Is the Honor System a Failure for Books?

Is the Honor System a Failure for Books?
(image courtesy Smashwords)

Smashwords today on their blog revealed some interesting statistical data; that people are cheapskates.

I know, you’re shocked. Try to keep it together for the rest of this post. Apparently, in a wide ranging study (353 people!) only 15% paid. Everyone else downloaded the book for free. Smashwords explained their take on this data:

Not captured in this data is any other ancillary benefit received by the author/publisher. Possible author benefits might include:

* customer goodwill
* purchases of print versions
* free author and book publicity from satisfied readers on blogs and social networks
* increased fan base to which to market other titles by the same author/publisher

I neither encourage or discourage our authors to use the Radiohead model. As I’ll discuss this weekend in my Ebook Revolution session with Dan Poynter at The San Francisco Writer’s Conference, there’s no one-size-fits-all pricing strategy for ebooks. Your choice of pricing really depends on your objective as an author, and also your subject matter. Are you looking to maximize readership or revenues, or do you want to do both?

High prices tend to discourage readership by reducing affordability. Lower prices expand the available market. Free eliminates price as a barrier. And the Radiohead model offers a middle ground by trusting the customer to decide.

Smashwords has an interesting point, even if their data is highly, highly suspect. I wonder why they picked 353? Did they not have an even number of people for the time frame they wanted to use? Or were they just looking for a way to show the most shocking numbers possible (ONLY 15% OF PEOPLE WANT TO PAY FOR BOOKS) to prove they are right?

There is definitely something to the idea that there are psychological triggers for consumers, and when prices cross them we all subconciously recoil. $.99 is a bargain, $1.00 makes us pause. Mike did a great job of showing how this has affected the music industry earlier this week.

But my issue with Smashwords post is that it seems designed to tilt us all into believing free riders dominate ebooks. And they do, to a certain extent. But there’s no context to the reasons the statistical pool was chosen, and that makes it very tough to believe it is as bleak, or that pricing expectations are as low, as Smashwords wants to make it seem.

Do you believe Smashwords is right on with their assessment? Do you pay for books you download from them, or do you just enjoy your free ebook and move on? Share below!

Via Nate’s eBook News

About the Author

Carly Z
Carly has been a gadget fiend for a long time, going back to her first PDA (a Palm M100). She quickly went from researching what PDA to buy to following tech news closely and keeping up with the latest and greatest stuff. She loves writing about ebooks because they combine her two favorite activities; reading anything and everything, and talking about fun new tech toys. What could be better?
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  • davenicholls

    Ok, let me check this. You feel that the statistical validity is suspect because the number of samples is odd? Statistical samples can be biased in many ways, but I’m aware of no rule that says that you have to have an even number of samples.

    They describe the sample as ‘recent’ data. I think it’s much more likely that they took data from the last week, or month, or some other period. As a commercial organisation they may not wish to divulge the period because doing so would allow their revenue figures to be inferred.

    It would be nice to have a larger sample, but 353 is a reasonable number. Assuming the sample is not biased it gives a Margin of Error of 3.76%, which is nowhere near enough to prevent the result being statistically significant.

    If you want to question their survey that’s fine, but at least do some checking with them as to the sampling methodology rather than basing your opinion on statistical nonsense

    Dave

  • Ok, to be fair I was tired last night and didn’t make my issue with the numbers clear. I apologize.

    What I was trying to say is that 353/a recent sampling doesn’t give enough information. If they don’t want to divulge traffic/revenue (fair enough) then just say “data from the last week/month/start of the year” and give the percentages. But without that, they’re basically showing a slice of numbers that lines up with what they want their thesis to be (that people don’t pay/don’t pay much for books when given the chance.)

    If they could put more context into their time frame and the average volume, I’d feel more comfortable getting behind the data. But it’s tough to say this means much without that. Especially if they’re measuring, say, the two weeks post-new years, when people are fed up with spending money (I’m not saying they used that time frame, I’m saying if they did that adds a very different context to the discussion).

    Hope this makes more sense…

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  • Mizst

    IMO, 15% looks pretty high to me. I’d have expected something like 2%. Furthermore, only one-quarter of them paid $.99, while half the people elected to pay more than $2. If anything, the linked article strikes me as being very positive.

    Also I couldn’t find any mention of “cheapskates” anywhere in the linked article.

  • davenicholls

    Carly,

    I agree that the context would be clearer, but you still seem to be reaching on this one. You said

    “But without that, they’re basically showing a slice of numbers that lines up with what they want their thesis to be (that people don’t pay/don’t pay much for books when given the chance.)”

    Where is your evidence for this? Do you have some extra insight into their motives that isn’t in the article? Or do you have any eBook sales figures that refute theirs?

    If you don’t then all you’re actually saying is that they’ve printed figures that don’t square with your world view so they must have fiddled them.

    Dave

  • I think we are being too bogged down in specifics here. My only point was that a sampling from a random period of time, for me, didn’t provide conclusive evidence. If Smashwords were to post their percentages from the past year, I’d be far more inclined to regard them as important proof in the debate about ebook pricing. As it stands now, a random sampling from an indetermine “recent time” is interesting, but to me totally inconclusive as far as what it means for ebook pricing as a whole. I, personally, am reluctant to form an opinion of whether the “Radiohead model” as Smashwords puts it, is bad or good, and what it means for pricing, until I have more information. If the same data holds over a 6-12 month time frame, it says a lot more, at least in my view of numbers and statistics.

    I look at it this way. If someone were to tell you they recently “doubled their money” in an investment, you’d wonder what that meant. You’d want to know what recent means to them (a week? a month? 6 months?), and you’d want to know the makeup of the investment as well. It’s not so different here.

