Optimizing CreateSpace: Price Theory for Indie Authors (Part 2) Is there an ideal price for your book?

Is there a way to optimize a CreateSpace book to maximize author royalties? So far, I’ve shown that Amazon’s print-on-demand service for indie authors is remarkably fair in the way it figures royalties no matter how a book is configured.

The only slightly odd trend is that trim size does not impact author royalties (a 300-page 5″ x 8″ book and a 300-page 6″ x 9″ book pay the same royalty with the same sales price), which translates to the rough rule that a book with larger dimensions and fewer pages will pay out better than a book with more pages and smaller dimensions, assuming that they have the same list price, even though both books might have the exact same number of words.

Adding additional pages to any trim size adds to costs (and subtracts from author royalties) in a predictable manner, stabilizing at about 2.4 cents in reduced royalties per additional two-sided page by the time a book reaches 200 pages. I put together a graph showing this stable trend for marginal page costs last week. Once again, a larger trim size has the advantage because each additional 2.4 cent page can hold more words. I posted a chart showing the average words-per-page for various trim sizes two weeks ago.

In all of my testing to this point, I’ve kept selling price stable at $12.99, a constant that has allowed me to compare a 100-page book and a 500-page book directly as both will earn a royalty at that price, though it is obviously an inflated price for a short book and possibly a bit of a discount for a longer book.

That static pricing begs the question: Is there an ideal price for a CreateSpace book? Once you’ve selected your trim size and have a set page count, is there a price point at which royalties will spike, or does CreateSpace produce another stable trend line for price v. royalty percentage?

Optimizing CreateSpace: Price Theory for Indie Authors (Part 2)

Let’s find out.

Finding a CreateSpace Pricing Sweet Spot: Method

I started with a page count of 300, which was arbitrary, but it did seem logical to start with an average-sized book rather than one that was very short or very long. I’ve shown that trim size does not affect author royalties at all, so while it doesn’t matter what trim size I used to gather this data, I’ll note here that I selected the smallest trim size that CreateSpace offers (5″ x 8″).

FYI, a 300-page book can hold anywhere from 93,000 to 150,000 words, starting with the 5″ x 8″ and stopping with the 6″ x 9″ trim size. You can see a complete chart showing trim size, word count, and page count here.

Using the CreateSpace royalty calculator and a bit of trial-and-error, I found that the minimum list price for a 300-page book (regardless of trim size) is somewhere around $7.49, which nets an author royalty of $0.04. The theoretical break-even point is a few cents lower, but I wanted my data points to look like normal book prices. Starting at $7.49, I recorded projected royalties at every price increase of $0.50 ($7.99, $8.49, $8.99, $9.49, etc.) up through $21.99, which got me 30 data points.

I completed the same process for books with page counts of 100, 200, 350, and 400, always starting with a price of $7.49 and ending with a price of $21.99, though that did result in some negative royalty numbers for the 350- and 400-page books, which means you couldn’t actually list a book of that length at that price. You also could go cheaper than $7.49 for a 100- or 200-page book, but as I didn’t want a whole mess of ragged data that couldn’t be compared to the entire population, I elected not to go cheaper than $7.49 regardless of trim size.

With the resulting data, I was able to see the effective royalty percentage of each book length at each price point, determine Amazon’s profits from the sale of each copy, and estimate the total and per-page revenue that CreateSpace receives to print a copy of a book of each length.

Finding a CreateSpace Pricing Sweet Spot: Results

For anyone who wants to look at the raw data, here you go. For everyone else, here’s a graph of what author royalties look like as price increases for a 300-page book:

CreateSpace Royalties by Price
Click for full size.

That is a very straight line. For every $0.50 added to the list price of the book, author royalties increased by $0.30. Every. Single. Time. While I don’t have a graph for each page-length, a quick scan of the linked Excel data file from above shows that every book length earns $0.30 for every $0.50 price increase over the minimum price for the book. This all leads to one definite conclusion:

CreateSpace gives authors a 60% royalty for every dollar of profit above and beyond the cost of producing the book. That’s pretty incredible when you think about it. CreateSpace/Amazon does all of the work for production and distribution, for which they charge a fixed cost regardless of quantity, and then they give the author the bulk of the profits.

The obvious critique to that glowing praise for CreateSpace and Amazon is that we don’t actually know how much it costs them to print and ship a book. It is likely that both ends of the business turn a profit, with CreateSpace earning a profit on the back end for production and then Amazon earning a profit out front for distribution, with a grand total that is more than what the author earns.

In fact, I can guarantee that CreateSpace/Amazon earns more than the author for every sale. Looking at the data for a 300-page book again, a sale price of $7.49 earns the author $0.04, or a 0.53% royalty. CreateSpace/Amazon keeps 99.47%, though we can only quote their revenue, not their profits, as we don’t have enough information about their costs. Still, we’re betting they make more than $0.04.

