Leanpub and Pricing

by Peter Armstrong

published Oct 05, 2016

Scott and I launched Leanpub back in April 2010, with the goal of creating the best way in the world to write, publish and sell in-progress and completed ebooks. Our first customer was this up-and-coming guy named Eric Ries, who was advocating a strange idea called “The Lean Startup”. We made a Leanpub book out of Eric’s blog. This led to our second customer, Babak Nivi, who let us make a similar book out of his and Naval Ravikant’s blog, Venture Hacks. Eric, of course, went on to write The Lean Startup, and Naval and Nivi created this small thing called AngelList.

Eric wasn’t just our first customer, he was also the reason for the name Leanpub. After my experiences writing two books, I realized that Eric’s Lean Startup principles had great applicability to the way that authors should write and publish books – that as an author, you should publish your book in-progress, using lightweight tools and many iterations to get reader feedback, pivot until you have the right book and build traction once you do. I called this approach Lean Publishing, wrote a manifesto and book about it, and talked about it wherever I could. Leanpub was a reference to the idea of Lean Publishing – and if you wanted to do Lean Publishing, then Leanpub should be your obvious choice.

Leanpub’s positioning and our traction from the launches of Eric’s and Nivi’s books helped us gain an initial customer base with agile and computer programming book authors. It helped that these authors were highly technical – since our books were authored in Markdown, our user interface was terrible and our book generation was flaky, to get past all these hurdles and actually finish a book it really helped if you were a computer programmer.

Since these humble beginnings, we’ve grown steadily, and today thousands of authors from around the world use Leanpub to publish early and publish often. We’ve paid over $4.4 million in royalties to authors, and we currently pay over $100K in royalties to authors every month.

Leanpub Today

Leanpub is a powerful platform for serious authors. This platform is the combination of two things: a publishing workflow and a storefront. Leanpub is more than the sum of its parts, however – by combining a simple, elegant writing and publishing workflow with a store focused on selling in-progress ebooks, it’s something different. Leanpub is a magical typewriter for authors: just write in plain text, and to publish your ebook, just click a button. (You can click a Preview button first if you want!) Once you’ve clicked the Publish button, anyone in the world can instantly buy your ebook from Leanpub, and read it on their computer, tablet, phone or ebook reader. Whenever you want to distribute an update to all your readers, just click the Publish button again. It really is that easy.

Our workflow is flexible. Authors can use our simple in-browser editor or upload completed ebook files, but most choose to write their manuscripts on their own computers, using either plain text (formatted using Markdown or Markua markup) or Word documents. These manuscripts are synced with Leanpub using either Dropbox, GitHub or Bitbucket. From these manuscripts, we generate ebooks formatted in PDF, EPUB and MOBI which look great on all devices. This is a fully-automated process: authors literally just click a button. We also automatically generate print-ready PDF and InDesign files, so that authors can easily create and sell print books on sites like Lulu or CreateSpace. (The InDesign files are for a book designer to make a custom book, but the print-ready PDF files are exactly that: ready to be published as a print book.)

Our storefront is an elegant way to sell in-progress or completed ebooks. There are lots of good places to sell completed ebooks, such as Leanpub, Amazon or Apple, but the Leanpub storefront is the best place to sell in-progress ebooks. It includes attractive book landing pages, variable pricing with minimum and suggested prices, analytics and mailing list integrations. Our variable pricing feature alone earns many of our authors thousands of dollars of extra money. Just as people love backing projects on Kickstarter, readers love supporting authors – and our pricing sliders which show the author royalties make it clear to readers how buying a book on Leanpub does just that. Readers often voluntarily pay much more than the minimum price of a Leanpub book. In fact, our bestselling book by lifetime revenue, R Programming for Data Science, has a free minimum price!

One of the most interesting features of the Leanpub storefront is the royalty rate our authors earn: 90% minus 50 cents royalties per paid sale; free for free sales. On Leanpub, a $10 ebook sale earns $8.50 in royalties, and a $20 ebook sale earns $17.50 in royalties. Respectively, those royalty percentages are 85% and 87.5%, which we’re very proud of. By the way, in case you think those ebook prices are higher than what Amazon “encourages” you to charge, or what you hear from publishing industry commentators, you’re right: the average paid ebook sale price on Leanpub is over $14. Now, a $14 ebook sale earns $12.10 in royalties on Leanpub, but would only earn $4.90 on Amazon KDP – while Amazon KDP essentially pays 70% royalties for books between $2.99 and $9.99, it only pays a 35% royalty rate for books which cost less than $2.99 or which cost more than $9.99. Many books on Leanpub cost more than $9.99, so Leanpub authors earn a far better royalty percentage on those books than they would on Amazon KDP.

