Alan Sorensen, John Freeman, Ami Greko on Book Pricing for Literary Fiction

Publishing
Here are the final three participants in the first phase of our ongoing LitKicks discussion.
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Alan Sorensen is a professor at Stanford's Graduate School of Business, where he has written influential studies on book and product marketing.

Q: I've enjoyed reading your research on the impact of book reviews (PDF) and book bestseller lists (PDF) on sales. We are discussing whether or not the practice of publishing only expensive hardcover editions of new novels has a positive or negative effect on overall sales. Do you have any suggestions as to simple methodologies we could apply to come up with a meaningful answer to this question? For instance, is there any validity to comparing pricing/sales data from other arts/entertainment media (film, music) in trying to determine how various pricing models might apply in books? This seems to be the best way to infer patterns, but are there other approaches that might better help us answer this question?

Alan: I do think it can be useful to draw insights from other (similar) industries, but I'm not sure where you'd find a meaningful comparison here. Some movies get a wide release and others a limited release, but I don't think that's a perfect parallel to the hardcover vs. trade paper question.

More fundamentally, even if you found a good parallel, the problem here is that books (or movies or music albums or whatever) are *not* randomly assigned to be released in a particular way. If a publisher decides to release a book in trade paper instead of hardcover, presumably there was something about that book that motivated the decision. So if you compare hardcover releases to trade paper releases, you're not comparing apples to apples.

It seems that the only people in a position to answer this question are the publishers themselves. To be honest, given the numbers of books these major publishing houses release each year, I don't see why they don't run some in-house experiments. Take 200 titles that are due to be released in the next six months. For each one, flip a coin to decide whether it goes out as a hardcover or as trade paper. Then compare the aggregate sales of the two groups one or two or three years after release.

I'm sure publishers would have any number of short-term reasons *not* to run such an experiment. But it seems the potential long-term benefit of getting a clean answer to this question would more than offset those short-term concerns.

Q: Opponents of high-priced hardcover fiction publishing cite the loss of "word of mouth" and "buzz" as the primary problem with the traditional model. But how can we quantify "word of mouth" and "buzz" so as to determine whether this is a significant loss or not?

Alan: Personal introspection can be an unreliable guide, but in this case I can't help thinking about my own experience. I would say that 9 out of 10 books I read (for fun, not work) are books that were recommended to me by a friend or family member. So for me it's easy to believe that word-of-mouth is one of the most important drivers of book sales. Of course, this doesn't answer your question, which is *how much* does word-of-mouth matter -- i.e., can we quantify its impact on sales.

I think this would be extremely difficult to do with the data currently available. For one thing, "buzz" is inherently difficult to measure. But even if you could measure it, you'd have a hard time determining whether the buzz caused increases in sales, vs. the increases in sales causing the buzz.

My own research about the impact of bestseller lists yielded suggestive evidence that word-of-mouth effects are quantitatively important. I found that appearing on the New York Times bestseller list has a causal effect on sales -- i.e., sales of bestsellers get an additional boost when they first appear on the list. This could be seen as a word-of-mouth or buzz effect, if you interpret the terms loosely.

Incidentally, although it wasn't the focus of my research, I did also find that the effect of an endorsement by Oprah has a *huge* effect on sales. This is no surprise, I guess, but it's certainly evidence that sales can be very sensitive to information shocks.

If you think demand for books is anything like demand for music, you'll be interested to read this clever experimental study(requires free registration). The evidence here suggests that social influences play a significant role in people's consumption of music.

Q: As a person who has studied book sales in detail, can you share any thoughts or ideas you have about whether or not more innovative pricing structures might increase profits for literary fiction?

Alan: Unlike many economists, I'm sympathetic to the idea that industries can get stuck adhering to institutional conventions that are no longer optimal. But in this case it's tempting to say, "If it were significantly more profitable to do things differently, then someone would have figured it out by now." After all, there is a *lot* of money at stake here.

Without more information about the cost structure in this industry, it's difficult to say exactly what an optimal pricing structure would look like. But I think the high-priced hardcovers are a natural price discrimination device: publishers sell early to the price-insensitive segment of the market, and then late (in paperback) to the more price-sensitive segment.

So to answer your question directly, I doubt that a major shift in pricing structure would increase industry profits. There may be specific titles that could be priced in a more innovative way -- indeed, some books might make more money if initially they were given away for free -- but my hunch is that for the most part the publishers have it right (in terms of profitability).

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John Freeman is a book critic and President of the National Book Critics Circle

Q: There's a widespread belief that a new work of fiction must be published in hardcover to get reviewed in the major outlets. Some publishers even claim to choose the hardcover format solely for this reason. At the same time, the evidence shows that major review publications do often review trade paper originals. Can you share your thoughts on how the industry may be changing (or not changing) in this regard, and any other thoughts you might have on the effectiveness of hardcover vs. paper original for literary fiction?

