The Business Rusch: Free

The Business Rusch: Free

Kristine Kathryn Rusch

I just came across a terrible article on Galley Cat from the Media Bistro site. Galley Cat bills itself “The First Word on the Book Publishing Industry,” and Media Bistro, when it started years ago, was supposedly going to shed journalistic light on the publishing industry. Let us all pause while I chuckle darkly.

I really should stop railing against the decline in journalistic standards. I really should, because all it does is give me heartburn. But I got my journalism training from a bunch of blue collar World War II reporters who believed in verifying sources, researching the material, and never ever trusting what someone said in an interview without doing a bit of investigation first.

This Galley Cat article would’ve been tossed in any newsroom I worked in after a few phone calls. Instead, Galley Cat, which should know better, printed the dang thing, and now I’m watching this badly written article go viral.

What is it?

Here’s the misleading headline: “Author Loses Royalties From 5,104 Books.”

Here’s the story: a new self-published author named James Crawford told Galley Cat that Amazon lowered the price of his book, Blood Soaked & Contagious, to free without his permission.  Crawford now claims that Amazon owes him money for the 5,104 free downloads—and actually, he may have a case for something or other. I’m not quite sure what.

The problem isn’t with Crawford, although I’ll deal with some of the issues raised by his circumstance in a moment. The problem in this article is with Galley Cat for taking what he says at face value, reprinting an e-mail from Amazon (probably without their permission, ignoring copyright), not interviewing Amazon for their point of view, and—most importantly—not understanding the new face of publishing.

Let me explain.

What happened to Crawford is this: He published Blood Soaked & Contagious at $5.99.  Then he put up a few chapters of the same book as a loss leader for free on Barnes & Noble.  What I’m assuming is this: He put up the chapters under the same title as the book on Amazon.com. I can’t tell you this for sure, because a search of the B&N website only turned up one version of Blood Soaked & Contagious.  (God, I want to add punctuation somewhere in that title.) That version is priced the same as the Kindle version at $5.99.

Anyway, the free chapters triggered the suspicions of Amazon’s bots. They troll the internet, searching for the same items that are for sale on Amazon, only at cheaper prices. If the bots find a cheaper price, then they lower the Amazon price to the same amount.

The Kindle Direct Publishing (KDP) Terms and Conditions that all folks who use KDP agree to states that Amazon has the right to set the retail price on any book published through KDP. Amazon maintains some form of this agreement with most of its suppliers.

Traditional book publishers fought a battle with Amazon almost two years ago now so that they wouldn’t be subject to Amazon’s ability to set a retail price.  This is called—for some strange reason—agency pricing.  (Do not confuse it with prices set by agents.)  Not all traditional publishers signed on to the agency pricing agreement. You can tell which ones have by a little snarky comment near the price on the Kindle listing: This price was set by the publisher.

The problem is that even with agency pricing, Amazon may discount a price if they find the exact same version of the book for sale at one of its major competitors at a lower price. Note the term “major competitor” and “exact same version.” Important distinctions. So if B&N are selling the new Stephen King at $8.99 and Amazon has the book at $9.99, Amazon will give the customer the $8.99 price.

Wal-Mart does the same thing for everything from diapers to blankets. Retailers have long advertised that if you can find the same item at a lower price elsewhere, the retailer will meet or match that price, or maybe even give a better discount.

I’m not defending the practice. Hell, I’d love to have the price of my book remain the price of my book.

I’m just saying that the practice exists and whoever publishes a book through KDP agrees to abide by this concept.

The concept failed James Crawford. His B&N book with the same or a similar title triggered the Amazon bots and they mistakenly lowered the price of a different product to zero.  When Crawford pointed out the mistake to Amazon, Amazon immediately corrected the price, returning it to $5.99.

Here’s where the misunderstanding comes in on Crawford’s part. In the space of time—not mentioned in the Galley Cat article—that Crawford’s book was available for free, it sold 5,104 copies. Crawford believes that he is owed royalties for that.

He is not, although he might be able to get some kind of compensation if he can prove harm and if he can get an attorney to take his case. But I’m not sure he can prove harm.

Because here’s the problem: Crawford believes those 5,104 sales would have happened anyway. If he was correct, then Amazon would owe him in the neighborhood of $21,000 ($5.99 x 5104 x 70%).  I’d be fighting for that too.

But Crawford’s book wasn’t selling at that same rate before the book went to free. How do I know this? Crawford noted “a huge spike in downloads over night” (and that misspelling comes from the Galley Cat article) and that spike caused him to investigate what had changed.

What had changed was the price.

I went through something similar during the first week of October. Sourcebooks lowered the price of my novel Wickedly Charming to free for one week (October 2-9) as part of a promotion. I blogged about it here and promised to come back to the topic when the promotion was over. It’s been a month now, and I can say a few things for certain.

