Francis Hamit: A New Business Model

Francis Hamit of Brass Cannon Books, author of The Shenandoah Spy, shares his new strategy for pricing e-books (from a discussion posted on LinkedIn today):

A NEW BUSINESS MODEL: We are making the price of the e-book edition the same as that of the least expensive print edition.

Most of our publishing since 2004 has been in e-books. Originally we followed the conventional wisdom that e-books should cost less because they are virtual rather than real-world products. We had most titles at about $1.95. We distribute through Ingram, so we only receive, net, 45% of that price. We found that some online retailers were marking up our titles to $9.95 and keeping the difference. We also found that we have no control over what other people charge. Most of this material, more than sixty titles in all, are recycled trade magazine articles of limited interest to the general public. It sells slowly. We raised the price to $4.99. That gives us a net of $2.25 per copy. The rest goes to paying for distribution.  These items are available in just three formats, Adobe, Microsoft Reader and Sony Reader. They sell best in the Sony format. We have one fiction piece “Buying Retail” for 49 cents and that sells ten times as many copies than the rest, but it’s an entertainment product rather than an information one.  Given our new orientation towards fiction and other narrative forms, it’s a sampler. A leader item to attract readers for The Shenandoah Spy and other works of fiction.

It recently came to me, in the wake of the dust-up with Amazon and the big publishers over pricing that anyone who can spend several hundred dollars for the coolness and convenience of an electronic book reader can afford to pay full price for a book, regardless of format. Mr. Bezos may consider all books as just another online commodity to be sold at high velocity at the lowest possible price to gain market share, but my view is that every book is unique and has value regardless of the way it was produced. The current system locks me into surrendering more than half the fair market price of my book to others to get it to the customers.  Each format has front end costs which must be recovered. And I don’t care which format the customer prefers.

I want my percentage.  Making an e-book version available is a accommodation to a customer, but it’s a convenience they should pay a fair price for. My own preference is to sell the print edition and have done with it.  So, if you want to read the book electronically, you pay the same price.

Now some retailers routinely cut the price, but that doesn’t matter to me since that discount comes from their end of the deal and not mine. I have to maintain per-copy margins to survive as a business. I own this book and have put it out at a fair price. Certainly, it’s not the only one on the shelf, but if you want to read it then you have to buy it from me, unless you buy a used copy or deal with pirates. And if you do that, then you were never really a potential customer anyway, were you?

I will cut the price of the e-book edition in the future to match the least priced paperback in the U.S. market. I think if other publishers follow my lead this will resolve a lot of the current problems of print versus electronic pricing.