This is a bit out my usual blogging style, as it concerns technical aspects of the publishing biz. Feel free to ignore it and look at Stormwalkers made of Legos. But as an author, I have to keep up with these things, and occasionally make my opinion known.
This weekend, Amazon more or less “de-friended” one of the six big US publishers, Macmillan. They removed the buy buttons from all Macmillan books as part of an ongoing conflict about electronic book pricing. Many people are quite annoyed with Amazon, and a few are also blaming Macmillan, in a “pox on both your houses” kind of way. But I think a lot of people are uttering total yackum on the subject.
So let me attempt to set the record straight, as best I know how.
Stage 1: Amazon prices ALL its Kindle e-books at $9.99 or less. This becomes a selling point for Kindle, as new hardback books can cost up to $27. In some cases, Amazon is actually paying the publisher MORE than $9.99 per copy sold, and losing money. But, hey, Amazon has stacks of cash, and it’s a way to sell more Kindles. “Loss-leading,” as it’s called, is a fairly common practice. It’s a way to get people into the store, to leverage other products, etc. Plus, books are commonly discounted well below suggested price.
My Verdict: I don’t hate anyone yet, but I’m kind of sad. Losing money on every book sold is a very aggressive form of pricing, which indie bookstores will never be able to match. This is not going to be great for my bookseller allies in the physical world, where many of my readers (especially the youngest) like to get their books.
Stage 2: Macmillan (and many other publishers, to be sure, but let’s stick with Macmillan for simplicity of narrative) suggests to Amazon that they raise their Kindle-edition prices. Macmillan is worried that e-books are being devalued, and that customers will always expect this discount forever, when it’s currently being propped up by Amazon’s crazy-internet-bubble stacks of cash. Macmillan is also worried that normal bookstores, made of bricks and mortar, will take a hit as sales are lost to much cheaper electronic editions. These are difficult times for bookstores, and we (authors, readers, and publishers) all want a diverse bookselling ecology that includes chains and indies, as well as online and physical bookstores.
Macmillan also suggest something called the “agency model” to calculate what cut Amazon gets. I will not bore you with details, but it does change the way profits are divided between Amazon and Macmillan.
My Verdict: I still don’t hate anyone. It’s far-sighted of Macmillan (etc.) to take the needs of their smaller allies into account, rather than just saying, “Hey, Amazon’s selling at a loss, and we get to keep out usual profit! FTW!” (By the way, I know this is merely self-interest on Macmillan’s part, but at least it’s enlightened self interest, which is what I mean by “far-sighted”.) As for the agency model, Macmillan is certainly allowed to suggest new business arrangements to Amazon. As a bonus, it’s all fairly polite so far, or at least it hasn’t affected those of us on the outside world.
Stage 3: Amazon says, “Nope. We set out own prices. And we like the cut we’re getting now.”
My Verdict: Okay, I still don’t hate anyone. Amazon has the right to set prices (even if the pricing seems predatory to, say, an indie bookstore going through tough times) and to negotiate for the cut they’re taking. If they want to burn their own money to make electronic books cheaper, I may shake my head for the future, but I can’t stop them.
Stage 4: Macmillan says, “Fine, if you’re going to do that, we’re going to ‘deeply window’ our electronic editions.” In other words, Macmillan will delay the release date of electronic editions (Kindle editions in particular) so that they don’t cannibalize the more profitable hardcover sales.
My Verdict: This is cool with me. Publishers have always delayed lower-priced editions, like paperbacks, until the people who will pay $27 for a shiny new book have coughed up their money. This is not an evil strategy. It’s common with many products—clothing, music, gadgets, prescription medicine—early adopters pay more. Why? Because they’re the ones paying to defray the creation costs. (Which is ME!) Once that’s been done, later adopters can pay less by buying last year’s stuff (and cheap knock-offs). We’ve been lucky in publishing, because we have a physical distinction between what we sell early and late adopters (hardcovers and paperbacks). But this is not a given. In fact, in many industries, the reverse is true. (A later generation iPhone is both cheaper and better. A later, cheaper DVD release often has more extras on it.)
