The Opportunity Apple Just Created For Publishers

[stonetools]

Blogger Eon Purcell notes that Apple may have created a big opportunity for publishers to sell directly to consumers, rather than through retailers:

Apple did book big book publishers a favour some time ago when, by giving the big six leverage over Amazon (with the launch of their new ebook platform iBooks), they enabled those large publishers to enforce Agency pricing for ebooks.

That gave the big six the power to set prices and extract a higher share of the revenue from their sales then had been the case for print books. It was a major moment in the development of the ebook market and one that has received a lot of attention and, at least from within the industry, a lot of praise.

Apple’s more recent decision to enforce tough rules on in-App sales of content has been less popular. It has forced Amazon, Google, B&N and Kobo among others in publishing and other creative industries, to change their Apps to disable links to their ebook or content stores. Further it made it impossible for an ebook retailer to sell an ebook through the Apple in-App purchase system without giving 30% to Apple. Nasty eh?

The opportunity this created and that everyone missed , even me (till this weekend when it dawned on me), is for publishers to go direct to consumers and launch their own apps selling ebooks to readers.

Think about it, ebook retailers cannot make money from selling ebooks via Apple’s in-App sales because their margins simply won’t stretch that far. In the case of Agency titles they would be losing money, even on self-published works they might be losing money. However, a publisher, selling direct through their own app, or even a branded app in partnership with a number of other publishers in a given genre, could easily afford the 30% charge and even an administration charge too so long as it was kept low.

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Well, what do you think? Is this the wave of the future? Mike Shatzkin thinks maybe:

Like Eoin, I have no idea whether any of the Big Six publishers are working on this idea or whether any of the major agents have suggested the possibility. But we’re talking about literally hundreds of smart people here, so it would be surprising if nobody’s exploring this possibility

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The book publishers could even do it in partnership with the Ibookstore, the way that magazine publishers are doing it in partnership with Apple's forthcoming Newsstand app. Come to think of it, its not totally crazy to think that Apple might not have had something like this in mind when they announced their much maligned policy change!

[Graham]

Selling directly works well for houses that have a clearly-defined genre (e.g. Baen) or for authors or small groups of authors (e.g. Closed Circle), as the customers know clearly where to go.

If the big publishers sold directly you would need to know which house sold the book you were looking for, or you would need the catalogue exposed to good search tools, or the big publishers would need to set up an aggregate site - effectively to act as their own agents.

Exposing the catalogue to a general search would make sense, but wouldn't this be easier using the web rather than specific apps?

Regarding iBookstore, aren't they selling through that already? Or do you mean that Apple could licence the iBookstore app to produce cloned versions for the big publishers?

Graham

[JeremyR]

I don't get it.

Old model - company would sell Amazon (or whoever) an ebook license at fixed price, which they would then turn around and sell to the customer at whatever price the seller wanted.

Amazon would sell e-books below cost, generally $9.99 as a way to get people to buy kindles.

So they would sell the e-book license to Amazon for $12.99, Amazon would sell it for $9.99, and Amazon would lose $3.

Agency Model - Amazon, Apple, B&N, whoever, just works as a sales agent, taking a 30% cut of the purchase. Book prices hitting $12.99 and up and up and up.

Sure, there is an opportunity to gouge customers more, but isn't the cut to iBooks (the official e-book store, who would be the sales agent there) pretty much the same as it would for their own apps? 30%?

For $12.99 book, the sales agent gets ~$4, the publisher gets $9.

If they did it in the app, the publisher would get the $9, plus the $4 for being their own sales agent, but they'd have to turn around and give apple the $4 for the in app purchase.

[tubemonkey]

Publishers should do this. That way, they can have complete control over their books and raise prices as an added bonus.

[stonetools]

Frankly I'm not sure how an IBook partnership would work, as yet. I do know that there are comic publisher apps already. Baen could do an app, if it wanted to . The Big Six guys could roll out very specific lines of books , I guess (Macmillan Mysteries, Harper & Collins Paranormal Romance ). There could be an Oprah Book Club or Zondervan Press App.

[stonetools]

Originally Posted by JeremyR

I don't get it.

Old model - company would sell Amazon (or whoever) an ebook license at fixed price, which they would then turn around and sell to the customer at whatever price the seller wanted.

Amazon would sell e-books below cost, generally $9.99 as a way to get people to buy kindles.

So they would sell the e-book license to Amazon for $12.99, Amazon would sell it for $9.99, and Amazon would lose $3.

Agency Model - Amazon, Apple, B&N, whoever, just works as a sales agent, taking a 30% cut of the purchase. Book prices hitting $12.99 and up and up and up.

Sure, there is an opportunity to gouge customers more, but isn't the cut to iBooks (the official e-book store, who would be the sales agent there) pretty much the same as it would for their own apps? 30%?

For $12.99 book, the sales agent gets ~$4, the publisher gets $9.

If they did it in the app, the publisher would get the $9, plus the $4 for being their own sales agent, but they'd have to turn around and give apple the $4 for the in app purchase.

No, they would not. As a publisher, they would be their own sales agent. Apple would take its 30% and the publisher gets to keep 70. That would be the publishers incentive to go that route. That's how the magazine publishers are doing it now.

[stonetools]

Originally Posted by tubemonkey

Publishers should do this. That way, they can have complete control over their books and raise prices as an added bonus.

Or, lower prices, knowing that they would take 70 % and would not have to pay retailers their cut.

