Lately I’ve been talking the hard numbers of indie publishing. I shared a sales chart last week showing the rise and fall of my bestselling fantasy novel Taming Fire and discussing some of the factors that drove those trends.

Then on Tuesday I took a little pause to tell you about my charitable publishing contract. I was really just trying to lay the groundwork for today’s discussion, but that post proved surprisingly popular. That bodes well.

Price Points

Now I’ve got to lay a little more groundwork. If you’ve never looked too closely into publishing with Amazon, this bit might be a little complicated, but it shapes today’s story. The heart of the issue is that Amazon believes an e-Book ought to cost $2.99-$9.99.

They believe it so much that, for a long time there, they were buying those books from publishers at up to $14.99 per copy and still selling them for $9.99. They were taking the loss to sell Kindles and get the public to really buy in to the whole e-Book phenomenon.

Then early last year Apple and the Big 6 Publishers went to war with Amazon and forced them to stop that–they forced a business arrangement called the “agency model” that allows publishers to set the final sales price. Amazon can’t discount below it, can’t take a loss even if they want to. And publishers have used that to keep e-Book prices artificially high.

Still, even after losing that war, Amazon certainly has some muscle to flex. They decided to do that in the form of financial incentives. Prior to agency pricing, the industry standard royalty rate for digital distributors was 35% of list price. After the change, Amazon announced that they would begin paying 70% royalties on any e-Books listed at $2.99-$9.99.

By pricing our books under $10, I automatically give Consortium Books a competitive advantage (price) over the major players in the industry. As Konrath loves to point out, lower prices mean more sales, and quite often they also mean more money. Many of the biggest success stories of Kindle Publishing have gotten their breaks by selling ’em cheap and picking up tons of readers.

The cheapest Amazon will allow a book to be published is $0.99. And that creates a really interesting strategic decision. Lower prices mean more sales. But the bottom end of the 70% royalties is $2.99. That means I can sell a book at $0.99 and take home $0.35, or I can sell it at $2.99 and take home $2.07. I triple the price, and I make six times as much money.

That fact forces a publisher to evaluate (at least) two major questions:

• What’s more important: Gaining readers, or making money?
• What’s the actual difference in sales between $0.99 and $2.99?

Those are two questions I’ve been thinking about very hard for three months now. I made a general policy decision last spring to price all “entry point” novels (the first book by an author or the first book in a series) at $0.99, and all full-length sequels at $2.99–that way we can capture a hung chunk of readers with the lower price, and then make our money off the ones who like the book enough to keep reading.

The Value of a Dollar

And I saw the benefits of that decision with Taming Fire. With no promotion at all, it took off. I think the low price played a major part in that. It’s a great novel, but indie books are generally considered risky, so I lowered the “risk” factor as much as possible by selling it cheap, and that paid off. For several months it was selling more copies every day than it had the day before.

That was exciting. And as I’ve mentioned before, seeing significant numbers finally gave me a chance to start looking for trends and testing hypotheses. I was really excited about that, and one big hypothesis I wanted to test was the price one.

The things was…I couldn’t bring myself to test it. As long as Taming Fire‘s sales kept climbing, I had no interest in messing that up. My daily sales went up and up, and my sales rank dropped and dropped, until at one point I was within 8 spots of being on the Top 100 bestseller list for all books on Kindle. I spent three days hovering under 110, and desperately wanted to break that milestone.

I didn’t. I got a 1-star review and my sales rank shot up into the 200s. That’s the story I told last week. When that happened, it really shattered my hopes of getting into the Top 100. But that also freed me up to finally try an experiment I’d been waiting three months to try. I raised the price on Taming Fire from $0.99 to $2.99.

And my daily sales dropped. The change went into effect on late in the day on September 14th, and I immediately fell from an average of 240 sales a day down to 175. If you look at the chart I posted last week, you’ll see a big square dip just to the right of the middle. That’s after I got my 4.5-star rating back. That dip wasn’t from reviews, it was from my price change.