John: I wish books were cheaper, but I also wish other forms of entertainment didn't cost so much, too. Movies that run just 90 minutes are ten, eleven dollars now; CDs will set you back $15 or more; tickets to a first run art exhibit run close to $20; and a play or Broadway can cost $75 to about $200, with a good seat at a concert costing even more. So given how much time and enjoyment you get out of a book -- if you pick the right one, that is -- $25 for a hardcover isn't such a bad deal. And it will last a lot longer than your Whitesnake World Tour '89 tee-shirt.

Still, I see all the arguments for publishing in original paperback originally as smart and I'm glad they're being made. Paperback originals appeal to an audience with a lower price point, they wind up on stacks of books that people not too long out of college (where they read almost entirely in paperback) implicitly trust more, they are easier for retailers to stock, and they cost less to produce, allowing publishers to take bigger risks in what they publish even if the margins they take home are smaller.

And, to the point of your question, paperback originals don't, for what I can tell, get unduly ignored by review outlets. So far this year the New York Times Book Review has put two of them on their cover. In previous years, books by Vic LaValle (Slapboxing with Jesus) and Ernesto Quinonez (Bodega Dreams) were widely reviewed even though they were paperback originals. In fact, I think their case is instructive. Given how many hardcovers are published and aggressively marketed today, I think a paperback original (especially in fiction) can activate many critics' desire to discover something unusual.

But this is not new. As far as I know, paperback originals have been around as long as paperbacks themselves. Set aside City Lights' pocket poet series (all paperback originals except, weirdly, their 50th anniversary anthology), and all those early pulps or dime story mysteries, westerns (including some of Elmore Leonard's earliest work), science-fiction (including some of Kurt Vonnegut's work), plays, and virtually all of romance, literary fiction has come out in paperback first for years.

In the late '50s, some of Jack Kerouac's books began to be issued in paperback originally, like Doctor Sax, which had a small simultaneous hardcover run), as were some of the anthologies which launched the careers of Paul Bowles (New Penguin Writing), as well as nonfiction (like Mailer's The White Negro). In the '60s you've got more Kerouac (Tristessa), John Updike (Olinger Stories, Verse). In the '70s there's more Updike (Too Far to Go), Thomas Pynchon (Gravity's Rainbow was issued simultaneously in paperback and hardcover), and Elmore Leonard. In the '80s John Edgar Wideman published a trilogy of novels in Avon paperback first, Vintage started their contemporaries series, which eventually had Jay McInerney, Joy Williams, Richard Ford, Chris Offutt, and others in paperback original, and David Foster Wallace's debut, Broom of the System, was issued simultaneously in hardback and paperback. Finally, in the '90s Mariner started doing books in paperback originally -- from Penelope Fitzgerald to Jhumpa Lahiri. And recently I can think of Mark Z Danielewski (House of Leaves, which was put out simultaneously in a limited hardback) Tom McCarthy and George Saunders who will make the format work.

I suppose Black Cat and Europa have a small difference in the American market by putting out most of what they do in paperback, but it's not that big of a change. In England, most fiction is published in paperback originally -- everyone from Jeanette Winterson to Roddy Doyle debuted that way -- and in France and other European countries, almost all books are published in paperback full stop. I guess it's possible that American publishing could go in that direction, aside from print on demand books, but I really sort of doubt it. I think some of this has to do with libraries -- though the library system in England is perhaps even more extensive than ours (and authors even get royalties when their book is checked out). And price, ultimately, isn't the final determinant: the paperback originals abroad are not that much cheaper than the hardbacks. I think it just has to do with habits. As a society, we've become used to having some books in hardback, and if paperback originals have anything to overcome it's that small segment of readers who prefer a sturdier, handier book.

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Ami Greko is Marketing Director for Folio.

Q: From your vantage point as a publicist and marketing representative for authors, what do you think about the various issues regarding book pricing, hardcover vs. trade paper original, etc? When representing the work of either well-known or lesser-known authors, do you find that issues of format and pricing can become significant factors in how a book is received? I'd also like to hear how you personally feel, as a reader, about these issues.

Ami: In the interest of full disclosure, I should be clear from the beginning: I love a paperback original. They seem superior to hardcovers in so many ways: portability, price, the way you can appropriately position them for perfect bedtime reading, their lovely rough cut pages and French flaps -- all unspeakably wonderful.

When I was a publicist at a house, I was rarely brought into conversations about whether a book should be released as a PBO or hardcover (possibly because I always wore my opinions on my sleeve via my requests for a galley copy of a book, even when the hardcover was available). But I do know that as a consumer, I've rarely been in a position to pay the $25 or so that a hardcover book costs. I remember very well the look of shock that came over a sales team when I revealed this at one of our weekly marketing meetings -- "What was the last hardcover book you bought?" they asked, and the best I could do was cite a copy of Jonathan Lethem's The Fortress of Solitude that my Grandma bought me for Christmas in 2003.

