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The Strange Economics of Indie Publishing

How is selling ebooks like selling bulk goods at Costco? And why are box sets so inexpensive on Amazon? Some assorted thoughts on the economics of self-publishing.

Why are there so many free e-books out there?

Have you ever been to Costco? You might have noticed that they sell hot dogs very cheaply in their food court. In fact, they’re losing money on those hot dogs. They’re literally paying you to eat a hot dog! But it remains a smart business move, because people who come to Costco dreaming of a delicious yet cheap hot dog will often spend a few hundred bucks on other bulk goods, goods which turn a nice profit.

Whenever you see book one in a series listed for free or 99 cents you’re looking at a loss leader, a product sold at a loss as a form of marketing. This is publishing’s hot dog. We authors know that if you like book one in a series, you’ll likely buy the rest. Enjoy that book! Just don’t cover it in mustard.

Free ebooks are a double-edged sword for authors. Certain retailers, like Kobo, actively suppress the listings of free books. But a “free book one” in a long series can be a smart business move. Still, some readers will always assume a free ebook must be garbage.

My take? Never feel bad about snapping up free ebooks. They’re good for authors who are looking to entice new readers. And they’re good for readers looking for free entertainment. It’s up to us to hook you and leave you wanting more.

I routinely download free books from newsletters like The Fussy Librarian and The Book Cave to sample new authors. I’m a picky reader, so I abandon many of these books without finishing them. But when I find something I enjoy, I buy the rest of the series. Loss leader books are a win-win for authors and readers.

How can authors sell boxed sets so cheaply?

You may have asked yourself: Why is this author selling a 5-pack of ebooks for a dollar? Do they not know how money works?

It does seem odd to sell so much fiction for such a small price. But there are two good reasons why authors sell big boxed sets cheaply.

Reason number one we’re already familiar with. The box set might be a loss leader! If there are 15 books in a series, selling the first three as an inexpensive box set may get you hooked into that fictional world.

The other reason is specific to Amazon’s ecosystem. Amazon has a system (KU) in which some authors get paid by the pages read. Let’s say a boxed set has 5 books and 2500 pages in it. An author can sell that boxed set cheaply, let’s say for 99 cents. It’s a fabulous deal, so it may sell a lot of copies. Those sales won’t earn the author much money, but the flurry of sales activity will activate Amazon’s recommendation algorithm, and they’ll start recommending it to even more readers, including KU subscribers. Perhaps one sale of a 99 cent box set only earned the author a paltry 30 cents. But each complete KU read through of those 2500 pages could pay much more. Perhaps eight or nine dollars per reader.

In short, authors sell big box sets cheaply to jostle the recommendation algorithms, to get that loooong ebook in front of KU readers.

Algorithms, man. So weird!

Where are all the standalone novels?

You might have noticed that standalone novels are rarer than they used to be. Why? Let’s start with this: The financial cost of acquiring a new reader is often greater than what an author will earn from a sale of a single book.

That’s right! Authors often lose money advertising a single book! Right now, a “click” on a book ad can run about 50 cents. If an ad is very good you might get one sale for every ten clicks. So take a newly written book, apply the cost of editing, cover art, and formatting. Then, unless you already have a large reader base (something that takes a decade or more, for most folks), you’ll need to advertise or your book will sit among the millions of other books like a single pebble on a rocky beach.

Can you afford to pay five bucks to sell a book that will net you $2.80? Nope! That would be what we call poor financial decision making. And yet, if you don’t pay those rates, you’ll likely get outbid by other authors who will pay those rates!

That’s why many authors will write three books in a series before they make any income at all. You write three books, advertise book one, and by the time people have bought multiple books in the series you’re earning some profit. Granted, this is also a win-win with readers, because most readers prefer ongoing series. 📚

Word of mouth is lovely. It’s what we all want! But in the cold hard world of marketing you need to get your book in front of busy brains with millions of options. Even free books require advertising, making your loss leader a bit more lossy. Granted, an ebook is a digital product, so at least you’re not buying hotdog meat and buns.

Still, the principles are quite similar.

Anyway, I hope this post encourages you to enjoy free and inexpensive ebooks without guilt. It’s all part of an economic system that makes more sense on the backend than the front end.

Free samples! Costco does it, and so do we. ☺️