Joseph Esposito's Concentric Publishing Circles

Today we read what we believe is a very interesting viewpoint from our friend and US publishing consultant, Joseph J. Esposito and immediately ask and received his kind permission to share his thoughts with you. A lively discussion on ebook pricing and releases has ensued within the community ever since Sourcebooks said that they would hold back the ebook of ‘Bran Hambric’ until after the hardcover had had its sales opportunity. Joe’s view:

‘There are many things that are taken into account in setting prices, formats, venues, etc., just as consumers have a wide range of choices. This is simply to say that the environment is competitive. Over-the-top example: Someone who wants to buy Robert Darnton, offered at $20, is not likely to buy Danielle Steel, offered at $10, at least not on the basis of price alone. But if Darnton were $200, the needle begins to move for some portion of Darnton's prospective readers. At $1,000 it moves further. But there is no price at which Steel takes ALL of Darnton's readership. (Darnton, for those outside the US literary world, is a distinguished historian and now head of the Harvard library. If you don't know who Steel is . . . . ) All of this was true before there were digital books; what ebooks does is create greater options and complexity (including pirate sites).

For a publisher, a useful metaphor is to think of the market as concentric circles. At the inner circle (for a particular book) is the hard core readership that will put up with any indignity, any price or format, to get that book. My daughter was in this category for the Harry Potter novels, my son for Lord of the Rings. (For me, say, Italo Calvino, and when I was a kid, it was all Asimov all the time.) At the next circle out from the center, the consumer exercises some discretion ("I will wait for the paperback"). Move another ring out, and there is more discretion ("I'll only purchase this if it comes in the Kindle format"). Any publisher can make up their own typology to define each circle--in effect, an algorithm covering price, format, options, timeliness, alternatives, etc. And this typology gets adjusted for every book.

When someone says, that they will only purchase something if it is in a specific ebook format and costs under ten bucks, to a publisher that prospective customer is in an outer ring. The question for a publisher is how to maximize the return across ALL the rings, which means that some rings compete with the others (aka cannibalization). For Grisham the inner rings are potent; for O'Reilly books perhaps the outer rings are more important. And in five years the relative weighting of the rings (the formats, etc.) may be very different. Indeed, the weightings are changing as we speak.

The reason that legacy publishers with legacy brands pay unequal attention to legacy formats and legacy channels of distribution, is that the legacy world is still generating more money than the world of new media for certain kinds of books. Again, that is changing every day. A smart publisher has to play the game with skill; there will always be catcalls from the bleachers. Mike Shatzkin's idea of debut pricing is one way to play this game. If you are a customer out in the outer circles, you won't like this. But it is not a publisher's job to make you happy. A publisher's job is to make shareholders happy (and to abide by applicable law, including contractual commitments to authors). Part of the skill is in not hurting the people in the outer ring too much as revenue is extracted from the circles as a whole.’

The problem is that there are no silver bullets to digital book pricing and what works for one will not work for all. Perhaps the concentric circles are more like Venn diagrams in their appearance. In the end, we believe that we live in a consumer centric driven market and pricing and availability of content, in whatever form, will be ultimately driven by them.