I'm certainly not trying to play the class card -- that argument would take far more space than there actually is on the internet -- but I do think there can be a lack of awareness on the part of a publishing house of how much a reader can actually afford to spend on a book. I was lucky to grow up in a family that cherished reading and books, and we always bought in paperback -- not because we were poor, but because we all just read too quickly to make a hardcover book purchase worth the money. As someone who has drawn a publishing salary for several years now, I'm keenly aware of how thin the profit margin at publishing houses can be, and I can appreciate the necessity to make as much money as possible on every book sold. My argument takes a different direction -- it seems to me that the more we can get books into the hands of readers, especially the readers who may not be able to afford a hardcover immediately upon publication, the more a book's publication will be valued as a pop culture event, thus generating more discussion and catching the interest of more readers. Once a brand-new book consistently costs the same amount as a first-run movie, we may see a shift in the number of people who find space in the budget to purchase a book, and increasing space on television, radio, and in print for author interviews.

It is heartening to note, however, that paperback originals are being adopted by many younger members of publishing houses. One of my favorite (and successful) publicity campaigns was for a paperback original called RIP IT UP AND START AGAIN: Postpunk 1978-1984 by Simon Reynolds. Young author, young editor, young subject matter made the fact that the book was published as a paperback original something of a non-issue. Ditto the many paperback originals that Faber and Faber continues to release -- BITCHFEST, a book of compiled essays from Bitch magazine, and Adam Rapp's Year of Endless Sorrows are just two that pop to mind. Hopefully in the years ahead, as these editors and writers begin to take even more prominent positions at publishing houses, we'll see even more paperback originals.

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Next Steps by Levi Asher

The first phase of this project is complete. I selected these twelve participants carefully because I felt the combination of all their responses would provide a useful overall "heat map" of what book industry insiders, professionals and experts think about issues regarding book pricing and availability.

As I promised earlier, one thing is clear: everybody has something to say about book pricing, and the issue cuts much deeper than one might expect on first glance. The more you think about this topic, the more you may find your opinions will change. I found many of the points raised by Richard Nash, Mark Sarvas, Scott Hoffman, Simon Lipskar, Keith Arsenault, Dave Weich, David Poindexter, Danielle Marshall, Kelly Nagle, Alan Sorensen, John Freeman and Ami Greko surprising, and I'd like to thank them all for speaking so candidly about their areas of expertise.

But guess what? I said this was going to be a two-month conversation, and the conversation is just about to begin. I'm now inviting a wider range of literary-minded people to participate in the discussion, and I'm also going to invite the original twelve respondents to respond again, if any of them wish, or to recommend others they know who might like to respond.

On another front, we are hoping to present (in the beginning of October) some estimates of book sales, book publishing costs, profits and losses so that we can get a clearer look at the actual performance of our predominant pricing models for literary fiction. We're going to try to "run the numbers", as they say, but of course this is made difficult by the fact that most available industry statistics are estimates, and that access even to these estimates is difficult to obtain. We hope to put up these financial models and projections as a "group effort", and everybody who is reading these posts and has information or expertise to share is cordially invited to participate in the construction and analysis of these financial models and projections. Yes, in early October 2007, LitKicks is going to look like Economics 101. And then we'll go back to normal afterwards, I promise.

Thanks to everyone for paying attention to or participating in "Phase One" of this discussion, and please don't hesitate to keep telling us what you think, as we proceed.


10 Responses to "Alan Sorensen, John Freeman, Ami Greko on Book Pricing for Literary Fiction"

by stevadore on

I like Ami's response...But it still doesn't truly answer the original question: 'Why don't the publishing houses release hardcover and paperback simultaneously?'So, why don't they? It accomplishes two wonderful things at the same time: 1) maximizes their profits and 2) satisfies two different, yet equally important, demographics.(Why do they make the one audience wait for 12 months? Geez, even DVDs come out in less than 6 months after theater runs!)Seems like a no brainer. I realize it can't/shouldn't be done with other genres, but if the model is going to work, it seems like literary fiction is the best bet.All the excess verbiage aside, I'd like to see a clearer answer as to why they don't release simultaneous litfic on a regular basis. (And to say that it would hurt the hardcover sales is foolish. Hardcover buyers generally don't buy paperback and vice versa.)

by Billectric on

Steven, you say it would maximize profits, but we don't know that. What if a lot of people, who could and would have bought the hardback, decide to buy the paperback because it's there from the start? I've noticed that even people with plenty of cash will still save when they can (maybe that's why they have plenty of cash). If only the hardback is available, they will buy it, no big deal, but if the paperback is there, too, hey it's a better bargain!That's where Alan Sorensen's suggestion comes in. There is only one way to find out. Experiment.