Many Kindle owners will get angry at this point, because they want to read new books NOW, not when the paperback comes out. But should they really be mad at Macmillan? As I said, publishers get to stage their pricing, starting high and gradually lowering it, to cover the costs of acquisition, editing, marketing, etc. And Macmillan would love to release its Kindle editions right away, but not at the risk of undercutting its hardcover sales and its physical bookstore allies. By insisting on low prices, Amazon has forcibly turned its Kindle customers into people who haunt the bargain basement and wear last year’s jeans. These customers simply didn’t realize this was happening, because Amazon’s industry muscle and huge stacks of cash were subsidizing them all along.
Stage 5: Amazon de-lists Macmillan, removing all buy buttons from both electronic and physical books from the publisher. This is done unilaterally, without warning or explanation (and on a Friday afternoon, when, supposedly, fewer people will notice). This deprives not only Macmillan but also their authors of both income and the accessibility of their works to readers.
My Verdict: I call SHENANIGANS!
Some have likened this de-listing as a “shock and awe” campaign, a stunning display of muscle power from an industry leader (or proto-monopoly). But I think it’s a bit more pathetic than that. It reminds me more of an educational film from an old Simpsons episode, the one with the tagline, “Sorry, Jimmy, but you said you wanted to live in a world without zinc!”
It’s like Macmillan woke up on an otherwise fine Saturday morning, and there was no more Amazon! Wow, that‘ll teach you to negotiate, rather than just caving.
Of course, in this case, zinc blinked. Amazon has admitted that they will re-list Macmillan, because an online bookstore that sells only five-sixths of all books is somewhat useless.
So to the “a pox on both your houses, Macmillan and Amazon” crowd, I must say that I think your analysis is lazy. This is not a case of two corporations pissing down on us mere mortals with equal disdain; it’s a case of complex negotiations in an ancient industry with many arcane traditions that’s in a state of technological flux, being conducted at a level which the overwhelming majority of readers do not understand (nor should they have to), and which were going along in a way that made, frankly, perfect sense to those of us who understand this industry a little, when suddenly, out of the blue, one of the sides in this negotiation spat their pacifier across the room in a very public and embarrassing display of petulance. And that corporation was Amazon.
Yes, Amazon gets to set whatever prices it wants. (Free market!) But guess what, Macmillan also gets to release its electronic editions later if it feels simultaneous release is not in its best interests and those of its allies. (Free market again, sir!) And yes, Amazon gets to de-list an entire publisher if it wants to, even on a whim. But that’s a massive free market fail, because authors, customers, and publishers start to hate them, and they have to back down two days later. And that’s really the end of it: their strategy failed, because the rest of us can call shenanigans and take our business elsewhere.
Oh, wait, except Kindle owners . . .
________
A quick note: All discussions of this event will draw commenters who think they magically know how books should be priced, and who say there is no reason for electronic editions to be more than $9.99. A quick note to them: You don’t know what you’re talking about. Seriously, your back-of-the-envelope calculations are crap. The printing costs of a book are generally between 3% and 10% of list price. So in most cases, 10% should be your “first-printing” e-book discount, not 50%. That may seem weird to you, but that’s because all the cheap stuff on the internet is backlist (like Baen Books), subsidized/coerced (like Amazon), self-published (no editing or marketing costs), or promotional (like when I gave Uglies away for free). Yes, the “long tail” of backlist books may become very cheap, or free, but not the new stuff, which is what this discussion is all about. (UPDATE: Also, see comments 1 and 9.)
And full disclosure: Most of my books, and the vast majority of my sales, are with publishers other than Macmillan. But two, The Risen Empire and The Killing of Worlds, are Tor books, a Macmillan imprint. They are, however, still available on Amazon due to their bargain bin status. *sobs*
Update: Regarding the last line of the post proper, I have been reminded that Kindle owners can put non-Amazon books on their readers. But much of the utility of the Kindle comes from the instant, wireless purchases, which are only through Amazon. So the point stands, but only partly.