At the high end of the scale, with a sale price of $21.99 for the same 300-page book, the author would receive a royalty of $8.74, or 39.75% of the sale price. Amazon would receive $5.82, or 26.50%, and CreateSpace would receive the remaining $7.42. or 33.75%, splitting the money roughly three ways but with the author getting the largest cut.

I don’t think authors have much to complain about so long as they are pricing their books intelligently. A traditional publisher would likely give an author  10-15% of sale price for a first-run trade paperback, with those margins only increasing when a popular book was reprinted as a mass market paperback or when a proven bestselling author wrote another book. Self-publishing is definitely more profitable on a per-sale basis for an author who isn’t already popular, unless they choose to sell their book as cheaply as possible.

Finding a CreateSpace Pricing Sweet Spot: Analysis

The one hole in this analysis is that there’s no way to know CreateSpace’s profit margin for book production. I’ve played with the data several different ways and haven’t found anything conclusive. All we can really see is the revenue they earn from from a sale and then make the assumption that whatever trends seem to exist must be optimal for their business model. If it weren’t, they’d change it.

Here’s a look at what I did determine—a list of CreateSpace’s revenue-per-page at all of the different page counts I tested earlier:

100 Pages: $0.0359/page
200 Pages: $0.0271/page
300 Pages: $0.0247/page
350 Pages: $0.0241/page
400 Pages: $0.0236/page

What does this downward trend in revenue tell us? Not much, other than that there’s a reason (besides practicality) that the largest book CreateSpace will print is 828 pages long. Beyond that, their pricing model must no longer work, with revenue-per-page approaching $0. Why else would they set such an arbitrary upper page limit?

The one thing that the downward trend in revenue-per-page does tell us is that CreateSpace is actually trying to be fair to authors. They could have looked at these same numbers, noticed that they bring in $0.0359/page for a 100-page book, and decided that they wanted to generate that same per-page revenue regardless of book length, dropping author royalties severely.

But they didn’t. Authors earn a higher effective royalty percentage for longer books, thus encouraging longer, more substantial publishing activity on the CreateSpace platform rather than making it equally profitable for authors to pump out a ton of short books. Stay classy, CreateSpace.

Wait, What’s The Best Price For My CreateSpace Book, Then?

Oops. I got so caught up in all of that data that I forgot to discuss actual pricing strategy. There are three ways to go, at least in my way of thinking:

  1. Price your CreateSpace book so that it is competitive with similar titles.
  2. Price your CreateSpace book so that you maximize your profits.
  3. Price your CreateSpace book so that your print-on-demand and digital royalties are roughly equal.

The first option is strategic. Pretty much every indie author goes with $2.99 for their e-book edition, at least until they get popular. Why not go with the flow and price your print-on-demand edition in line with your direct competitors? The only reason I think that might be a bad idea is that, for some strange reason, indie authors tend to price their print-on-demand books way too high. They try to get the same retail price as a NYT bestseller, and that just ain’t gonna happen.

Option number two is a bad idea for the same reason as option number one. If you are just starting out, no one is going to pay $19.99 for your book. I mean, maybe someone will, but that extra dollar or two in royalties for that one sale is not going to make up for the sales you potentially lost because everyone else balked at that price.

Option number three has been my strategy in the past because it just makes sense. A $2.99 e-book is going to net the author somewhere around $2.00 per sale on Amazon, depending on the file size. Shooting for a similar royalty for print-on-demand, you might choose to sell your 300-page book for $10.99 and earn $2.14 per sale. CreateSpace and Amazon do all the printing and shipping work, so why get greedy? A digital sale and a print-on-demand sale are effectively the same thing for an indie author, so price them accordingly.

Finding a CreateSpace Pricing Sweet Spot: Conclusion

While there will seemingly always be some mystery to how CreateSpace operates and manages their money (which is the modus operandi for Amazon as a whole), what is important is that, once again, Amazon and CreateSpace seem to be offering indie authors a very fair pricing and royalty structure.

As a point of comparison, Book Baby, a competing print-on-demand service that sells through Amazon much like CreateSpace (as well as through Barnes & Noble and a dedicated online storefront platform called BookShop), lists an author royalty of 20% ($3.25) for a 200-page book sold for $15.99. A 200-page book published through CreateSpace and sold for $15.99 on Amazon would earn the author a royalty of $6.34, just a hair under 40%, or roughly double what Book Baby offers.

If the expanded distribution of Book Baby’s print-on-demand services are worth the 50% drop in royalties to you (or if they offer other perks that I didn’t notice in my brief survey of their site), then definitely go with Book Baby.

For my time and money, though, CreateSpace wins hands down. Much like what I found in previous weeks, there is no magical sweet spot for pricing where author royalties spike, but that’s because the royalty structure is fair all the time. There’s nothing tricky going on, no reason to lie awake worrying that you might be getting ripped off.

A book with larger dimensions and fewer pages is, once again, the key to increased royalties. But a smaller book with more pages will generate lower royalties in a predictable manner if there is some advantage to a smaller trim size in certain situations. There’s nothing complicated about how CreateSpace operates, and that’s a good thing for indie authors who have many, many other things to worry about.

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