by brooklyn on

Bill, I have to agree with Stevadore. Experimentation is great, but it is also crystal clear that dual format publishing is the choice that makes the most sense for literary fiction. Here's a case in point, which I wrote about just before starting this discussion: Denis Johnson's Tree of Smoke. This is a hot, intense, emotionally cathartic book about America and Vietnam, and about human violence. The subject and the voice are highly resonant in the age of Iraq and Bush/Cheney. This book should be a hit with college students and alternative-minded people all over the country. It should be marketed to the Fahrenheit 911 crowd, the Jon Stewart Show crowd, etc. Am I sure that it would *definitely* be a huge seller at $12.95? No, I'm not.But here's what I am sure of: it will NOT be a huge seller at $27.00. It never had a chance. Dead on arrival. What a way to treat a good novel.So, Bill, I have to conclude that we don't need to waste a lot of time experimenting. Dual format publishing makes sense. Libraries and hardcover-lovers get their hardbacks. The rest of the world get to read the book at a price that's commensurate with other forms of entertainment like music CD's or movie tickets, so that they can feel comfortable spending the money.Dual format publishing makes sense. We want it now.

by RichardGrayson on

author's book pricing experiencesThe only thing I know is my own experience. My first two books, story collections in 1979 and 1982, were published only in hardcover. They got lots of reviews in newspapers and magazines but very low sales. My first publisher was a NYC commercial house that sold the book for $7.95; the second one a small press which hoped to get library sales and it charged $11.95 for the book. No one was interested in paperback publication.My third book, in 1983, came out from Zephyr Press with a limited (100 copies) hardcover, the rest in trade paper, priced at $9.95 and $4.95 respectively. (All these books had small print runs of 1500-3000 copies.) This was the first book that got reviewed in the NY Times Book Review. Ironically, Library Journal gave this title a "highly recommended" review, and some libraries apparently bought all books designated that way. All bought the hardcover, and Zephyr lost money because they had to convert some of the paperbacks into hardcovers. (I am not sure by what process this was done.) This book went into a second printing and sold that out, too.My fourth book, in 1996, came out only in hardcover from a small press also hoping for library sales. This book cost $21.95 and I actually told my friends not to buy it because it seemed not worth the price to me. (I don't buy hardcover books.) This also got reviewed favorably in NYTBR but had negligible sales.The fifth book, in 2000, from Red Hen Press, was the first one only published in trade paperback. It's the only one still in print and costs $14.95, although you can get a used one for a penny from Amazon Marketplace. It's sold better than any book except the third, the only other trade paperback.The first four books, long out of print, are now in trade paper thanks to the Authors Guild's Backinprint.com program with iUniverse. They each sell a few copies a year, but they exist. In order of publication, the books are priced at $12.95, $14.95, $8.95 and $11.95.I leave it to others what conclusions, if any, can be drawn from this; I just thought I'd share it. As I said, I don't buy hardcover books unless I'm at a friend's reading and have to in order to be polite. The prices are too high for me.But one thing to remember is inflation. My 1979 book may sound cheap at $7.95 but in constant 2006 dollars that equals $23.74. But I can tell you that psychologically it was much easier to ask people to buy my first book back then than it was to ask them to buy the 1996 book, which at $21.95 in constant 2006 dollars equals $28.09.

by brooklyn on

Thanks for the real-world tale, Richard.And I may add, they are all good books!

by sceter1138 on

My Post / ThoughtsLevi this panel is great, very diverse. I have a long post at my blog with some thoughts -- check it out, see what you think.

by brooklyn on

Thanks, Daniel -- I think you forgot to include your URL, though, so here it is for others to check out:http://danpritch.blogspot.com/

by brooklyn on

Just read your post, Daniel -- thanks for the commentary.But I have to speak in defense of Ami's post. Ami knows this business well and speaks from experience. The class card is a tough one to play, and most people would rather not bring touchy subjects like this up. But it IS relevant. I feel very much the same way Ami describes feeling, and I bet many other readers out there do too.

by stevadore on

When I was on vacation the end of August (sitting on the beach reading paperback novels, of course) a friend told me about her mother who reads 7 or 8 books at a time. She keeps them in different parts of her house and picks up and reads whatever book is nearby. The point: all her books are hardcover. The woman never buys paperback. I think this well illustrates that, despite some crossover, two separate demographics exist, so why not satisfy both at the same time. Why make one wait for a year? Doesn't make sense.

by Billectric on

Regarding the "class" issue: It's all so relative. No matter what your income, there will be some people who think you "have it made" while others wonder how you even survive.