Article on ebook profits

[GA Russell]

Originally Posted by DMcCunney

The bigger issue is people waiting for cheaper ebooks. I don't see those appearing from the major publishers at the rates people would like to see, because I don't believe they can publish them that cheaply.

Dennis, the inability of the big publishers to publish cheaply is a recurrent theme of yours.

It appears to me, however, that it would be more correct (assuming that you know what you are talking about, and I am willing to believe that you do) to say that they cannot do so if they do not change their way of doing business.

But this is not an unusual concept in business. Change or die is how the business world works if the industry is not protected (from competition) or propped up by the government.

Another recurrent theme of yours is that the corporate parents of the big publishers have unrealistic expectations of the profits these publishers can earn. Well, whose fault is that?

You have frequently said, "Be careful what you wish for..." Given a continued reluctance to change and unrealistic profit expectations, I don't see why the customer shouldn't wish for change. It's not like we owe them anything.

[DMcCunney]

Originally Posted by GA Russell

Dennis, the inability of the big publishers to publish cheaply is a recurrent theme of yours.

It appears to me, however, that it would be more correct (assuming that you know what you are talking about, and I am willing to believe that you do) to say that they cannot do so if they do not change their way of doing business.

I fully agree. There are actually two questions. The first is what the changes ought to be. I don't think anyone knows at the moment.

The fundamental problem the industry is facing is not a new one. It's been going on for years, and ebooks didn't cause it. There are simply too many books chasing too few readers, and there have been waves of wrenching consolidation as publishers trimmed lines (and dropped authors from contract and laid off employees), imprints folded, and larger houses acquired smaller ones to get economies of scale and gain market share.

eBooks simply add a complication, as publishers try to figure out how to produce them profitably. They may well be the savior of the publishing industry, though they may also doom most bookstores.

The second question is whether publishers should try to publish ebooks at the rate many on MR would like to see.

Consider the poster who commented that he restricted his ebook purchases to indie published and self-published work that he could get for $2 - $4 each. If what you read is fiction, and you can find enough that satisfies you restricting your purchases to that sort of material, fine. What if you can't?

For instance, I read a lot of fiction, primarily in the SF/fantasy and Mystery genres, but with a mix of other types mixed in. I also read a lot of non-fiction, including works on the arts, history, politics, business and finance, economics, politics, philosophy and the sciences. I'm not going to find stuff like that written by people writing as a hobby who are happy if they cover expenses and people read them. Consider a book like David McCullough's _The Path Between the Seas_, a history of the creation of the Panama Canal. It won the National Book Award for History, the Francis Parkman Prize, the Cornelius Ryan Award, and the Samuel Eliot Morrison award. It was not a spare time activity. It was the author's full time job for a couple of years. I'm not going to see that published as an ebook for under $5, and it would be absurd to expect to.

Some things just cost more to do, and you pay more for them. If you aren't willing to pay, you don't get them.

But this is not an unusual concept in business. Change or die is how the business world works if the industry is not protected (from competition) or propped up by the government.

Yes, it is. And the industry is changing, but everyone is still reading the tea leaves, trying to figure out what the new environment will be, and how they'll need to change to adapt to it.

And change will be a slow process. Fundamental changes in the business model of a large corporation don't happen quickly. They can't. Changes must be made by people, and those people must understand what they are doing and why they are doing it, and agree with what's being done. Since that sort of fundamental change often means that many of those working for the company now won't be when the changes are finished, getting that agreement can be fraught.

Another recurrent theme of yours is that the corporate parents of the big publishers have unrealistic expectations of the profits these publishers can earn. Well, whose fault is that?

Not entirely that of the publishers. I think I've lost count of the number of times I've seen major corporations stumble because they misunderstood exactly what they were doing. The growth of media-centric corporations including book publishing was predicated on the idea that there were benefits to having all forms of media under one roof. It foundered on money and differences in business model. Different businesses have different fundamentals and different ways they should be measured, and require different kinds of management. Those details got lost in the consolidations.

