VOL.77/2024.12

 

Book Pricing Strategies in Korea

 

2023.07.03

 

 

 

Average list price of books sold in 2022 was 17,869 Korean won

 

In Korea, books are usually sold at a fixed price. It’s because the “fixed book price policy” is implemented as the book price policy in accordance with the Publishing Industry Promotion Act. According to the Korean Publishers Association’s statistics, the average fixed price of books in Korea in 2022 was 17,869 won, 4.4% up from the previous year (17,116 won). This isn’t a sharp increase considering the international pulp prices and domestic labor costs that have been driving prices up in recent years because publishers sell books at a “competitive price” as they fiercely compete with multiple titles in the market.
In the Korean publishing market, the hardback, paperback (lightweight and inexpensive, Western style), and pocket book markets take a small proportion - instead, a type that lies between the three is highly developed. So, it is different from the Western publishing markets where the same book is published in hardcover and paperback at the same time with a significant price difference.
Fixed book prices in Korea have been held in check in regard to their growth rate. If we look at the actual trend in the average fixed book prices, the increase in book prices is lower than the average increase of general inflation. Also, according to Statistics Korea’s Consumer Price Index (CPI) calculated with the year 2020 as 100, the total price index was 107.71 in 2022, a 13.5 point increase from 94.196 in 2014. However, regarding book prices, the index increased by only 9.1 points from 93.419 in 2014 to 102.57 in 2022.
The average fixed book price in 2022 analyzed by category was as follows: comics (6,314 won) and children’s books (12,674 won) were the cheapest, and history (25,620 won) and social sciences (24,352 won) were relatively the most expensive books. The average price of literary books, the most popular genre, was 14,493 won, which was lower than the overall average. The major reason behind this was the unique characteristic of the Korean publishing market, where small-volume and relatively inexpensive poetry books are often published.

 

Many publishers adopt the so-called “trade-off” pricing approach that references the price of similar books

 

In the field of business administration, there are three main ways to set prices for goods: cost-plus pricing, demand-based pricing, and competition-based pricing. Then, how are books priced in the Korean publishing market?
There are many ways to set a price for books. The most commonly used methods are cost-plus pricing (adding a certain profit to the production cost) and the so-called “trade-off” pricing (reflecting profit but referencing the price of similar books in the market). Here, the elements that comprise a book’s fixed price are the author’s manuscript fee (customary taxes) (10%), production costs (30%), distribution costs (40%), and book promotion and publisher’s administrative costs (20%). Of course, this is a rough calculation based on the average of published books.
Publishers decide the final fixed price based on a combination of book genre, production specifications, number of pages, and the number of copies. So, it is obvious that popular books with a large number of copies and thick academic books with a small number of copies choose different pricing strategies. Each genre – poetry, fiction, practical, self-help, liberal arts, academic, and children’s books – has slightly different price points. So, it seems that the “trade-off” strategy is most likely to be used among publishers to determine fixed book prices.

 

 

As books go into pricing competition in many cases, it is common for books across various genres to adopt a pricing method that makes a profit after their second print, instead of choosing the strategy to break even on the first print. Considering that there are many similar books in the publishing market, publishers have no choice but to try to reduce the purchase burden on readers through fierce price competition (competitive pricing).

 

VAT exemption and the Fixed Book Price policy

 

There are two important pillars that should be taken into consideration when pricing books in Korea: VAT exemption and the Fixed Book Price policy. Korea has been applying the VAT exemption policy on paper books since the 1970s and on e-books, including online publications (general books, webtoons, web novels) that started on CD-ROM in the 2000s. As the typical VAT rate in Korea is 10%, the exemption is equivalent to 10% of the price reduction.
On the other hand, there are also variables that should be considered when applying the Fixed Book Price policy. The policy, which is commonly institutionalized in non-English-speaking countries with developed publishing markets, locks in the price initially set as the selling price to consumers. However, in Korea, the policy allows sellers to provide 5% of the price as mileage points on top of the 10% discount from the fixed price. So, major online bookstores with great market dominance offer such discount services (10% price cut and 5% of mileage points) to the purchasers. This implies that it is difficult for a publisher to ignore such a situation when pricing books.
According to the survey of fixed book pricing stakeholders conducted in March this year, almost half (47.7%) of the publishers said they would “set book prices with discount rates factored in,” and fewer replied “no” (39.4%). A majority of other parties relevant to book pricing, such as authors, bookstores, libraries, and readers (book buyers), also replied that they would set book prices with discount rates factored in. In short, the consensus was that publishers were willing to incorporate the universalized discount rates into their fixed prices.

 

 

Such findings show that even though the publisher – the one that sets a book’s price – has no intention or awareness of raising the price in response to the extra discounts, a 15% of either direct or indirect discount has been structured in the industry, and it is highly likely to be reflected when setting the price. As such, book prices in Korea reflect the price-reduction effect based on the VAT exemption, and the nominal price increase is offset by additional discounts.
The publishing industry is also interested in how the small-quantity batch production trend and the recent rapid inflation will affect fixed book prices in the future. If we look at the Korean Publishers Association’s statistics on the number of books deposited in the National Library of Korea, the number of newly-published titles in 2022 was 61,181, which increased from 43,585 in 2005. However, the average number of copies per new title was 1,192 in 2022, which decreased from 2,745 in 2005. The reduced number of copies is likely to lead to an increase in book prices, as it is hard to turn a blind eye to the rapid inflation and labor cost increase these days, as well as the increase in pulp prices. Yet, raising book prices in proportion to the underlying elements is never an easy task, as the dropping purchase demand for books has been a concern among publishers.

 

 

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Written by Baek Won-Keun (President of the Books & Society Research Institute)