Update 2:
According to commenters, certain Kindle books are priced higher than $9.99. Those aren’t the books this issue is about, really, but for the sake of completeness, it is duly noted.
Tobias Buckell is wicked smart about this kerfuffle. Read his take here. Also, go buy his books.
Charles Stross is smart about, um, everything. Here’s his take.
PS
Hey, Amazon. When cutting off publishers, don’t start with the one that has the most science fiction writers. We will blog you dead!
Great analysis.
I’ve been thinking about this over the weekend, and I think this is a very nice synthesis of the myriad issues going on here.
One question: Shouldn’t distribution costs (such as warehousing, shipping, transport damage, etc.) go into your back of the envelope calculations? I’d have to believe that’s going to knock off another 5-10% at least.
Nice write-up! What a mess this has all been. If you’d like to see a humorous video on the fracas, check out this author’s website:
http://www.jacksonpearce.com/
I found it quite amusing.
Laura Hartness
The Calico Critic
I’ve learned a lot more about the costs of even getting a book ready for the printing (or e-book formatting stage) since become a book blogger. My sympathies are with the publisher – perhaps they are looking out for their own profits too, but at least their goals will line up with what I want, which is the continued availability of printed copies of books, the continued existence of both independent and chain brick-and-mortar bookstores where I can spend my time browsing and go to author events. And as a paper-book-only reader I am not pleased with a company that built itself up as the online bookseller where you can order any US-published book in print and get it delivered to your door, suddenly not selling every single book by a major publisher.
I visted the Kindle forum and found it rather confusing. There are so many people that think paper books will be gone soon and seem to be considering any publisher useless and standing between the author and the reader. First off, since obviously there are posting on a board where 99% of people own a Kindle, they are gonna find a lot of e-book only readers. But I really don’t see that so much in my community of blogging friends – who either read paper books only, or who read e-books for traveling convenience but like to keep a collecting of printed books – or in the real world, where most people I know consistantly read a handful of books a year and aren’t going to spend $300 on an electronic device that would take them years to save any money on those 5-10 books they raid a year.
So yeah, maybe someday paper books will be gone completely. I personally don’t see it happening in my lifetime, because of schools, libraries, casual readers, childrens books, people who want a physical copy they can do what they want with, etc. But I’m truly terrified by these people’s idea of a world without publishers. Do they think an author turns in their book to a publisher and poof, it’s done and all the publisher does is print and distribute it? It’s a lot more than that, and I’ve become even more aware of that since becoming a blogger. Do I think it’s unfortunate that there are probably some great books out there that were turned down soley because they weren’t in a popular genre? Sure. But the publishers do a very good job of weeding out truly terrible stuff, as well as taking the good stuff and polishing it into the finished book we get. I wish more readers were aware of what goes on in the publishing process and how much work the people at the publisher (editors, publicists, designers, proofreaders, etc) put into turning that manuscript into a published book. And that’s where the bulk of the book costs come from. Not from printing the book, or formatting the e-book. But for all the steps before that.
sorry, that was read a year, obviously not raid.
Andrew Mayer – I believe I have read that the bulk of distribution costs are covered by retailers and not the publishers.
You’re a cool dude, Scott. I was hoping to hear some input from an author’s perspective, so this has enlightened quite a bit for me.
I thought both Macmillan and Amazon were rash in their decisions, and I do feel that said decisions were made to provoke. These are two very big companies and a feud between them would cause chaos, so I’m glad they came to some kind of consensus.
And Amazon just caved: http://news.yahoo.com/s/ap/20100201/ap_on_hi_te/us_amazon_macmillan_20
Great post – it takes a great look at everything going on. I tend to dislike how Amazon has handled this situation…mostly because none of the other distributors are having this issue. The publisher says that the book is at a 25% discount, they sell it at a 25% discount of the hard copy…except for Amazon.