And even having all forms of media under the same roof doesn't mean you'll have synergies. Each division will have its own agenda, and will be competing for resources. Cooperation that will be seen by one division as benefiting another without helping them will be resisted. Take a look at the internal tensions in the former AOL Time Warner between the folks from the web side and the folks from the traditional publishing side. That combination came unglued even though it made sense on the surface to have both online and traditional publishing assets under the same roof.

Book publishing and things like films, TV, and music have similarities in that all are content based and need to insure a continual flow of new content. But they differ in the amount of money they can make. A successful movie studio can earn far more than any publisher. As mentioned, management at large publicly held corporations are custodians of other people's money. They have a fiduciary responsibility to invest corporate funds where they will yield the greatest return. It means that there will be extreme pressure on divisions to produce results in line with expectations, and divisions that don't might get folded.

You have frequently said, "Be careful what you wish for..." Given a continued reluctance to change and unrealistic profit expectations, I don't see why the customer shouldn't wish for change. It's not like we owe them anything.

No, we don't. But from a reader perspective, ask yourself a couple of questions. Think about the books you like to read, and the authors who wrote those books. I'd bet most of them were from major trade houses. If those outfits went Poof!, and disappeared tomorrow, where would what you like to read come from? What would happen to the authors who may well be making a living writing those books? (Never mind about the people working for the publishers that produce those books.)

Something would doubtless arise to fill the publishing void, but the effects in the meantime would likely fall into the "Be careful what you wish for" category.
______
Dennis

[J. Strnad]

How could publishers say that they don't know the cost of producing an ebook, yet know how much it costs them to produce a paper book? Or don't they know that, either? They're either being purposefully disingenuous or they are worse businessmen than I'd thought.

[Ankh]

Originally Posted by DMcCunney

Yes, it is. And the industry is changing, but everyone is still reading the tea leaves, trying to figure out what the new environment will be, and how they'll need to change to adapt to it.

I am not sure that "the industry", as we know it, can survive the change. It is to big, to slow, to inefficient to deal with the challenges of the digital content delivery. That delivery has opened a possibility, for the first time, to go "samizdat" with the minimal cost. There is no need for big publishing house and the printing plant.

What most of us would like to see is a situation where authors don't sell the rights. Instead, let them use the percentage of proceeds to finance editors, proofreaders, typesetters, cover artists. Grant them percentage of profits, let them share the risk and benefit from success.

Marketing? Easy. Let the accomplished authors use their names to appear either as co-authors (Baen is already experimenting with similar concept) or editors.

I sure would be interested to take a peak at any work that Neil Gaiman, Guy Gavriel Kay or Orson Scott Card decide to edit or co-author. Or to write a foreword for! A guild, a manufacture, a primitive form of ad-hoc project can concentrate the resources needed for high-quality works, and probably deliver them at very reasonable prices. Those reasonable prices are NOT enforced by customer rebellions, they are mandatory anti-piracy measure.

The authors or their works will not disappear as long as there are readers. That much is certain.

[GA Russell]

Originally Posted by DMcCunney

...But from a reader perspective, ask yourself a couple of questions. Think about the books you like to read, and the authors who wrote those books. I'd bet most of them were from major trade houses. If those outfits went Poof!, and disappeared tomorrow, where would what you like to read come from? [/b]

Actually, I have no idea who publishes my books. They all have imprints I am unfamiliar with, but that may not mean that they are indie publishers. They could be "fronts" for the big boys.

But I am unwilling to assume that they are not indies. I am unwilling to believe that I would find little that would interest me if the big publishers were to disappear. Not only are there current small publishers, but there would likely be new small companies which would start up.

As a customer/consumer, I don't believe that I have a vested interest in what the big publishers put out for the first time today. I do believe that I have an interest in their back catalogues. If the big ones were to disappear, I assume that the corporate parents would sell off the assets including the rights to publish the back catalogues. (I assume you know how I feel about copyright, so no need to get into that here.)

The fact that Joe New Yorker loses his job doesn't bother me, because his salary is a lot higher than mine and he's never cared about me. The fact that Harry New York Real Estate Mogul would have to find a new tenant doesn't bother me, because he's never cared about me either. I just don't see what my downside is if the big publishers break up into tiny pieces as their assets are sold off.