Maximizing Profits

I left the book at $2.99 for one week. Late in the day on the 21st it went back to $0.99 and the daily sales recovered almost immediately. I’d lost the momentum from that initial, exhilarating rush, and I’ve never gotten anywhere close to the Top 100 again. Mostly I’m bouncing right around 200, but owning the 200th most popular book among all Kindle titles is still pretty satisfying.

Anyway! The point is that I got a full week of data at the $2.99 price, and as I said, I averaged a pretty steady 175 sales/day at that price. That means that even looking at my worst week of sales since early July, I made more than three times as much money as I had on my best week ever. In that one week I earned almost $2,400.

If I left the book at that price and it maintained that number of sales, we’d be talking about $130,000 a year from just that one title. Doing 240 sales a day at $0.99, it’s only earning $30,000. Yet I changed it back (and left it there). Why?

Cross-Promoting

It goes right back to those two questions I mentioned before:

• What’s more important: Gaining readers, or making money?
• What’s the actual difference in sales between $0.99 and $2.99?

The difference in sales wasn’t as much as I’d expected, honestly, but it was still a significant one (given the loss of 70 new readers per day). But, really, the deciding factor for me was the first question. Because without a doubt, gaining readers is more important to us than making money.

Now, I have to admit: Part of the reason I could make that big-picture decision and pass up all that instant cash is because I wouldn’t get all that instant cash. Like I told you Tuesday, I’d only get the first $30,000. I would get that $30,000 sooner that way, but I’ll be getting it either way.

But the real decision for me is more concrete, and it’s rooted in the wording in that statement up above: “we’d be talking about $130,000 a year from just that one title.” But we’re not talking about just that one title. Want to see another sales chart?

That’s for Gods Tomorrow.  The orange line is July. It started somewhere between 0 and 1 sales per day, which is where Gods Tomorrow had lived since October of last year.

But in the three months Taming Fire has been soaring, Gods Tomorrow has been steadily climbing, too. Right up until Taming Fire faltered, anyway. You can see August’s red line on the top chart start to dive right around the end of the month, and September’s blue line sagging all month long.

Gods Tomorrow is only making me about $100 a month, even after that big increase in sales. But Gods Tomorrow has two sequels already out, both priced at $2.99, and both of them are selling in proportion to Gods Tomorrow. So, all told, that series is earning me more than $1,000 a month. And there are going to be lots more books in that series, so anything I can do to increase its sales will pay dividends.

But that’s not the end of the conversation, because that extra $1,000 doesn’t come close to making up for the difference in money Taming Fire could generate. The thing is, Taming Fire is part of a series, too.

Come December, it will have a sequel out at $2.99, and based on the retention rate I’ve seen with the Ghost Targets series, I expect The Dragonswarm to do right at 50% of Taming Fire‘s daily sales. That means 120 sales a day from the moment I release it. Probably more, because the buzz around that book’s release will probably drive more new sales of Taming Fire.

But even without that boost, I can reasonably expect The Dragonswarm to earn me $90,000 in its first year. That means it’ll be “fully funded” before The Dragonprince comes out in June next year, and that one’ll do about $90,000 per year, too. And there there are my short stories. And my Ghost Targets novels. And the standalone books. And the non-fiction how-tos I’m putting together.

And let’s not forget Courtney’s books. Let’s not forget Joshua’s and Jessie’s and Becca’s and Bailey’s. I’m running a publishing company here, and if I can use the success of one book to cross-promote and get other books selling, I can build an empire. And suddenly it becomes pretty clear that those readers are worth way more than those extra dollars.

It just takes a mountain of patience and an iron-hard self-discipline and a single-minded obsession with getting my story to as many readers as possible. But, y’know, that’s what it takes to write a book in the first place, so I’m pretty well situated to make the right choice here.

See you next week.