This is the problem you get when the same place that makes the Reader sells the books too. They make a lot of money on the reader, so if they don’t make as much on the book they don’t really care. I hope more of the “big six” try to settle this in the year ahead. If they don’t soon it will just get worse. Set standards and keep them…unless the actual consumer thinks it is to much aka they DON’T buy books over $9.99. (oh wait, they do on other readers).
This is the most insightful post about the Amazon/Macmillan conflict I’ve read. Thanks for posting, I’ll be passing it on to friends.
Shyla
One question: Shouldn’t distribution costs (such as warehousing, shipping, transport damage, etc.) go into your back of the envelope calculations? I’d have to believe that’s going to knock off another 5-10% at least.
At the moment, Amazon is claiming all those percentages as its own profits, because it does all that stuff for physical books. Which is why Macmillan wants to move to an agency model, where Amazon would take a lower cut.
So yeah, eventually you may see steeper discounts, but only if Amazon accepts the agency model. (We all leaving my zone of expertise, however.)
Scott, as always, you are a voice of reason. My own personal thoughts on how Amazon reacted are more strong, partly because of what I did for over a decade, and I know how that kind of power can lead one to believe they have the right to negotiate via a Mexican Standoff. But I instead call it a form of censorship, and petty, and of course a desperate grab for continued dominate market share.
Publishers and retailers are never adversaries, but partners, always partners.
Great job of writing this up.
@Catie F (#7) I don’t think Amazon is making money on the Kindle yet. And if they are, it’s not scalable money. They only get to sell one per customer, really. What they want to do is sell one to EVERY customer (even at a loss) in order to be selling eBooks too those customers forever.
If they have to sell some of those eBooks at a loss, well, that’s just one cost of doing business. Ultimately, though, the Kindle is about creating customer loyalty through a sort of lock-in.
Oh, and Scott? Great post. Best summary I’ve yet seen. Duly tweeted.
You know, last week I was thinking about buying something from Amazon, even though I’ve purchased pretty much nothing from them in months, (since before their last epic failure in communication/strange weekend decision, even) and then this happened. It just seems like, for a giant that dominates the market, Amazon should be less tragically *bad* at operating. But lately, with that badly-handled homophobia “glitch” on Easter Sunday, the tragically ironic recalling of already-purchased GEORGE ORWELL ebooks, this whole corporate blackmail / practically TELLING customers that maybe it would be a better idea to look elsewhere… It’s like they don’t even *have* a public relations department. Or they just don’t care. I’ve never bought a single ebook, and honestly, don’t care about the negotiations in any way except for how they affect brick-and-mortar (and, you know, the future of the industry at large, so I suppose I do care quite a bit) but the complete and utter failure of this corporate giant at well, doing pretty much *anything* really doesn’t make me want to shop with them, umm, ever.
Not all Kindle books are priced at $9.99 – my New New Media is $35.44, and check out the prices of some of the other Kindle books on this page http://www.amazon.com/dp/B002RWKSHO/ref=nosim/?tag=dexter2a-20
Great post! I’m merely a reader, and as you say know nothing about how the industry actually works.
Note: not all of Baen’s WebScriptions catalog is backlist. They release (some? many? all? – I don’t know) new books in ebook format concurrent with the print editions.
Thanks for putting so much time into your blog. I read the original letter, but your post explains things even better. I’ll pass on the link.
You do know that the world without zinc is a direct ripoff of Kentucky Fried Movie’s Zinc Oxide and You skit, right?
*sigh* Kids these days.
Scott, I’ve brought this up elsewhere, but any analysis of this situation that only includes Amazon and Macmillan is missing an 800 lb gorilla in the room. Apple. Supposedly this negotiation has been going on for some time, close to a year I believe somebody has said. The reason it became “nuclear option” time for Amazon is almost certainly that they see their window of having leverage closing rapidly as Apple backs up the iPad truck to the ebook market and starts scooping out their market share by the shovel full (WOW I’m mixing metaphors left and right here, but somehow I still think they’re working? maybe?).
