussions in Amazon's Kindle message boards, Smith says "Fifth Avenue" remained in the Top 100 for three months and also has done well on Amazon's U.K. Kindle Store. His sales, he says, are in the "six figures," and he's now represented by an "A-list" agent, Matt Bialer at Sanford J. Greenburger.

"Fifth Avenue" spent three months in the Amazon Top 100, mostly selling for 99 cents.

"When I went to 99 cents, I was going for longevity," Smith says. Later, when he was firmly planted in the Top 100, he started playing with pricing and listed the book back at $2.99. For every $2.99 book he sold on the Kindle, he needed to sell six books at 99 cents to make the same amount of money. While he drifted downward on the best-seller list, if he priced at $2.99, he says he was making significantly more money.

"To keep the book on the list as long as possible, I'd just switch it back to 99 cents and it would quickly climb the list again," Smith says. "Rinse and repeat. This went on for months."

The App Store effect: Price drops
In some sense, what's happening in the Kindle Store is what's already happened in Apple's iPhone App Store, where developers have been forced to lower their prices to 99 cents to compete (recently, Angry Birds' maker Rovio told fellow developers to get used to pricing their apps at 99 cents). The price erosion isn't that great yet on the Kindle; there are still plenty of $9.99 and higher e-books out there from traditional publishers. And many of them still sell very, very well. But with so many more e-readers and iPads out there, the market has grown large enough--like the iPhone market did--that you can actually make decent money at 99 cents, particularly if you crack the Top 100.

You'd think that even at a low price, people might have some reservations about buying a self-published e-book with no "professional" reviews on them and reader reviews that aren't exactly screened (it's no secret that many authors get friends to seed their books with user reviews). But apparently not. Arguably, then, like apps, e-books have turned a lot of people into cheapskates or, to put it more politely, serial bargain hunters.

Whether people ultimately end up reading these cheap books--or just collecting them--is open to debate (some argue that because people have invested a reasonable sum of money in buying a book, there's less urgency to read it). But Smith says his experience contradicts that notion. He says he's received a "massive amount of fan mail," as well as "hate mail from conservative groups" who want a warning label put on his book for those aforementioned gay sex scenes.

The new pricing sweet spot
Just how many 99-cent e-books are in the Kindle Store's Top 100 on Amazon? Well, at the time of this writing, I counted 17 e-books priced at a dollar or less on the list. If you take away the game titles, newspapers, and magazines that are on the list, you're looking at the 99-cent e-book making up slightly more than 20 percent of the list. In some cases, authors like John Locke have multiple 99-cent best sellers (read one and think it's good, you buy the rest, right?) and other extraordinarily successful indie authors like Amanda Hocking have a mix of 99-cent and $2.99 best sellers. In fact, these cheap indie titles may be even more popular than they appear, since they often aren't included in mainstream best-seller lists like that of The New York Times.

As for the Nook, Barnes & Noble is somewhat new to the self-publishing game with its PubIt platform, but more indie authors are starting to bring their books to the Nook, which has a 25 percent share of the e-book market in the U.S., according to Barnes & Noble CEO William Lynch. (Sites like Smashwords allow you to publish to multiple e-book platforms, including Apple's iBookstore, in one shot and only take a tiny cut of your profits). In a recent e-mail to the press, Barnes & Noble noted that 35 titles in its top 200 were from indie authors.

Whither publishers?
None of this bodes well for the publishing industry. Why? Well, 99 cents and $2.99 works for self-published authors, but it's probably not going to cut it for traditional publishers or the authors who sign on with them. The exodus won't happen right away, but you're seeing such established authors as Seth Godin hiring their own editors and graphic designers and creating what are essentially their own "imprints" or publishing companies through Amazon's newly launched Powered by Amazon program.

Amazon also has its Amazon Encore program that identifies breakout self-published books and helps market those books and authors to readers. To take advantage of much higher royalty rates and Amazon's incredibly powerful promotional tools, more authors will undoubtedly take this route, as Amazon's book selling continues to grow as more bookstores go out of business. The speed with which Amazon can bring books to market is also appealing. The gestation period for an Amazon Encore book (yes, Amazon, too, has hired its own editors and graphic designers) can be much shorter than a traditionally published book, which usually takes around a year to come to market after a manuscript is turned in.

As someone who's gone from self-publishing to traditional publishing, I'm in the unusual position of wanting to defend both. While many of these 99-cent books simply can't find an audience if priced higher and won't attract the interest of traditional publishers no matter how many copies are sold (because traditional publishers know they can't sell those books at higher prices), I certainly appreciate the more democratic, free-market nature of the Kindle, which has provided a way for overlooked, talented writers to get noticed and be evaluated directly by readers rather than a phalanx of gatekeepers who are looking at excuses to say no rather than yes.

Of course, there are plenty of e-books priced at 99 cents that don't get any traction at all and Smith, like others (JA Konrath, for example), maintains that an e-book has to be really good to sell. Not only does that mean it has to be well written and offer a compelling story (or subject in the case of a nonfiction book), but it should be professionally edited and copy edited. It's also crucial for the author to hire a graphic designer who's well versed in designing book covers.

While there's certainly a lot of truth to that, I'd argue that if you have a good cover and are able to come up with just a bit of creative marketing, at 99 cents--and lowered reader expectations--you can get away with your book being "good enough." And in fact, like the rise of blogging, volume and speed may end up being more important than top-notch quality (so much the better if your books happen to be spectacularly written page-turners).

Smith likes to mention that his success helped lead to a blurb from Stephen King, who is his neighbor in Maine. That's a nice marketing tool to put on your Amazon page, but it's interesting to note that King didn't actually make a comment about the book.

"Put me down as an enthusiastic Christopher Smith fan," King said. "Smith is a cultural genius."

Stephen King is smart enough to know the writing is on the wall. Will publishers?

More: How to self-publish an e-book