Pricing Digital Content

 Posted by at 6:57 PM  Tagged with: , , , , , ,
Apr 122010
 

We are seeing more and more digital content, including:

  • E-Books
  • Downloadable & streaming movies and TV shows
  • Apps and games
  • Magazines
  • Newspapers

This digital content costs less to produce and distribute than the non-digital version. It eliminates printing costs, fabrication of DVDs and DVD cases, and shipping costs, just to name a few. So why isn’t this stuff getting less expensive?

The problem is that the content providers are generally overcharging. Why can I rent a DVD from RedBox for $1, or unlimited movies for a month from Netflix for $9, but on the iTunes Store I’d have to pay $5 just to stream a movie one time, or $15 to download it? Why are you charging $3 for a single TV episode I could watch for free? Why are many e-books $9.99 and up, even when they have a paperback version out for several dollars less? Do they really expect me to pay $5 for a single issue of Time magazine, or $20 a month for the Wall Street Journal? Don’t they give it away for free on their website?

And, one thing I quickly noticed on my wife’s new iPad: all those $0.99 and $1.99 and $2.99 iPhone apps have iPad versions that tack “HD” onto the title and sell for $4.99, $9.99, and $14.99. A tad greedy, methinks.

What these content providers don’t seem to realize is that the great benefit of digital content is that there is no marginal cost. Once the content itself is created, you can sell an unlimited number of digital copies for essentially no cost. Yet, many of these providers are still stuck in the tangible retail model, where they need to make a certain profit margin on each book, or CD, or magazine that they print or produce. What they fail to realize is that they could cut prices in half and probably sell 3, 5, maybe even 10 times as much content, doubling or tripling their revenue and profits. (Also, to the extent that magazines and newspapers make a lot of money on advertising, even selling only twice the content at half the cost is a huge win for them.)

I grappled with pricing issues with my e-books. I first priced them at $4.77 each. I figured that was a “fair” price for an e-book, about half the cost of a paperback, so the readers were getting a good deal. But then a funny thing happened. I tried selling them for just 99 cents each. A little voice in my head cried out that I was “devaluing” all my hard work (those books took over a year each to produce) and that they were “worth” more than that. But when I sold 7, then 20, then 35 times more copies at $0.99 than I did at $4.77, it didn’t take long for me to silence that tiny voice. But what I don’t understand is that, if I can figure that out, why can’t the movie studios, large publishers, and newspapers?

Think about it. I’m not gonna pay $5 to digitally rent a movie I can get for $1 elsewhere. But if that movie was $1 or $2, I’d probably digitally rent at least a few a month for the added convenience. So, the movie studio can make $0 off of me, or $6 a month. Remember, it costs them almost nothing to actually stream the video to me. So who’s winning with these high prices?

That doesn’t even consider the fact that higher prices increase piracy. I don’t think overcharging makes piracy okay (you’re still illegally downloading something you didn’t pay for), but it helps people justify it in their own minds when they can say, “Screw these greedy movie studios. I’d never pay $15 for that movie anyway, so they’re not really losing anything by me pirating it.” When an e-book is just 99 cents, for example, the vast majority of people would rather just pay what they consider a fair price than resort to piracy. Apple figured that out with 99 cent music downloads … and the greedy music studios forced them to raise prices to $1.29 … and (prepare to be shocked) digital music sales declined for the first time ever.

On the other end of the spectrum is the “everything should be free on the Internet” model, which people are slowly realizing doesn’t work (even newspapers are finally figuring it out as they lay off reporters and editors). The problem with everything being free is that the people who create quality content need to get paid, so you can get insightful commentary, professional journalists who can travel to report on stories, quality television and movies, and well-written novels. If even the people who are very good at creating content can’t make a living at it, they will take their talents somewhere else that pays the bills, and we’ll all be poorer for it.

So, my belief is that people are willing to pay reasonable prices for digital content (read: less than the old cost of physical content), and that lower prices (that are still above free) will result in more sales and more revenue, and will allow more people to enjoy more content. That’s a win-win in my book.