[patrickt]

Correct me where I'm wrong because I'm not a publisher. Now, when I buy a book from Amazon that is less of a novel than it is a "guess this word" game, I get a refund from Amazon. If I wrote the publisher I get an email telling me why it's not their fault. Now under this new model it would be up to the publisher to give me a refund, or not, right? So, at best I would be dealing directly with the herd of publishers and at worst I could just blow off the bad book.

[JoeD]

The opportunity this created and that everyone missed , even me (till this weekend when it dawned on me), is for publishers to go direct to consumers and launch their own apps selling ebooks to readers.

Except Apple are still a middleman taking a 30% cut of each sale via the app.

The only real way to sell direct to your customers is via a website, no middlemen and you keep 100% of the profit. (Usual exceptions for web hosting, payment processing etc) Then they could have an app that sync's content like the kindle app does to avoid the 30% fee.

[Graham]

Originally Posted by stonetools

No, they would not. As a publisher, they would be their own sales agent. Apple would take its 30% and the publisher gets to keep 70. That would be the publishers incentive to go that route. That's how the magazine publishers are doing it now.

I thought the Agency pricing model meant that the publishers already get to keep 70% regardless of the seller?

i.e. that they currently get to keep 70% selling through Amazon, for example?

Unless I've got this wrong, the publishers wouldn't get any more selling through the iBookstore than through any other retailer.

The way they could potentially get more is by bypassing in app purchases and selling directly with a web app, but they'd have to have their own payment handling and download servers in place and deal with customer queries and refunds, which would eat into that 30% considerably.

What's more, they'd do this in addition to using the other retailers. Unless they wanted to go no-DRM they'd still want to be on the Kindle as well as in ePub, for example.

Graham

[charleski]

Originally Posted by stonetools

Blogger Eon Purcell notes that Apple may have created a big opportunity for publishers to sell directly to consumers, rather than through retailers:

This is a ridiculous statement. Apple is offering publishers a chance to use Apple as a retailer, that's all. Apple doesn't want to cut out the middle-man, it wants to be the middle-man.

Does Shatzkin seriously think publishers want to get involved in producing reader hardware? Does he think they want to deal with all the customer-support issues currently handled by Amazon, B&N and Kobo? Shatzkin sometimes makes sense, but not here.

No, there's no 'big new opportunity' here for publishers, at least not one that doesn't come with precisely the sort of overheads that they seek to avoid by giving retailers a cut of the consumer's dollar.

[stonetools]

Originally Posted by Graham

I thought the Agency pricing model meant that the publishers already get to keep 70% regardless of the seller?

i.e. that they currently get to keep 70% selling through Amazon, for example?

Unless I've got this wrong, the publishers wouldn't get any more selling through the iBookstore than through any other retailer.

The way they could potentially get more is by bypassing in app purchases and selling directly with a web app, but they'd have to have their own payment handling and download servers in place and deal with customer queries and refunds, which would eat into that 30% considerably.

What's more, they'd do this in addition to using the other retailers. Unless they wanted to go no-DRM they'd still want to be on the Kindle as well as in ePub, for example.

Graham

This is Mike Shatzkin explains it:

e immediate consequence of Apple enforcing this policy of theirs was to drive the direct-to-our-store connection from the Kindle, Nook, Kobo, and Google apps. Because those retailers only get 30% margin from the publishers, they can’t afford to give 30% to Apple for the privilege of in-app selling.

But publishers don’t have that margin problem. They already pay 30% for their sales, and if they put their own apps up with sales enabled through them, they’d only be paying what they already are to a retailer for the privilege. So apps for authors or genres or series of any kind could be offered as free downloads through the App Store with direct-purchase buttons inside. These could send you to the iBookstore, if the right kind of landing environment could be created, or to the publisher’s own landing page where sales commissionable to Apple could be made.

The publishers could sell direct to consumers on the same terms thyat they currently have with Amazon and the other booksellers, IOW. Why would the publishers do this? Shatzkin again:

If there is yet another channel available to publishers at the same cost as the existing channels, it would be appealing. And, frankly, anything that dilutes the Amazon share is also appealing to most publishers.

I'm always open to learning something new or getting an additional insight, as I hope the post made clear. However, I don't think that whatever might be wrong with my logic has been pointed out to me yet.

[Graham]

OK, it appears from those quotes that all Shatzkin is suggesting is that publishers could add additional entry points to their content with custom apps that would then make the sale with an in-app purchase or by transferring to iBooks. It's interesting that he also sees this as being diced up with apps for "authors or genres or series" rather than as a single app per publisher.

Effectively he's suggesting that publishers could capture some extra business by having their catalogue show up in app store searches rather than relying on sales within apps. Fair enough, particularly if the same basic app could be cloned for each new piece of content to spread the development and maintenance costs.

(On a sidenote, regarding the transfer to a sale through iBooks, is that possible? Can one app call another in that way?)

Graham

[Barcey]

The publishers have had 10 years to setup an ebook marketplace portal on their own and haven't done so. They've had more time to prepare for what was coming then any other industry and did nothing but bury their head in the sand and hope it would go away. I don't know why Eon thinks they suddenly have an opportunity.

[ilovejedd]

Originally Posted by Barcey

The publishers have had 10 years to setup an ebook marketplace portal on their own and haven't done so. They've had more time to prepare for what was coming then any other industry and did nothing but bury their head in the sand and hope it would go away. I don't know why Eon thinks they suddenly have an opportunity.

Simon & Schuster used to sell ebooks on their site. Pretty great as it was usually 30% (or was it 35%?) off the list price. They used to have the best prices on their own titles. Too bad they switched to agency pricing.

*sigh* Isn't agency pricing a form of price fixing? I've always wondered, is that even legal?