Why the Pricing of Ebooks is Going to Change

Simon Dunlop, founder and CEO of ebook subscription service Bookmate and co-founder of emerging markets music streaming service Zvooq, discusses how changing consumer behavior calls for a different approach to ebook pricing.

Historically, consumers of media content have generally had to put up with a one-size-fits-all approach to the pricing of that content. People who wanted to consume media in different ways had to hack a rigid system where format was not adapted to the usage, preference, or financial means of the individual. However, new technology and online services that enable new methods of media consumption have rapidly changed this picture. Consequently, businesses working in the content industry have had to develop new business models and pricing to adapt. The ebook industry, which has lagged behind the music, TV, and film industries in the race to adapt pricing models, is waking up to this challenge and catching up.

The music industry was the first to recognize that not all content consumption was the same. The audio tape, the CD and then the MP3 file had the same fixed retail price irrespective of who the customer was and what they could afford. When we are faced with limited choices we hack the system. Before I could afford to buy music I used to make tapes of tapes and happily listen to them (crackles, warps, and all) on my Walkman. The quality of sound was less important than the fact that I could to listen to something. The music industry defined the fixed format with the creation of the 'studio album' until iTunes blew it apart by offering single-track sales and the album never recovered.

Now, we have a range of different pricing models to cater to different types of music consumption, all the way from Tidal or Deezer elite, with subscription service priced at $20 per month, to Pandora, Spotify and other services that offer fully ad-supported listening (albeit with certain restrictions of functionality). Young listeners can get all the music they want with the payoff of some limitation to their listening comfort, while at the high-end, audiophiles can find a service to fit their expensive audio equipment.

The publishing industry lags way behind the music industry. It has been slow to adopt new business models, formats, or attempts to keep up with new user behavior.

Ironically, this is already acknowledged in the offline world where publishers have long differentiated between hardback and paperback as being distinct user experiences and priced accordingly. The average hardback book costs three times more than a paperback but you pay for the experience. The smell of the book, the weight of it in your hands, the feeling as you crack open the spine of a hardback, and its place in your bookshelf are reflected in the price.

Ebook reading is different, especially on mobile: it's casual and spontaneous. Readers understand that they don't own a physical object and that the quality of the reading environment may be low -- on a small mobile phone screen for example.

When publishers look at the iTunes 'tracks vs. albums' experience in the context of ebooks they feel deeply uncomfortable. Ebooks on mobile devices are similar to albums on iTunes in that readers might only want to read one chapter or to sample a few paragraphs in an affordable way. At the moment rigid retail pricing has stopped the ebook industry from offering this type of flexibility. Publishers and authors don't want to acknowledge that readers don't always read books from cover to cover. Offline you have to buy a whole book for the privilege of only reading a bit of it but online you can choose.

Subscription services offer consumers a more natural way to dip into multiple books without paying for each book opened. On Bookmate we see readers browsing several books in a month but on average only completing one book. In general, publishers do not acknowledge this behavior let alone try to find a commercial model to fit it.

The music business has shown us that if you don't price to match the experience then consumers will find a way around the problem and piracy flourishes. Currently, we have a publishing industry that caters for those consumers that are willing to accept the formats and pricing set by the industry. Meanwhile, there is wide and varied consumer consumption roaring ahead outside of these narrow borders. Like water, online behavior finds its own way. There are new companies being built that empower, facilitate, and monetize varied consumer behavior, but it remains to be seen which publishers embrace it and which get left behind.