The way I see it isn’t that both corporations are pissing on “us” (us being consumer or content creator), but that basically Macmillan probably tried to use the iPad leverage they had just gained against Amazon and Amazon realized that they were, to a degree, right, and used their nuclear “un-friending” option.
I don’t think anybody really expects Amazon to never carry Macmillan books again (hell, they even told their customer’s in Kindle forum land that they would probably give in to Macmillan demands at some point), but to say Amazon is the “wrong” party here is ignoring that Amazon has the same responsibility to its employees to not get muscled out of profitable business as Macmillan does to theirs… I’m not saying Amazon didn’t use the jerk move tactic here, they did, but let’s not fool ourselves into saying this is them being a bratty baby… this is them being self aware of how fickle the consumer is and how much they stand to lose if Apple chews up their market share. I don’t think it was the RIGHT negotiating tactic (frankly I think an open letter to their consumers posted on front-page would have been a MUCH smarter move), but it’s one I can understand.
Very nice piece. But the zinc oxide gag comes from Kentucky Fried Movie. The Simpsons didn’t do quite everything first!
Good analysis: and I have bought your Tor books. 🙂
I’m one of the very few people on the MobileRead E-book forums who is vocally supporting Macmillan on this. I do write, and I have managed a bookstore, but it’s not my industry experience that put me on Macmillan’s side, but rather Amazon’s unilateral employment of the nuclear option instead of good faith negotiation.
Amazon does not price ALL ebooks at $9.99 or below. They try to have a lot of them at that price point, but not all, by any means. For example, the new Connie Willis book is $26 MSRP, $17.16 discounted hardback at Amazon.com, and $14.30 for Kindle. They are currently listing the trade paper edition, $15 MSRP, for pre-order at $10.20. I expect that the Kindle book price will come down closer to the trade paper release in September. Amazon only discounts some books far enough to be real loss-leaders, in the same tradition as grocery stores, department stores, and other big retailers.
I totally agree that Amazon took things too far Friday night, and it doesn’t surprise me at all that they blinked. You’re right, I think, that negotiating this is all part of business; as many of us know, readers are not the real customers for publishers — retailers are. But readers are Amazon’s customers, and although they’ve tried their best to cast this as a customer advocacy move, in the end Amazon couldn’t risk customers deciding that buying books elsewhere is a better idea.
Ah, Scott. You remain my literary crush. (Except for the eating soap thing.) I feel so “in the know” now! Thanks! 🙂
Fantastic analysis of both sides. Best one I’ve seen yet. Thanks.
You, Buckell, and Stross have done the best job summing up this entire fiasco. Yours is the one my mother will be able to understand, and that means consumers in general instead of other publishing nerds (who by and large already know and understand what’s going on.) I will be passing this URL around. Thank you!
Well put, Scott. Had Amazon removed the buy buttons only on Macmillan Kindle editions, this would be a very different situation. But Amazon went way too far by removing not just the e-book editions and the print editions but also removing Macmillan titles from customers’ wish lists and from their previously downloaded content.
(Amazon has also said tonight that it’s going to cave…citing Macmillan as having a “monopoly” on “Macmillan content.” And you know what? I can’t take anything else Amazon says seriously. Really. Full stop right there.)
Thanks for all your kind words, and I’ll try to update about the other prices on certain Kindle books. And yes, as Puss in Boots says @25, Charlie Stross and Tobias Buckell are both smart as heck about this stuff. Here are those links:
http://www.tobiasbuckell.com/2010/01/31/why-my-books-are-no-longer-for-sale-via-amazon/
http://www.antipope.org/charlie/blog-static/2010/01/amazon-macmillan-an-outsiders.html
Great post, Scott, thanks! Instinct suggested that Amazon’s dummy-spit was illogical and unhelpful, but until now I wasn’t entirely sure I could justify that instinct. Now I can.
