A New eBook Pricing Model

OK, so I’ve been working on an eBook pricing model that makes more sense to me.  I considered forming a nonprofit to run with the model, but I love my job too much to devote the attention this organization needs.  I spent a lot of time on this, and talked to several library friends who think it might work.  So in keeping with the open source and open access philosophy, I’m posting the model here.  Please feel free to email me if you want to know more.  I’m look at OCLC or Library Renewal to pick it up and run with it, but really anyone could make a go of it.  If you hate the model, please feel free to leave comments.

In essence a library would purchase an eBook one time but would pay the publisher for each “downloaded” rental.  The payment would be tiered.  Libraries would maintain ownership over the title.  They would not have restrictions other than self-imposed restrictions (I would imagine that libraries would impose checkout limits or they could see a very large and unexpected monthly payout).  Libraries also don’t pay up front for a bunch of books that people don’t want to read.  Publishers will make a killing and capture a revenue stream hereto for they have been unable to capture.

My estimates are that this organization will need about $1,500,000 to start up.  It would be self-sufficient fairly quickly.  This model would also work for a for-profit company, but I think the publishers would be more likely to work with a nonprofit.  I am happy to support anyone who is willing to take up the charge.  Much of the sales forecasting that you would need for a business plan are here, and I’m happy to share my Excel files if needed.

A small/midsize library serving around 15,000 patrons could expect to pay around $12,500 a year.  They would have about 3,000 titles in the collection year one and it would increase by around 2,000 titles per year.  Titles that are more than 16 years old would have no fee to the publisher, and just a nominal fee to Adobe and the organization.  The best part is that libraries can incorporate the holdings into whatever system they like.  I am still a major proponent of a library system that resembles iTunes to make it easiest on those who use the library.

It’s difficult to explain in its entirety here, so I will just post a bunch of my projections:

Number of Patrons Size Infrastructure Fee Number Participating Total Revenue
0 – 4,999 Small  $500 100  $50,000
5,000 – 14,999 Midsize  $1,250 1,000  $1,250,000
15,000 – 49,999 Medium  $2,500 1,250  $3,125,000
50,000 – 249,999 Large  $5,000 75  $375,000
250,000-999,999 Urban  $7,500 10  $75,000
>1,000,000 Metro  $15,000 3  $45,000
Royalty Structure
Current Year  $0.40
Previous Year  $0.30
2-5 Years Prior  $0.20
6-10 Years Prior  $0.10
11-15 Years  $0.05
>16 Years  $-
Number of Patrons Size Infrastructure Fee Sales Clicks Projected Royalty Admin Fee Adobe Fee Total Cost Estimate
0 – 4,999 Small  $500.00 $120,000  $1,750.00  $366.00  $60.00  $96.00  $122,772.00
5,000 – 14,999 Midsize  $1,250.00 $6,000,000  $3,500.00  $1,830.00  $300.00  $480.00  $6,007,360.00
15,000 – 49,999 Medium  $2,500.00 $15,000,000  $7,250.00  $3,660.00  $600.00  $960.00  $15,014,970.00
50,000 – 249,999 Large  $5,000.00 $2,025,000  $14,500.00  $7,930.00  $1,300.00  $2,080.00  $2,055,810.00
250,000-999,999 Urban  $7,500.00 $360,000  $72,500.00  $12,200.00  $2,000.00  $3,200.00  $457,400.00
>1,000,000 Metro  $15,000.00 $144,000  $125,000.00  $24,400.00  $4,000.00  $6,400.00  $318,800.00
 Projected Revenue  Infrastructure Fee  Royalty  Sales  Clicks  Adobe Fee  Admin. Fee  Total
 LEC  $4,920,000  $1,185,500  $6,105,500
 Adobe  $1,896,800  $1,896,800
 Publishers  $7,231,550 $23,649,000  $224,500  $31,105,050
   Total Revenue  $39,107,350
Number of Patrons Size Number of Title Number Participating Total Titles Average Price Total Revenue Click Throughs Projected Buy Rate
0 – 4,999 Small 100 100 10000 $12 $120,000 3500 $1,200
5,000 – 14,999 Midsize 500 1,000 500000 $12 $6,000,000 7000 $60,000
15,000 – 49,999 Medium 1000 1,250 1250000 $12 $15,000,000 14500 $150,000
50,000 – 249,999 Large 2250 75 168750 $12 $2,025,000 29000 $20,250
250,000-999,999 Urban 3000 10 30000 $12 $360,000 145000 $3,600
>1,000,000 Metro 4000 3 12000 $12 $144,000 250000 $1,440
President 1 $125,000 $125,000 $162,500
Dir. Content 1 $80,000 $80,000 $104,000
Dir. Marketing 1 $80,000 $80,000 $104,000
Dir. IT 1 $90,000 $90,000 $117,000
Dir. Business Operations 1 $80,000 $80,000 $104,000
Accountant/Office Manager 1 $60,000 $60,000 $78,000
Accounting Clerk 1 $32,000 $32,000 $41,600
Graphic Designer 1 $55,000 $55,000 $71,500
Web Developer 2 $55,000 $110,000 $143,000
Programmer 3 $65,000 $195,000 $253,500
Metadata Specialists 2 $50,000 $100,000 $130,000
Network Administrator 2 $45,000 $90,000 $117,000
Outreach Specialists 3 $50,000 $150,000 $195,000
Technical Support 3 $40,000 $120,000 $156,000
Receptionist 2 $32,000 $64,000 $83,200
Collection Development 2 $50,000 $100,000 $130,000
Total Staffing Cost 27 $1,990,300
First Year Total
Technology $65,000
Furniture $50,000
Buildout $25,000
Lease $67,500
Salary & Benefit $781,300
Conference Travel $65,000
Ambassador Support $50,000
Utilities $30,000
Supplies $20,000
Legal Fees $30,000
Reserves $59,190
   Total Startup $1,242,990

*Postscript

I believe that publishers add a needed service in the publishing paradigm, however this model would work equally well if someone were crazy enough to buck the system completely and work directly with the authors.

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4 Comments

Filed under eBooks, eReading, model

4 responses to “A New eBook Pricing Model

  1. Good thinking here. I’m glad somebody’s got a sound understanding of new media and how it’s going to affect libraries!

  2. Thanks for your comment, kinetikat!

  3. Rebecca S.

    I like this model idea, and it looks like at least one publisher (though a comics publisher) is thinking along the same lines.
    http://www.comicsbeat.com/2012/04/25/iverse-launches-library-program/

  4. Thanks for the comment and for the info re: comics!

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