[Fbone]

Ebooks are still too new for publishers and retailers to have enough data to make needed changes.

Agency pricing is still less than a year old.

MMPB sales have not yet all been initiated post agency.

More Kindles sold the last 3 months than all of 2009.

Unemployment stubbornly high.

More libraries using Overdrive.

Future of physical bookstores unknown.

Many factors. Not enough time has passed to determine the full digital impact and develop new strategies.

[Elfwreck]

Originally Posted by DMcCunney

I'm also willing to bet their hardcover sell through rate is where they make their biggest money. What happens if ebooks take over, and Baen no longer makes and sells paper books? Think they'll be able to retain that $6 ebook price and survive? I don't.

No, they won't.

By that time, they'll have had more than 10 years, maybe 15 or 20 or more years, of profitable ebook sales, part of which was because they tied in well with hardcover sales, and they'll have 10-20+ years of happy customers willing to at least try whatever method they come up with to make book-production profitable as an e-only enterprise.

When paper publishing drops off drastically--which I believe is going to happen in the next decade or so--all of the publishers are going to have to make major changes in their business plans. Baen, at least, will have practice listening to their customers, and a measure of goodwill that could get them past the initial bumpy period. They may have more than that; every nuance of new possible tech is brought to their awareness, and they may may be developing sales plans that won't fly in today's marketplace, but might if pbooks didn't exist, or cost three times what they do now.

Or they may just be planning to milk their current methods for as long as they possibly can, and not bother making plans for changes they can't predict. 10 years ago, they weren't designing for the Kindle; there's no point in them designing now for brainchips. Or, if that's too extreme, eyeglass-readers that scroll a single line of luminous text across the top of a pair of glasses.

[hgwlackey]

Originally Posted by DMcCunney

The fundamental problem the industry is facing is not a new one. It's been going on for years, and ebooks didn't cause it. There are simply too many books chasing too few readers

One thing about ebooks that gets overlooked in the usual "cannibalizing sales" discussions is that while you see a lot of people who say they read about the same amount after getting an ebook reader, and a fair number saying they read more (some of them, like me, significantly more) since getting an ebook reader, you don't see many saying their reading has dropped off a cliff since they got that ebook reader.

Granted some of these people are sticking to public domain books, but out of all the people who got/will get new Kindle 3s this year, what is the percentage--the average user percentage, not the average hardcore Mobile Read user percentage--who are reading free books only? And then to use myself as an example again, I might have bought a book a month in the past, but in the past month I've bought nearly 20, all from non-indie (and mostly all from non-agency) publishers, and probably another 15 the month before that. (Nearly all of them came from Kobo with discount coupons. I love bookstore coupons.) I probably won't average 20 books a month every month, but a book or two a week--easily five to eight paid-for books a month--could conceivably be my new norm.

Even if, on average, everyone who gets an ebook reader only increases their reading by one book a year, that's just doubled a certain (and growing) percentage of the book market. The more attractive and convenient publishers (and reader manufacturers, reading app designers/programmers and social reading site creators) make ereading, the more books are going to be sold, over and above what would have been sold in an alternate, nearly identical universe where ebooks never happened to have been invented.

But first publishers have to stop acting like ebooks are the poor relations they wish hadn't shown up uninvited to the family dinner.

[GA Russell]

hgwlackey, FWIW, my experience is the opposite of what you describe.

I read mostly public domain works. In the past, the paper books usually cost me $12.99-$14.99 each (trade paperback).

This year with my jetBook Lite, I have read much more, but the eBooks have been free.

So although my reading has increased considerably, my spending has not.

[hgwlackey]

Like I said, "Granted some of these people are sticking to public domain books."

[DMcCunney]

Originally Posted by Notre Dame

The bottom line really, is that publishers don't want it to change, but are going to have to, and they will learn producing hardbacks will become a niche market so they'll learn to cost it separately. Nobody here seems to have mentioned the huge capital investment in static stock and the huge cost of warehousing, without factoring actually delivering the book to the shops & distributor costs too. The ebook is Amazon's dream, not the publishers'.