Thanks for this post. Prior to reading yours the ones I understood the best were the Buckell and Stross. Appreciate your grouping them together … just for me!
Thanks for the thoughtful posting. It helped me to get the gist of what the heck is going on. I will also be heading over to the other posts you’ve linked. Here’s hoping this all gets straightened out decently…
…and for the record, I too bought The Risen Empire & The Killing of Worlds… at brick and mortar stores, no less. 🙂
Publishers appear to be going down the same road that the RIAA did 10+ years ago. They are clinging to the old model, and refusing to adapt to the new.
There have been many, many, MANY musicians who have embraced the digital era, and are now making a comfortable living without the help of the recording industry. We are starting to see authors do likewise. With the continued success of the Kindle we’ll see even more. Sure we’ll see a lot of self-published garbage, but there will also be hidden gems; and in the digital age, good stuff will rise to the top. Thing Back Street Boys vs. Johnathon Coulton.
When you look at this from the single author perspective, any move toward the proliferation of digital formats should be welcomed with open arms.
Scott, I’ve read several of your books (BTW, hurry up with the sequel to Leviathan) but this is the first time reading your blog. Great post! As an avid reader and Hardcover book buyer, I personally don’t understand the popularity of the e-readers. I do think that all of the e-books are overpriced for what you get, but to price them lower would not benefit the authors in any way.
I would like to see Hardcover books come with an e-book copy (similar to the digital copy coming with some DVD’s and Blu-ray’s now). If you want the e-book on release day, you have to buy a Hardcover and get it with the book. The publishers could then release standalone e-book a month or so later or at the same time as the softcover.
I know that Germany and France have laws for fixed pricing. The publishers can set a minimum retail price for their books and any retailer has to sell at or above this fixed price. I am not sure if the US has this same type of law, but I do know that Amazon.de is currently being sued by a German book retailer for breaking this law. If the US does not have this law, perhaps the publishers should work on getting this in the US. The Amazon/Walmart $9 new release hardcover war just a couple months ago was ridiculous and did some damage to the non-chain bookstores, and even some of the chain bookstores.
Let’s not forget also, that when a Baen book is first released, it’s $15.
It comes down fast, but those first copies are expensive. Of course, they come out BEFORE the paper does. But that’s cool and Baen’s decision.
As a Kindle owner, I really enjoyed the $9.99 feature, but even at that price I usually wait for it to go down to “paperback price”. People never want to pay full price for things when they know it’ll come cheaper. That’s why I think it would be fine to raise the prices on the Kindle books. It would ultimately hurt me, as a consumer, because I’d have to pay more money… but the books are worth that much. Discounting them like crazy doesn’t help the market.
The biggest thing about the Kindle is it’s portability, not the discounted prices. Those were always a nice added bonus, but honestly it’s just an extra feature. The Kindle isn’t supposed to give away books dirt cheap, that’s not the point.
I hope this issue gets resolved… I would hate to have my selection of Kindle books limited because of this dispute. There are so many good books that might not get read due to this.
“By insisting on low prices, Amazon has forcibly turned its Kindle customers into people who haunt the bargain basement and wear last year’s jeans.”
Hilarious! 🙂
I have a Barnes & Noble nook (it was an unexpected Christmas present) and I can still buy Macmillan books. Those ebooks are also $9.99. I wonder if B&N is just trying to lay low. 😀
Just FYI, Baen publishes all their e-books for $6. (Except their pre-release hardcovers, which get published for three months as a $15 E-ARC, which then go down to $6 (or less, when bundled with all the other books Baen releases that money for $15) for their new release.
And Eric Flint has said that Baen is able to make a profit specifically on the e-book side of things, not just in terms of boosting print sales, and pay authors very decent royalty rates compared to other e-book vendors.
How are they able to do that when everybody else is not?