    The great thing about the internet is that everyone can voice their views and engage in discussions; I hope that Smashwords and other ebook providers continue to show this data, hopefully for longer periods, and we can continue to engage in discussions over what it means and how it may impact ebook pricing long-term. It would also be great if they shared whether the phrasing of the offers made a difference (when they use language that makes it clear buying the book supports the author, versus just something nice you could do if you liked the book-that may prompt different responses from people of buy vs free).

  • davenicholls

    Carly,

    None of what I have been saying is about the specifics of eBook sales.

    You said in your most recent comment:

    “I, personally, am reluctant to form an opinion of whether the “Radiohead model” as Smashwords puts it, is bad or good, and what it means for pricing, until I have more information”

    but in the original article you are happy to express a strong opinion, apparently based on no evidence whatsoever, that Smashwords had manipulated the data to support a particular point of view.

    For people who didn’t click through and look at Smashwords site for themselves, or who don’t recognise dodgy statistical thinking when they see it, your opinion that the figures were fixed would be what they take away.

    In a high traffic site like GearDiary that sort of reporting falls short of where I would expect it to be.

    For the record I am not in the eBook industry and I have no connection with Smashwords (I’d never heard of them until I read your article) I am just an individual who is becoming more and more concerned that statistical data is being increasingly misrepresented (whether by accident or design) on influential sites.

    Another example was the recent flurry of posts around the web a couple of days ago that were saying that Warner had reported plummeting iTunes revenue since they raised prices, where the fact of the situation was that revenues had actually risen, albeit not as quickly as they had done in the past.

    Dave

  • Dan Cohen

    davenicholls-

    I am perplexed. Carly asks a lot of questions in her post but doesn’t make any firm conclusions. Smashwords drew conclusions… Carly asked questions. And were I closely following the eBook world the way she does I would have questions about a survey sample of 353 participants as well. It IS an odd number for a sample. And it IS a bit snmall to my mind for rendering any judgments. Moreover SHE never said the numbers were fixed. YOU did. She asked questions and to my mind they are valid ones.

    But please feel free to keep arguing with her if you like… the only thing is– I think your are arguing with someone with whom you agree.

  • davenicholls

    Are we reading the same article?

    “Smashwords has an interesting point, even if their data is highly, highly suspect. I wonder why they picked 353? Did they not have an even number of people for the time frame they wanted to use? Or were they just looking for a way to show the most shocking numbers possible (ONLY 15% OF PEOPLE WANT TO PAY FOR BOOKS) to prove they are right?”

    Please explain how that does not constitute a suggestion that the figures were fixed?

  • It’s clear that you disagree, and that’s fine. I think we’ve both stated our thoughts, and nothing either of us says is really going to change the other one’s mind. Rather than continue at cross purposes, I think it’s time to just let it go, rather than continue to argue.

  • Mizst

    Carly, Dan,

    I’m sorry for persisting, but I would like to reiterate that it was not Smashwords who drew conclusions. They stated their figures very matter-of-factly, and they even took the tone that their system was satisfactory as a middleground between fixed prices and free by allowing customers to choose their own prices.

    It was through your lens that viewed Smashwords’s article as portraying a bleak picture, cheapskate people stealing ebooks, and that the honor system was a failure. None of this was ever mentioned in their article. Then you started challenging their statistics based on thinking that they have adopted this view, but it was all moot since you have misinterpreted their intentions in the first place.

    As for your questions at the end of your article, here is my answer: I believe Smashwords’s faith in their system is well-founded as it allows people to choose a price they’re satisfied with, and their statistics has shown, in my opinion, a better-than-expected attitude at paying. (As I said in my earlier comment, I’d expect only 2% to pay instead of 15%.) As for myself, I mostly read free public domain ebooks and have not moved over to paid popular books yet, as I have not owned any reader so far and have not commited myself to a vendor’s ecosystem yet.

    Respectfully,
    Mizst

  • I don’t begin to know about the specifics, but there have been a number of these recently, including the indie game World of Goo (http://2dboy.com/2009/10/19/birthday-sale-results/). That article – like so many others – provides a large amount of context and data. I found the article linked here very thin and not very communicative …

  • JDTagish

    Sorry to come late to the party, but I was on vacation.

    I think that people are more inclined to look at books, regardless of format, as something they can read for free, but pay for to own.

    What I mean by that is that to download a book and plan to read it only once, a large percentage of people believe should be free, and then feel no desire to pay for the experience. Libraries and book loaning offer the basis for this. You can borrow a book from a friend or library for free, read it and then return it. Libraries even offer ebooks that are downloadable and compatible with mobile devices for free.

    Those of us who desire to build libraries of books from authors we like, will purchase the books (physical or electronic) in order to maintain our libraries.

    There are also some books not available for sale, **cough** Harry Potter **cough** that I have downloaded for my library. Do I feel badly about that? Nope. I have purchased multiple copies of every book in hardback for my own use,given countless copies as gifts, and bought all of the audiobooks as well. So, I feel zero regret that I have the books in a format that is unavailable for purchase.

    As to the validity of Smashwords statistics, well, regardless of their time frame or the number of people in their sample, they are not stating that this reflects ALL people who read ebooks – they are simply stating that when a book is offered legitimately and legally by the publisher where people have an option to choose to pay or not pay, that the majority opt for the free download is valid.

    It’s kind of like donation-ware. Many people download it because it’s free but don’t know if they will like it or if it will serve their needs. If they find that it does, they may go back and make a donation to the creator or they may not. But, since they are not required to, many will not.