First, let me say that I don’t see the numbers for Wickedly Charming or my other novel, Utterly Charming, which is also published by Sourcebooks—at least, I won’t see the numbers until I get my royalty statement in April.  So I don’t know how the numbers spiked on those two books, although I do know that they did, from that goofy Amazon ranking.

What caught my attention was this: the sales of my 99 cent short story, The Charming Way, spiked the  morning that Wickedly Charming went free. The Charming Way spiked and spiked significantly—going from selling a few copies now and then to dozens that day. The blurb of The Charming Way mentions that the story provided the inspiration for Wickedly Charming.  Readers had not yet had time to read Wickedly Charming, and yet they were picking up the short story to read later.

By the night of October 2, my other Kristine Grayson titles—on which I can see the numbers—started to climb. The climb was slow, but steady, which suggested to me that the fast readers who had finished Wickedly Charming were now looking at the other Grayson books.

The books that sold the best were the paranormal romances, just like Wickedly Charming. The novels Completely Smitten and Simply Irresistible sold better by the end of the week. The other titles were short stories.  The paranormal short stories sold the best. The Western romances, also published under Grayson, and the few contemporary titles didn’t sell half as well, even though they were priced at 99 cents.

I’ll come back to that in a minute.

Debora Geary mentioned in the comments on my blog post about Wickedly Charming that the sales of my other titles would really spike the following week, when Wickedly Charming would return to its original price. I thought that very odd, but I decided to track it as best I could. I had the help of a friend, since I was in Canada when the price bounced back up.

I can’t give you the actual sales figures for Wickedly Charming yet, but I can tell you how the Amazon rankings went. Amazon has a bestseller list for free books on Kindle and for paid books on Kindle. Wickedly Charming went all the way to number seven on the free list, and stayed between seven and twelve from late Tuesday, October 4 until the book’s price went up on October 9.

The morning of October 10, Wickedly Charming’s sales rank on the paid list was 5,000-something. That means that according to Amazon’s algorithm, 5,000+ books were selling better than Wickedly Charming on Kindle. By noon, that number had become 2,000-something. By the time I arrived in the States—about five in the afternoon, that number had climbed to about 1,200.  By the time I got home at 9 that night, the number had climbed to 735 (where I finally got a chance to write it down).

The number continued to climb for the next day, peaking at 324, and remaining there for the rest of the week.  Then it started to go down. A month later, the book—which was released in May—is at 15,000.

A different promotion is going on this week, by the way. Sourcebooks has priced Utterly Charming at $2.99.  I am not seeing the spike in sales that I saw with the free book.

Aside from the whole free thing, pricing seems to make no difference, provided the e-book is less than $10.  The sales of my 99-cent short stories increased only on the paranormals, and were consistent with the sales of the $4.99 novels. The 99-cent westerns and contemporaries didn’t sell nearly as well.

Here are a few other interesting facts about that free book. Sourcebooks lowered the price on the NookBook as well, but there was no accompanying rise in sales during the free week on the other titles, although I am noticing a slow and steady increase throughout the month.

Barnes & Noble does not have a free bestseller list nor, so far as I can tell, does it have an easy way to find free books. So B&N customers had to stumble on the book to know it was free. Kindle customers troll the top 100 free books list—I know I do—and download books that sound even remotely interesting.

I have downloaded free Kindle books for the past 18 months, and I’ve only read about a third of them. Some are by authors I planned to read anyway, and some just plain sound interesting. I’ve bought other books by those authors, but later, after I had read the free book.

So of the free downloads that Wickedly Charming got, many of those books are as yet unread.

I had a similar experience when Audible.com offered The Disappeared, the first in my Retrieval Artist series, for free. Audible had published the entire series that summer—to date anyway. (Audible has just published, as an exclusive, the next RA novel, Anniversary Day. The paper/e-book version will come out in December.)

When my editor at Audible asked me if I wanted to put the first book up for free, I said yes immediately, startling him. So many other authors had said no (and were offended) that he was gun-shy. I figure a writer has to trust her work.  I’ll give you the first one for free, and trust that you’ll buy the rest.

Over the  next nine months, I could see the spike in readers moving through the series like a mouse working its way through a snake. The readers went from book to book, not dropping off, until they got to the last book.  But more than that: there was a significant rise in readership even after the bulk of the readers who had gotten the book for free were done. Those later readers had taken their time getting to the free book. Then they started through the others.

I’m still seeing a benefit from Wickedly Charming’s free week. I’m not sure where the sales of the other books and stories will level, but I know they will, unless they get goosed again.

The increase in sales on the other titles—the ones I can monitor—was significant. By this Monday, October 31, four weeks after the promotion started, sales on the other titles were ten times higher than they had been in September. I’m hoping that the free book made a lot of new fans.