Chris,
Perhaps partly because they (and Night Shade who also sell new similarly, and the ebooks have come out *before* print books in some case) are smart enough to sell to everyone in the world, whereas your Macmillans can’t manage that.
Well said, Scott.
This is the first indepth dissection of the faux pas I’ve read.
Firstly, to be a bit of a devil’s advocate, I think Kindle has partly caved in to consumers (there was a concerted campaign last year) to bring eBooks under the $9.99. So while we’re talking about Amazon, Mac and as another commenter pointed out, there is also the added dimension of the consumer.
The new royalty arrangments for Kindle (effective 1st July) caps the top sale price at $9.99 if you want to get your 70% royalty. The big publishing companies have said ‘no’ – they can’t make any money that way.
I’m proud to say I’ve never bought from Amazon (as I’m in Australia – the shipping is a killer). I can’t understand how Kindle/Amazon has been able to only offer 35% royalties to authors listing with Kindle… and thus I’m glad to see someone is willing to stand up to Amazon.
You point out Scott – it is a free market, it would be good to see large corporations behave with grace and morals. What I’d like to see is Amazon have a competitor who will make them pull their heads in… one can hope that will be Apple.
As an aside – the two largest media outlets/families here in Australia declined Amazon’s invitation to be part of their online news syndication when they released the Kindle here in Oct last year. If Australia’s two largest (and richest) media families don’t want a bar of Amazon/Kindle – us little guys better take note too I think.
That should read – ‘Apple’ as the other commenter pointed out. Ick!
Jodi Cleghorn: actually, it’s apparently even worse than that. Not only is the top sale price capped at $9.99, but it’s Amazon that gets to decide what the books sell at. See Charles Stross’ take on all this.
That’s a really interesting blog post. I didn’t know about the whole debate, and now I’ll have to go look up what others are saying on it too 🙂 It’s quite interesting to look at people’s arguments about these things!
Anyway, I agree that it’s kind of pathetic for Amazon to just take Macmillan off though… it reminds me of the little kids who say, “If you don’t do this for me, I’m not inviting you to my birthday party!” 😀
Sorry Scott, but Publishers need to realize that it’s “Change or Die” time. Ebook purchasers don’t ‘own’ digital books like we do physical books, we’re buying a license. We can’t lend or resell them and that needs to take part in your calculation of value. Publishers also need to realize that Ebook readers are some of their best customers. We love books so much that we paid hundreds of dollars for a device to read them on. I can honestly tell you (really, I’ll show you my invoices) that I’ve read more books since I’ve had my Kindle, than I’ve read in the past 10 years. Some of them your books, Scott. So while you might not be making the same percentage off of each of my purchases, you’re getting more of my money in the long run. Because I’m reading more of your books, and I’m telling people about them. And then they’re buying your books.
A cautionary tale: The publisher withheld Stephen King’s “Under the Dome” from the Ebook market for a few months. A week after the hardcover went on sale, a digital version was available all over the internet for free, ready to use on any Ebook reader. Publishing companies could easily go the way of Record Labels.
I need to stop being a bury-head-in-sand-and-hope-the-e-future-goes-away kind of author. Thanks for dragging me, a bit, into the 21st century.
Excellent post.
I agree with everything you said. However, I do think you left out one very important component: Apple. As one of the earlier comments stated, this was all pretty much brought to a head last week, I think, because of the response to Apple’s iPad. Yes, Sony and B&N have e-readers, but they don’t have the brand recognition and associated power that Apple does. Apple is the real threat to Amazon and the reason, I think, for Amazon’s knee-jerk (take my toy and leave) reaction.
I think you missed a step between #4 and #5, when Macmillan said to Amazon, we’re taking all our e-books and moving them to ibook and aren’t going to sell them on Amazon anymore. To which Amazon responded with step 5, ‘fine, we’ll not sell your print books either if that’s how you’re going to play.” So, painting Macmillan as a fine and upright negotiator with Amazon as a pouty child I think is a little lopsided. They’re both pouty little children.