Our royalty rate is better than Amazon’s and Apple’s royalty rates for any book over $2.99, and it is far better than Amazon’s royalty rate for books over $10. Leanpub exists to support authors, and our royalty rate does just that – regardless of what minimum and suggested prices an author chooses for their book. Since we adopted this royalty rate in 2010 we haven’t changed it, and we are not changing it now.

Pricing Changes

Today we are changing the pricing of Leanpub. Until now, Leanpub has been totally free for authors to use. We have earned all of our money from our portion of the storefront revenue. (After the author royalties, PayPal fees and chargeback costs, our gross margin on the storefront is about 8% – for every $100 of book sales on Leanpub, we earn about $8.)

Going forward, it will cost money to create a new Leanpub book. Here’s the cost:

$99 per book.

That’s it. This is a one-time charge, not a subscription. This price includes all the features of Leanpub, and is the price regardless of what writing mode you choose. We are charging the $99 at book creation. Like any Leanpub purchase, it will have our 100% Happiness Guarantee: for 45 days, you can get a full refund by clicking a button. (Refunding a book writing purchase deletes the book if it has no sales, and archives it if it has sales.)

Leanpub authors have created tens of thousands of books. We are, of course, grandfathering every one of these books: they will have all the features of Leanpub, for free.

For new books, there are discounts available based on lifetime royalties earned. There are also special discounts for translations.

We want to reward loyal authors who support Leanpub through their storefront sales. So, we have two discounts based on lifetime royalties earned across all your Leanpub books. Once you’ve earned at least $1,000 in royalties, creating a new book costs $49 per book. Once you’ve earned at least $10,000 in royalties, creating a new book is free. Hundreds of Leanpub authors will immediately qualify for one of these discounts, and we hope thousands more do in future.

Authors can create translations of their Leanpub books for $19 per book. Some Leanpub books are translated into a large number of languages, and at $99 each this would add up fast. (Of course, if you’ve earned at least $10,000 in lifetime royalties, creating a translation is free.)

To be clear, regardless of what you pay (even $0) to create a Leanpub book, this one time charge includes all the features of the Leanpub workflow and storefront. For example, there is no charge to create packages or bundles. (Packages let you sell extras with your book, like videos or code samples. Bundles let you sell your book bundled with other Leanpub books, at a discounted price.)

Again, the royalty rate for authors is unchanged: 90% minus 50 cents royalties per paid sale; free for free sales.

If you’re a publishing company, our publisher program just got a lot simpler. For any new book created by a publisher the price is now $99 per book. Our publisher program helps forward-thinking publishers like TidBITS Publishing easily produce dozens of professional ebooks using Leanpub’s simple, proven workflow. Publishers own their ebooks and can sell them wherever they wish. If a publisher chooses to use the Leanpub storefront, we pay 90% minus 50 cents in revenue per paid sale. Using Leanpub for ebook production is a pragmatic choice, like using a third-party printing press for print book production or using AWS for web hosting.

Why We’re Doing This

We haven’t changed our pricing since 2010, so we’re not making this change lightly. We have thought really hard about this. This pricing change will help us address a number of the challenges we have been facing:

First, where we were earning our money and where we were creating much of our value were different places.

Leanpub is the combination of a publishing workflow and a storefront. We have put years of work into the workflow, and it creates much of the value we provide an author. We were giving away the workflow to drive author growth, but this was only being monetized by the storefront. Now, when we were working on storefront features, there was an immediate connection to increased revenue – for example, adding a shopping cart helped us sell more books. However, when we were working on workflow features, there was a huge delay between a workflow improvement and increased storefront revenue. We have a viral loop, but it takes a lot longer to write a book than a tweet! By making our workflow a source of revenue, and not just the main reason that authors use our storefront, improvements to the workflow will also have an immediate connection to increased revenue.