The surprise for me was that once the book stopped being free, it continued to climb the rank of Amazon’s paid bestseller list. I’m assuming—and I honestly don’t know this—that the algorithm combines free sales and regular sales in that crossover. Once readers see the book on some of the subgenre lists, then they start buying, and the sales increase.

The subgenre lists, by the way, look like this: Fiction—> Romance—> Paranormal.  So you can drill down to some interesting subgenres. The Charming Way actually made it onto a World mythology bestseller list for a short period of time.

I’d been planning to offer something for free for a long time, but I had known that I needed a game plan before I did so. The fact that Wickedly Charming went free was a bonus for me—Sourcebooks conducted the experiment, and I saw a direct result in related titles.

Friends who had done free books had seen very little impact on sales when the free book or story had no similar titles to boost.  A free mainstream short story didn’t boost sales of science fiction novels. A free mystery novel didn’t boost the sales of the author’s romance titles. And so on.

I saw that in my Grayson titles. The sales of all of the Grayson paranormals increased. The sales of the light Westerns increased, but not nearly as much. And the sales of the contemporary romance stories remained exactly the same. On Kindle.

There was no benefit that I saw on B&N, although friends tell me that there is a long-term benefit on titles that remain free for a month on B&N. That makes sense to me, because that gives readers time to find the free book—something Amazon does automatically.

This brings us back to James Crawford.  A glance at his name on the Kindle bookstore turned up 30 different books, but with a quick scan it became clear that most of the titles by the various James Crawfords weren’t him. So I went to his Amazon page, and found only two titles, Blood Soaked & Contagious and Super Love! Kaiju.  The first book, Blood et. al, appeared on September 15, 2011, and the new title (which is 99 cents) appeared on October 19.

I have no idea if the second publication was available when the first title went free. I doubt it. But what this all means is that Crawford had no way to benefit from the accidental free offering of his book. Although I do wonder if the sales of Blood et al increased after it was briefly free. I’ll wager it did.

So does Amazon owe Crawford royalties for the mistake? No. The sales wouldn’t have happened if the book hadn’t been free. Does Amazon owe him damages? Only if he can prove harm, and again, given my experience and the experiences of others, I don’t think there was any.  He can always hire a lawyer and see what he can get—but I suspect all he’ll get will be some legal fees.

Galley Cat on the other hand deserves a slap on the wrist and a long lesson in the art of reporting. If they are, indeed, “the first word on the Book Publishing Industry,” then they should know that free promotions often boost sales. They should also have contacted someone at Amazon to answer Crawford’s claims, and they should have asked uninterested third parties for analysis.  This kind of article is just plain shoddy reporting, and has, unfortunately, diminished any credibility that Galley Cat ever had with me.

Back to the whole concept of free, however. Let me share what I’ve learned over the past few weeks. Use it as your guide if you want to offer a free e-book some time in the future.

1. Make sure you have more than one title before you offer a book for free.

2. Make sure that you have titles in the same genre, and if possible, make sure they’re in the same series.

3. Limit the amount of time the title is free. I have a date with both Kindle and iTunes to check the free listings once per week—and I know I’m not alone. This will introduce a lot of readers to your work, although maybe not right away.

4. Expect blowback. Readers who get books for free are a vocal bunch. Someone will hate your book. Others will love it. A few will be offended because the book isn’t what they expect. A friend of mine calls this the Netflix effect. His theory works like this: Most of the popular movies on Netflix have ratings of 5-7.5 (out of 10) because when you have hundreds (if not thousands) of people ranking the movie, the spread will work out so that the movie will rate right in the middle.  Some will like it, some will hate it, some will love it. It all averages out.

5. Remember that this is a promotion. It’s called a loss leader—meaning that you expect to lose money on this title to lead readers to your other work. Do this only when you can afford a promotion, and not before. Think of it as advertising, and like all advertising, it’s a bit of a gamble.

If I were giving advice to Crawford, I’d tell him to stop worrying about the “lost” royalties and get another book up on Amazon ASAP. Take advantage of all those new readers who got the book for free. I’d also advise him to read the terms and conditions of something before he agrees to it.

Will I offer a free book in the future? In a heartbeat. But as I said above, I will have a game plan, and I will make sure that I know what I’m aiming for with the promotion. That’s what other businesses do. They don’t just randomly offer a special. They put some thought into it.

Writers and publishers should do the same.

Speaking of pricing, for the last few weeks, I haven’t explained the donate button. As I discovered last summer, when I fail to comment on the donate button, donations drop off. I have a donate button on the Business Rusch part of my website because I use up valuable fiction writing time to write this nonfiction blog. The money I make from donations keeps me writing the blog every week. So if you got something from this week’s blog (or previous blogs), leave a tip on the way out. Thanks!

“The Business Rusch: Free” copyright 2011 by Kristine Kathryn Rusch.