Also, I’m not certain I agree with basing the price of an electronic book on the cost of making a book. It should be based on the cost of making the electronic version of the book.
When you start your post with a blatant error, it makes one wonder. “Amazon prices ALL its Kindle e-books at $9.99 or less” is just not true. They have always said they would price NYTimes best sellers (and some new releases) at $9.99. You can find dozens of ebooks priced way above that:
Examples: -Louis D. Brandeis: A Life the Kindle book is $23.76 (It had originally been priced HIGHER) than the paperback)
All you have to do is go to Kindle books and do a sort by high-low price. Some fiction is as high as $340 delivered wirelessly.
I buy about $4000 worth of books a year. Now I buy ONLY in digital format (unless unavailable and then I buy a used copy) simply because it’s so much easier to read on my Kindle or Nook or iTouch than holding a physical book which requires two hands.
If I really want to read a price, the price isn’t usually a deal-breaker, although I start to look at title alternatives over $15 for an ebook.
This battle is a result of the Supreme Court’s 2007 decision in Leegin Creative Products v PSKS. [There is an excellent article about the evolution of MSRP at http://www.aterwynne.com/files/Dr%20%20Miles%20Resale%20Price%20-%20Bauman%20PBJ%209-07.pdf%5D It is no longer illegal under the Sherman Anti-trust Act to require a minimum price. Publishers are very upset with discounters and this is an attempt to break their ability to discount.
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The issue isn’t Amazon’s eBook pricing. The issue is that publisher’s have razor-thin margins that can’t be improved upon until they shed the costs and infrastructure associated with physical book production. Until they do so, they’ll continue to see eBooks as a cannibalizing threat, rather than the HUGE opportunity that they are.
If you’re to actually look at a publisher’s net cost for publishing a physical book (this includes prepub expense, printing, capital contribution, warehousing, freight, and returns), the profit margin is much less (3-7%) than those of an exclusive eBook (25-35%). But instead of embracing a format that allows them to improve their margins, publisher’s are clinging to a dying business model. For book lover’s, the anger should be directed at the publishers, not Amazon.
I think one reason more authors and agent types aren’t seeing this is because they signed away their works’ electronic rights and thus are losing money in this transition from physical to digital because their royalty rates aren’t reflective of the production costs of an eBook.
Scott,
A wonderfully accessible summary of the situation, imo. but your tagline PS is a masterpiece!
Not only are Baen’s Webscriptions $6 on release (E-arcs are somewhat different, see below), they’re unencrypted and don’t require a reader. They’re popular also with people who travel extensively and don’t want to take physical volumes with them.
Genre fiction has an advantage over mainstream in that readers re-read their favorite books. They’ll willingly cough up for a printed edition, and a few bucks for an electronic edition, but if you try to tell them it costs as much to produce an electronic version, they’ll call BS and not buy. As noted above, illegal editions will be out in short order. It’s in the publisher’s (and author’s) interest to beat that with a competitively priced download.
Just as iTunes has set a typical song price at .99, a typical book price is under $10. No argument from industry, with any number of figures, will change that. The negotiation is, “Will I buy your electronic edition at $10, or will I not buy it at all?”
The market sets the price, not the industry.
And since I get 50% of that electronic download price, in addition to the usual advances, royalties, reprints, paperbacks and limited editions, I see no downside as author.
*Baen’s E-arcs are a marketing trick. The moment I finish a rough draft, the hard core fans may pay $15 to see it, warts and all. This generates a bit more income, and actually improves production–in volume, they find errors that even skilled copy editors miss. That price drops the next month, and again, and then goes to the normal $6 price a month before the books hit stands.
As every book I’ve written has continued to sell more print copies than the previous, and as this is pretty much standard for ALL Baen books, the model works. People who complain the model doesn’t work aren’t using the same model, so it’s an apples and rutabagas comparison.