Inside Look at RAND's $9.95 Ebook Pricing Strategy

Recently, the RAND Corporation announced that it has revised the suggested retail pricing on all RAND ebooks to $9.95 each. RAND ebooks are available through a wide variety of wholesale and retail partners.

The press release provided some explanation for the decision, also discussed in Publishers Weekly. I have been asked by Tools of Change to provide some additional insight into our ebook pricing strategy.

There were several things that went into our thinking on, as one of my colleagues appropriately called it, this “new math.” Some of these factors will generally not apply to other publishers, though I do believe some factors should, and eventually will, affect other publishers’ pricing strategies as well.

  • First of all, and this is important, RAND is not a traditional publisher. RAND is a nonprofit institution that helps improve policy and decision making through research and analysis. RAND research, which spans a broad base of subjects and is funded through hundreds of resources, is dedicated to serving the public interest. RAND’s focus is on conducting objective, high-quality research, and every publication endures a rigorous review processes. These exacting standards are the foundation of RAND’s impeccable reputation throughout the world. No consideration is made on whether a particular topic or book might be a good title for sales — the emphasis is on quality of the research. In addition, RAND’s revenue comes primarily from its research and philanthropic support, not from the sales of books and ebooks.
  • Going along with the first point, a crucial component of RAND’s mission is operating in the public interest. This was written into the our charter, in 1948: “To further and promote scientific, educational, and charitable purposes, all for the public welfare and security of the United States of America.” This is one of the reasons why we post all of our publicly available books and reports online for free PDF download; we had ~4.3 million PDF downloads from our site last year. Dissemination is more important than sales. (I do believe there is a compelling argument, supported by many, that free electronic dissemination helps drive sales, instead of cannibalizing sales.) We have posted all new titles since 1998 on our Web site, and sales of book sales have still increased during that period.
  • Book sales help support the marketing and publishing program, but the main consideration, as a nonprofit, is to break even, not recoup a huge profit. Book sales need to recoup the costs of printing, distribution, marketing, etc., and with ebooks, conversion costs.
  • Previously, we had been pricing ebooks at the price of the printed book, which in our case is nearly always paperback; we publish few hardcovers. This seems to be the most common model for publishers, price the ebook at the print price. RAND prints nearly everything print on demand (POD), and sells the majority of our print titles through our distributor, NBN, so the price of the print book factors in POD and distribution costs. POD cost rises when the book is longer in length and/or has color charts or graphs. Thus one book may be priced at $44 because of color charts, another may be $25 because it is shorter in length and entirely black and white. These factors have nothing to do with an ebook, however. Ebooks are agnostic as to length (except as the length may affect the costs of editing) and color charts and graphs have no bearing compared to black and white in terms of ebook costs.
  • We have no manufacturing, distribution, or warehouse costs with ebooks, nor do we have to deal with returns, so the back end is much cleaner.
  • I believe firmly that customers have an expectation, which is only likely to grow, that ebooks should cost less than printed books. I believe this is being reinforced, but not driven by, Amazon’s decision to make many Kindle ebooks $9.95, even when they must pay the publisher more. I don’t believe they pulled that number out of thin air, though that is possible. At $9.95, RAND hopes to make up in volume what it may lose in profits from a higher price on each ebook.
  • Library funding is tight. Increasingly, libraries want to buy ebooks on demand, when a patron asks for it, not before. Jobbers and wholesalers are now entering into relationships with ebook distributors to aggregate ebook purchases, and the library market is a key market for us to reach. Libraries may balk at $35 for a printed book, or lack the shelf space to store it, but they can afford and store a $9.95 ebook.
  • Since we post PDFs for free download, two reasons we are able to sell ebooks on other sites such as, Books 24×7, EBL/, ebrary, Ingram Digital/ MyiLibrary, netLibrary and Questia, and soon Sony and Overdrive, is from a convenience standpoint (customer has a particular device and wants it seamlessly integrated, or a library subscribes to an ebook service and makes all titles available to their patrons) and/or ignorance (the customer may not be aware that we post PDFs for free). I don’t want to bank on customer ignorance, but the convenience factor can hold up over time.

These are the main factors influencing our decision making on this new ebook strategy. It will be interesting to see if others follow.

John Warren is marketing director, publications, at the RAND Corporation. He contributes to the Publishing Frontier blog. He was recently selected as the winner of the International Award for Excellence in the development of the book for his paper, “Innovation and the Future of ebooks,” which is available for free download on the RAND Web site.

tags: , , , ,