Sunday, March 13, 2011

eBook Price Elasticity

Tech Dirt reports here on JA Konrath's eBook pricing experiments. As expected, lower prices generate higher unit sales and better net results – at the expense of much lower marginal results.

Credit cards and other payment systems have fixed transaction costs that always have made the micro-transaction market problematic. The price elasticity curve is fighting these fixed costs when prices go below $2-$3. Authors typically receive 70% of sales for products with a price above $2 today, but only 35% for products under $2.

Who knew that future authors would be working for Visa and Mastercard?

Maybe there is an opportunity for an online publisher who sells $20 of credit with an offer like buy $20 of eBooks and get one free. Reducing the transaction costs per dollar of revenue could provide authors with a higher percentage of the sales for <$2 products.

eBook gift card business, anyone?

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