WARNING All Authors a Lesson on Pricing Content From the Music Industry

• November 15, 2019

Selling books and content is no walk in the park. And it’s about to get even harder.

To understand the changing landscape for authors. Here’s a parallel situation that’s already played out for music content publishers.

When Napster crashed the music party in 1999 giving away music for free, attracting the masses to one platform, one group quietly noticed and went to work. Advertisers copied the model and took over the music industry by controlling the distribution. Now the industry doesn’t care about making money selling music anymore. They give away music to sell other products. Killing revenue margins for musicians in the process.

 Now they’re playing a different game…

Today iTunes is the new version of the record store. Apple promotes extremely discounted music to sell Apple’s lucrative products. Music’s just the bait.

Think about it, how is it that Spotify and Pandora, whose sole business model is to make money from the streaming of music, DON’T ACTUALLY MAKE ANY MONEY selling music?

80% of Pandora’s net revenue comes from the ads playing to people listening to free music. Only 20% comes from users who pay for ad-free listening. In turn, Pandora pays musicians insultingly tiny royalties established in 2016 at $0.00176 on for each song played essentially as Pandora’s marketing expense.

In other words, THEY DON’T SELL CONTENT! They use it.

They pay to give away content for free in order to sell advertising. Pandora hasn’t turned a profit since it started in 2000.

Spotify after 13 years and 96 million subscribers, finally reported a profit for the first time this year of $107M and are spending all of it and more ($500M) to acquire podcast networks for the same reason.

So what in the heck does this have to do with authors?

Publishers of all types, from news to music, to movies, to books, are NOT HAPPY that consumers won’t pay a premium for content anymore. The painful lesson content-driven industries are learning is that they never sold content! They sold access to content and the price you paid was simply the package it came in.

From records, tapes, CDs, now to streaming. But that’s all changing. Even for authors.

Amazon is doing to authors what iTunes has been doing to musicians. They sell books as low-cost leaders to sell higher ticket items.

 Don’t believe me?

Why would anyone buy a book in a retail book store for $24.95 when you can get it for $1.19 with free shipping to your front door? Look for yourself. This is a book we spent the better part of three years to build and promote. Amazon took it upon themselves to reset prices without consulting us.

Amazon sells the book below the cost it takes to produce it! It’s only a matter of time Amazon arbitrates book pricing below the cost of producing the book.

 

We launched this book in December of 2018 and In the 6 months since the launch, Amazon priced it $8 below retail.

The current book pricing model is absurd!

The book industry is still pricing books based on the old physical distribution model to keep the past model alive and it isn’t working. Retail pricing is almost twice as high for the same product listed on Amazon, and it isn’t delivered to your front door with free shipping.

People are more likely to buy coffee from a bookstore at this point than an actual book.

The first day of your book launch the listing price is discounted from the retail price on Amazon from $25 down to $15-17 right out of the gate. Amazon resellers then start to immediately undercut the publisher’s listed prices.

Ever heard of Seth Godin? Here is Seth’s most recent book that should be $24 at retail. However, you can get the same book on Amazon for $6-$11 or $0 if you sign up for Amazon’s Audible trial!

Seriously? It’s the same content and product. I’m certainly not the first to notice this phenomenon. This guy noticed it first and started a business around it.

Meet Jeff Bezos. The man, the myth, the legend.

Like a phoenix rising from the ashes of closed book stores. Bezos started Amazon in 1996 to sell books online with $16 Million in sales (Barnes and Noble took in $2 Billion that year). Today Amazon controls half the print book marketplace while B&N has only 1/5^th left

Amazon’s up to 84% for e-book market and B&N just 2%.

Amazon’s e-commerce is around $1Trillion in market cap while B&N is down to $475 Million. For context that’s .05% of what Amazon is doing in online sales.

Bezos cracked the code. The book pricing model is flawed but nobody seems to be talking about it. Books are still being sold at retail pricing when you can buy them under cost on Amazon. Authors today are required to do 100% of their sales and marketing making the retail price relevant for about 3 months before you go buy it from Jeff.

Something needs to change.