The capital investment in static stock isn't as large as you assume. Nor is warehousing and distribution.

Print/bind/warehouse/distribute come to perhaps 20% of the expense in an average book budget. All of the things that happen in acquiring the book in the first place and preparing it for publication loom far larger.
______
Dennis

[DMcCunney]

Originally Posted by GA Russell

Actually, I have no idea who publishes my books. They all have imprints I am unfamiliar with, but that may not mean that they are indie publishers. They could be "fronts" for the big boys.

They may well be. The big boys are umbrellas covering a large number of imprints.

And the fact that you aren't familiar with the publisher's name is one of the issues affecting the industry. I suspect most folks think in terms of authors and titles. If you ask them who published the book, they'd have to pull it off the shelf to check.

Branding is critical, but not all that many are doing it. Harlequin certainly is - they're the first name you think of when Romance is the genre in question. Baen and Tor are working hard on branding, too. But all of them are more or less specialty publishers focusing on a particular genre. It gets harder when you're one of the Big 6. (Technically, Tor is one of those imprints covered by an umbrella. The umbrella in the US is Macmillan, which in turn is a unit of Holtzbrink in Germany. What do you think of when you hear Macmillan? You're probably aware of them as a publisher, but would have to Look Stuff Up to discover what they published.)

But I am unwilling to assume that they are not indies. I am unwilling to believe that I would find little that would interest me if the big publishers were to disappear. Not only are there current small publishers, but there would likely be new small companies which would start up.

Without knowing who they are, I can't guess. And you may well find stuff you'll want to read. I don't know exactly what your tastes are.

I think the underlying assumptions in a lot of these discussions is that what everyone reads is fiction. For some folks that's true. For others, it partially true if at all. I probably read as much non-fiction as fiction, and a fair bit of it will be inherently more expensive to produce, so I don't expect the sort of prices people hope for in fiction to be the norm.

As a customer/consumer, I don't believe that I have a vested interest in what the big publishers put out for the first time today. I do believe that I have an interest in their back catalogues. If the big ones were to disappear, I assume that the corporate parents would sell off the assets including the rights to publish the back catalogues. (I assume you know how I feel about copyright, so no need to get into that here.)

I understand the concern about back catalog. There's a fair bit of stuff I'd like to see brought back as ebooks.

But I don't assume that the publishers could necessarily sell off the rights to a lot of that stuff as assets, because that assumes the imprint that originally published it still has the rights. Publishing contracts generally specify that the publisher retains the rights while the books are in print. If the publisher allows the books to go out of print, the author or agent can request that the rights revert.

In the case of the stuff you're talking about, those rights probably reverted some time ago, and aren't the corporate parent's property to dispose of.

The more justifiable complaint is "Why hasn't someone picked this up and re-issued it?" There are a variety of possible reasons, including "No publisher thinks it will sell well enough", "The rights holders have an exaggerated idea of how well it will sell and want more than any sane publisher will give them for the right to re-issue", "The rights holders haven't tried to get the stuff re-issued", and "Just who owns the rights is up in the air."

The fact that Joe New Yorker loses his job doesn't bother me, because his salary is a lot higher than mine and he's never cared about me.

The fact that Joe New Yorker loses his job bothers me, because most of the folks I know and hang out with these days are in publishing in one sort or another. Joe New Yorker might just be one on my friends.

But unless you're at the top of the food chain, publishing salaries are low. I talked to a woman I know last month, whose first job was as a proofreader working for an outfit that did it on a contract basis for publishers. She applied for a job as a copywriter doing cover and interior copy for books at a publisher. They handed her a manuscript and told her to submit sample copy for the book. She read the manuscript on the train home, wrote the copy over the weekend, and dropped it off on them first thing Monday morning.

