I was going through my LifeDrive memos and came across a Stephen Levy column from Newsweek that nails the argument for lower-than-print pricing of eBooks.
This column is from 2004 — four years ago!
FORECAST: SONG COSTS MAY FALL LIKE RAIN
MEMO TO MUSIC LABELS: LOWERING PRICES WILL GET YOU MORE SALES
This is the key point:
This summer  provided a clue to further harnessing the force of digital nature. For three weeks, Real Networks tried to lure new customers by slashing prices to 49 cents a song and $4.99 per album. Since Real paid the full royalty load to the labels (almost 70 cents a tune), the company lost money on every transaction. CEO Rob Glaser says that the company did get new customers, but here’s the real news: Real sold six times as much music and took in three times as much money.
This reflected the experience of Audible, which sells audiobooks on the iTunes Store. Working in conjunction with publishers and Apple, Audible offered some online titles at a fraction of the normal price. One of those buyers was me — I had been thinking of getting a David Sedaris audiobook to entertain my family on a summer drive, but balked at paying $11 for something I might play just once. After I got an e-mail informing me I could get it for $2, I snapped it up. Audible CEO Don Katz says the featured books on that single e-mail were downloaded at 60 times the previous rate.
Emphasis added by me.
Let me hammer down the point.
Audible was selling an audio-eBook. It sold at sixty times the previous sales rate once the price was slashed.
Let me run some math, and I’ll use simple numbers because math usually gets me in trouble!
An eBook at $10.00 with a 10% royalty, one copy sold = $1.00
OK, that’s the “normal” rate of sale.
Now let’s do the Audible price cut numbers.
An eBook at $2.00 with a 10% royalty, sixty copies sold = $12.00
Which would a writer rather have? A guarantee of $1.00 per copy with an increased risk of piracy?
Or sixty copies sold at a piracy-prevention price that makes him twelve times as much money than expected sales?
I will keep hammering this point home again and again, dammit.
I want to walk into a printed bookstore and witness this conversation:
Shopper 1: “Oh, this book I want to buy!”
Shopper 2: “Me too. But it’s cheaper as an eBook for my Sony Reader!”
That is the Marketing Point for eBooks, the one that will drive hardware sales and then increase eBook sales exponentially:
If you buy it as an eBook, it’s cheaper.
Remember: eBooks are not like music. People will listen repeatedly to a song. But people don’t read an eBook over and over again. Once it’s been read, people want to buy something else.
And the resistance to eBooks is not as strong as anyone believes. See Vox Populi: eBooks.