Around The Web: Smashing & Slanting

 Posted by at 3:21 AM  Tagged with: , , ,
Apr 052010
 

Kindle on the iPad

I was pleasantly surprised to find a couple of nice mentions of my novels around the web today:

• Mark Coker, founder of the wonderful author service Smashwords, posted about Right Ascension as one of the first Smashwords books available on the iPad.

• Over at True/Slant, Roger Theriault gave his thoughts about the new iPad, and reading on it compared to his Kindle. He also expressed chagrin at some of the high prices traditional publishers are demanding for e-books. He said:

Publishers want readers to pay more – but the alternative is the library or a used bookstore. Or independent authors…

David Derrico’s sci-fi novels Right Ascension and Declination are both $0.99 in e-book format from Amazon or Apple. I’ve read the first and I’m working on the second novel. Both are excellent alternatives to expensive e-books. There are many self-published authors in various genres, both fiction and non-fiction, with affordable and highly readable e-books. I think established publishers are sinking their own ships (and their authors as well) with their pricing strategies.

Thanks for the mention, Roger, I’m glad you’re enjoying them!

iPad: Hands-On Review (Early Impressions)

 Posted by at 5:25 PM  Tagged with: , , , ,
Apr 042010
 

You need something to read on your new toy, right?Yesterday was my wife’s birthday, and we somewhat spontaneously decided on her birthday present the night before: an iPad. We hadn’t pre-ordered, so we stayed up all night and went to stand in line at the Apple Store at 6:30 AM. All went well, and we came home with a new iPad (Wi-Fi model) yesterday.

Many have touted the iPad as a “Kindle-killer” and the next big thing in e-book reading. Others say it’s just a big, overpriced Apple iPhone / iPod Touch. Others consider it aimed at a totally different market than the Kindle. So, my early thoughts (after only using it for a day):

So far, I like it more than I thought I would. It’s a good size for web browsing, pics, and stuff. And gaming on it is really fun (we did not have an iPhone or iPod Touch before). Now, we didn’t leave the house yesterday, so the size and weight and lack of 3G connectivity has not been an issue. And it’s still new and “cool” … will we still use it as much in a few months?

One big reason I like it is because the battery is impressive. Reviews said it gets 11-12 hours of movie watching, and with heavy use yesterday it lasted all day, probably 12 hours or so before we recharged it. That’s very good — although not Kindle territory.

As for reading books, I poked around on the Apple iBook Store (and was pleased to see Right Ascension and Declination show up on there, for just 99 cents each, on the day of launch!). I haven’t tried reading on it for any length of time (I’ve mostly been setting it up, downloading apps, and playing games). The bigger screen is nice, and a good battery is a plus, and the navigation seems simple (like the Kindle). Things like page turns, going to your library and picking a book, dictionary lookups, and changing font sizes are all easy and intuitive. On the minus side, it’s heavier than a Kindle and 12 hour battery life is a far cry from 2-week battery life. Also, there is no text-to-speech, as there is on the Kindle. And I still think it will be much easier to read on the Kindle’s e-Ink display.

Also, to compare apples to Apples (as it were, capitalization intentional), you’d have to compare the Kindle 2 (at $259) with an iPad 3G with wireless built in ($629 + $720 for 2 years of service = $1,349). So it’s really not in the same ballpark as a reader. Yes, you may be able to find other uses to justify the price differential, but I don’t really see them as direct competitors, even though the media is obsessed with the comparison.

Now, will people read on the iPad? That remains to be seen. I don’t really think so, although even a small percentage if there are tons of iPads out there could add up to something. I still think real readers will get a K2. I will say one downside for independent authors: Amazon is great at helping people find stuff with their “people who bought this also bought,” their genre best-seller lists, etc. But on the iPad, unless you’re one of their 5 or 10 “featured” big-name books, you gotta search for what you want. So, I wouldn’t expect nearly as many sales through the iPad as Amazon, since no one can “stumble upon” me … they need to be looking specifically.

Anyway, those are my early thoughts. I’m gonna take it down to my family’s place for Easter dinner tonight and see how it works on-the-go. I’ll use it for a while longer and try reading a whole book on it and give you my further thoughts in a week or so.

What do you think? Is the iPad a “Kindle-killer”? An overpriced, but fun, diversion? A laptop replacement? The future of all things? Leave a comment below and let me know your thoughts….

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