She heard nothing for 8 months, and had already decided they'd filled the position, when she got a surprise phone call telling her she had the job. When she asked why it had taken 8 months to decide she was the one, she was told they got 4,000 resumes. And when she said "Why me?", the answer was "You were the fastest one to complete the test." Everyone else took two weeks or more. She realized that they didn't need it perfect - they needed it good enough and now.

As I recall, the job paid under $20K/year. This was 20 years ago, but things haven't gotten all that much better. You don't go into publishing for the money.

The fact that Harry New York Real Estate Mogul would have to find a new tenant doesn't bother me, because he's never cared about me either.

It will bother me somewhat because I live in New York, and the economy is already down. Harry New York Real Estate Mogul may have fun finding a new tenant.

I just don't see what my downside is if the big publishers break up into tiny pieces as their assets are sold off.

Consider why all of those tiny pieces aggregated into big companies in the first place. The forces that drove the consolidation producing the Big 6 are still there, and I expect more consolidation before the dust fully settles. Breaking into tiny pieces won't save the parent or the pieces.
______
Dennis

[DMcCunney]

Originally Posted by hgwlackey

One thing about ebooks that gets overlooked in the usual "cannibalizing sales" discussions is that while you see a lot of people who say they read about the same amount after getting an ebook reader, and a fair number saying they read more (some of them, like me, significantly more) since getting an ebook reader, you don't see many saying their reading has dropped off a cliff since they got that ebook reader.

Certainly. Ebooks dramatically increase the convenience of reading.

And forget about dedicated ebook readers. If I were publishing ebooks, I'd be going after the smartphone market as hard as I could. People may not carry anything else when they are out and about, but they will always have their phone, and if they have a reader app on it, they will always have a book (and likely more than one) to read, wherever they may be.

Ebooks increase the time you have to read, because you can do it anywhere at any time.

Ebooks do cannibalize sales of printed versions. If you get a title as an ebook, you're unlikely to also acquire it in paper.

But first publishers have to stop acting like ebooks are the poor relations they wish hadn't shown up uninvited to the family dinner.

As soon as they figure out how to make money publishing them, they will.
______
Dennis

[DMcCunney]

Originally Posted by Elfwreck

No, they won't.

By that time, they'll have had more than 10 years, maybe 15 or 20 or more years, of profitable ebook sales, part of which was because they tied in well with hardcover sales, and they'll have 10-20+ years of happy customers willing to at least try whatever method they come up with to make book-production profitable as an e-only enterprise.

Including higher prices on ebooks, since the acquisition/preparation costs won't be allocated across paper books as well, but will have to be borne entirely by the ebook?

When paper publishing drops off drastically--which I believe is going to happen in the next decade or so--all of the publishers are going to have to make major changes in their business plans. Baen, at least, will have practice listening to their customers, and a measure of goodwill that could get them past the initial bumpy period. They may have more than that; every nuance of new possible tech is brought to their awareness, and they may may be developing sales plans that won't fly in today's marketplace, but might if pbooks didn't exist, or cost three times what they do now.

I concur that change is coming. What I see happening is the mass market paperback being largely replaced by the ebook. Paper books won't go away entirely - there are too many kinds of books not well suited to reading electronically - but paper books will become more of a niche market.

The biggest losers will be bookstores, as MMPB editions are the bulk of what they sell. I see fewer and smaller outlets for those that survive, and likely a lot more specialty focus.

Or they may just be planning to milk their current methods for as long as they possibly can, and not bother making plans for changes they can't predict. 10 years ago, they weren't designing for the Kindle; there's no point in them designing now for brainchips. Or, if that's too extreme, eyeglass-readers that scroll a single line of luminous text across the top of a pair of glasses.

It's pointless to make plans for changes unless you know what the changes will be. You can speculate till the cows come home, but meanwhile, you have a business to run. The key will be flexibility, and the ability to adapt to change. That flexibility and adaptability are in short supply in publishing, but publishing is hardly the only business for which that's true.
______
Dennis

[kitkatie]

The markets still in it's infancy, trying to figure out if the market is profitable would be trying to figure out if making TV shows would be profitable in the 1920s. The data available now may be no indication of the profitability even a couple of years down the line.