Can a Free Book Be a Best-Seller?

During the more than two and a half years since Amazon (AMZN) first introduced the Kindle, the company has sent out many an excitable press release boasting about its stellar device and e-book sales. Generally, e-book sales overall have grown at an explosive rate, especially over the last 12 months, and Amazon, with an estimated 80% to 90% of pre-iPad market share, certainly contributed a great deal to those numbers.

But two points have worked against Amazon in its attempt to establish definitive statistical legitimacy with readers and industry types alike: a lack of hard numbers, and a best-seller list predominantly populated by free e-books.

The first point won't change anytime soon, but as Publishers Weekly reported late Wednesday, Amazon is changing its best-seller list methodology. Instead of a top 100 list that includes a significant proportion of free titles (as was the case late last year, when 64 of the top 100 Kindle best-sellers cost $0.00, or this week, when on Wednesday evening, the top ten books were free) there will now be two lists: one for books with a price tag, and one for those without one. The list of top 10 paid Kindle titles is already publicly available thanks to industry newsletter Publishers Lunch, which has released them on a weekly basis for nearly two years.

At this time, details are still scarce with respect to both the timing of the best-seller list split and the motivations behind it. An Amazon spokesperson told Publishers Weekly the change would happen "in a few weeks", and Amazon Communications Director Andrew Herdener told DailyFinance, "We'll be sharing more details in the coming weeks. Please stay tuned." But publishing industry reaction echoes what a HarperCollins (NWS) executive told the trade magazine: A list that combines free and paid e-books doesn't help readers who "want to know what books everyone is reading, and buying."

Will Free E-Book Supply Dry Up?

On Amazon's Kindle forums, customers appear to be in favor of the move to split the e-book best-seller list in two.

"I love the free books," said user SRB, "but often I want to see the mainstream fiction books & not the public domain stuff. Sort of like Apple's paid and free apps listings."

Author L.J. Sellers also applauded the move, posting that "calling a free book a 'best-seller' never made much sense to me or seemed quite fair ... I certainly understand the concept of giving books away as a promotional tool, and I would expect the practice to continue. I've given away hundreds of print books for various reasons." But another user asked what will likely be a very pertinent question for the future: "I wonder if this will cause the supply of free books to dry up?"

That the supply was so plentiful, especially from bigger publishers, was due to the correlation between high numbers of free e-book downloads and stronger sales for related books by a given author. For smaller publishers, the promotional value of free e-books has been huge. "Giving away a few books on Kindle has given us results we could NEVER have afforded via traditional publicity," Deborah Smith, proprietor of romance and historical fiction publisher BelleBooks, told GalleyCat.

Without the Lure of '$0.00,' Real Prices May Drop

But there could be another unintended consequence of separating out the free e-books from the Kindle best-seller list. If readers perusing the top 100 list don't immediately reach for the gratis titles, will they be as enticed by e-books with price tags they think are too high -- such as anything exceeding $9.99?

Prices for e-books ticked upward recently due to a move by most of the biggest publishers to an agency model from a wholesale one. Under the new system, retailers like Amazon or Apple (AAPL) get a 30% cut of the original e-book list price, giving them higher profit margins. The move was heavily lobbied for by Apple ahead of its release of the iPad -- only companies that switched to an agency model can sell e-books for the new Apple product. But already since the iPad's April 3 launch, prices have started to drop.

According to the Kindle Nation Daily blog, for the 30-day period which ended May 7, "the total percentage of e-book prices above $9.99 [among the 511,259 e-book listings in the Kindle Store] has decreased from 22.69% to 21.73%, essentially a full percentage point." And when the current and longstanding bestselling paid e-book, Stieg Larsson's The Girl With the Dragon Tattoo, is also one of the cheapest -- at $5.50 -- the lack of surrounding free digital books might force prices down further.

If so, the moral of the upcoming best-seller list split might be that free isn't good enough, but cheap is still very much desired by e-book readers -- even if publishers fervently hope otherwise.