Bottom of the Pyramid of Digital Media

PyramidIf you read this blog regularly you should be used to my constant carping about the lack of imagination in the music industry due to which the price per song is stuck at about $1.

While the music industry in the West and in Bollywood is doing its best ostrich imitation, in another product category we are seeing some amazing new developments – books.

From Novelr

Amanda Hocking is 26* years old. She has 9 self-published books to her name, and sells 100,000+ copies of those ebooks per month. She has never been traditionally published. This is her blog. And it’s no stretch to say – at $3 per book1/70% per sale for the Kindle store – that she makes a lot of money from her monthly book sales. (Perhaps more importantly: a publisher on the private Reading2.0 mailing list has said, to effect: there is no traditional publisher in the world right now that can offer Amanda Hocking terms that are better than what she’s currently getting, right now on the Kindle store, all on her own.)

If Hocking had gone to a publisher to do a paperback that retailed for $10, she would have made $1 per book. For the Kindle version, she would have made $3. But by self-publishing on the Kindle she gets to keep 70% or $2.10 per book and keep the low, low price of $3.

Yes, she has to figure out how to market the book. But as any good VC will tell you, when you are starting out, focus on the product. If it’s good, they’ll keep coming back and bring their friends with them.

I don’t know how good Amanda Hocking is. I actually don’t think she needs to be a Michael Crichton. This is the magic of low prices at work.

Now, can we get songs for a quarter any time soon?

3 thoughts on “Bottom of the Pyramid of Digital Media”

  1. My hypothesis (based on a ton of assumptions) about why the success of the cheap book will not work for music – The average book reader is not very young and either clueless about torrent or has old-fashioned values formed by a lifetime of giving money to get stuff. Give them cheaper stuff and they might buy more. The average music listener is young and has always had access to “free” music. Cheap music will never be cheaper than free and so lower price will not really increase consumption.
    Coming to Hocking’s story, the lesson is not really to sell cheap, it is to self-publish (cheap is a cool by-product). Self-publishing will allow creators of digital products to keep more of whatever they can sell (because there will always be suckers who will buy even when there are “free” alternatives).

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  2. The average music listener is young and has always had access to “free” music.

    Then why should anybody sell any CDs at all. After all, they cost money too. mp3 players are as cheap and ubiquitous as CD players are. Ease of use, easy access and yes a prosecution or two will fix things.

    Coming to Hocking’s story, the lesson is not really to sell cheap, it is to self-publish

    Somewhat of a chicken and egg. The reader doesn’t know what Hocking is making out of it. I would still say that the main event here is the low price. But, if it wasn’t for Kindle self publishing she wouldn’t have sold for $3. And sold in huge numbers.

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  3. We did some analysis of eBooks pricing – The economics behind Apple’s iBookstore – http://iptiam.com/?p=241. Summary: In a 14.99 eBook, author makes some 2.1 dollars or so.

    So the tradeoff is this – you can price it a little higher and cut out all the middlemen – but you also lose on all that reach and marketing. also, how many ppl will buy directly from you when they cannot pay 10 cents each for a good blog post ?

    There is some model around lending of books – but self publishing, i am not too sure, unless you are already a brand (gladwell, godin)

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