Second, we’re a bootstrapped startup, so cash flow actually matters.

Leanpub has raised exactly $0 in investment. We’re based in BC, Canada, and while startup funding climate in BC is improving, it’s not exactly Silicon Valley. Since we’re bootstrapped, work on the startup is fueled by revenue from either the startup itself or from us doing consulting work for clients. So, the timing of revenue matters. For Leanpub, a successful book will earn a lot of money over its lifetime in our storefront. Almost all of this revenue is for its author(s), as it should be. But some of it (about 8%) is for us as well. However, we can only spend our portion of that revenue once we actually have earned it, and much of this is deferred for months or years. By charging money when a book is created, we can spend that money on development or marketing as soon as its 45-day refund period elapses. This means we get our first $99 of revenue from a book months, or years, sooner than we do today. (Currently we don’t earn $99 from a book until it has been published and earned about $1200 in sales.)

Third, our pricing didn’t work well for authors who only want to sell their books directly.

Since we have created an amazing book writing and production workflow, some authors naturally wanted to use Leanpub to make books, while only selling those books on their own websites. This is perfectly legitimate. There are some good reasons to want to own the customer relationship. Some authors put a lot of work into developing an entire range of products, of which their books are only one component. For these authors, a purchase directly from their website is more valuable to them than a purchase on Leanpub, Amazon or Apple. For example, when an author sells a book on their own website, they can require the reader to share their email address. With Leanpub, readers need to opt in to share their email address with the author.

We need to support these authors. Leanpub authors own the copyright to their work, and are free to sell it wherever they want. Just as we value reader privacy, we value author control. However, the current situation was sub-optimal. For us, not only did we earn no money from those books, there was a support cost as well. For the author, they were stuck doing cheesy things like only previewing their book, and putting it in stealth mode so it didn’t show up in our store. Worse, there was a feeling of guilt: we’ve had multiple authors ask us to invoice them for our services, which is a hassle for both us and them. Charging money on book creation makes using Leanpub just for our workflow a guilt-free transaction for these authors: they’re not freeloaders, they’re customers.

Fourth, our pricing didn’t work well for publishers.

Just as some authors want to only sell their books directly from their own websites, many publishers want to do this as well. With our previous pricing, we used to make publishers choose when they created a book whether they wanted to use the Leanpub storefront. If they did, the book was free; if they didn’t, the book cost $299 to create. We had good intentions here, but basing a pricing plan on punishing honesty is a bad design choice. Making the price be $99 per book for every book created by a publisher is both simpler and fairer.

Fifth, books which did not earn a lot of revenue were costly for us to support.

We are genuinely helpful people who enjoy building tools to help authors write books. We also sincerely try to provide good customer support via email to hello@leanpub.com, via Intercom, and via our Google Group. There are many reasons to write a book, and direct compensation from author royalties is only one of them. But since the only way we earned money was from a percentage of a book’s storefront revenue, providing good customer support was problematic. With this pricing change, we earn money from every book, right when it is created. This will help us pay our support people, so that we can help any new Leanpub author to get started using Leanpub.

Conclusion

We thought really hard about this pricing change, and considered many alternatives. One thing we really don’t want to do is charge a monthly or yearly subscription fee per book. Books take a long time to write, and when you’re starting a book it’s hard to predict when you’ll finish. We don’t want authors to feel that they’re on a clock, or that they can lose access to their book once they’ve started it. We also want to keep things simple. Authors shouldn’t feel that they need a doctorate in Leanpub to understand what it costs.

This is really important to us. If we price Leanpub fairly, and if we can convince enough people to pay this fair price, then we can earn the revenue needed to go much faster than we have to date. We can build all the features we want to build, for both the author and the reader experience, much sooner. We can even spend money on marketing, helping the entire flywheel turn faster – which will drive us to grow and develop features much faster than we have in the past. If you’re a member of our Google Group, you’ll definitely appreciate this. As an author, paying to create a Leanpub book is an investment, since we will be spending that money to improve your experience using Leanpub.

Scott, Len, Braden and I would like to thank every Leanpub author who has helped us build our platform over the past six years. Without you, there’s no Leanpub. Thank you very, very much. Our sincere hope is that this change to our pricing helps us go a lot faster in the years ahead.

Peter Armstrong

October 5, 2016

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