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Old 02-12-2010, 09:47 AM   #1
dsvick
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20 years from now

I am not jumping in on either side of the whole eBook price argument that are going on all over the place but I do have a question that I'm hoping some of the people more in the know can answer - or we all just argue over this too

People keep mentioning Baen as the model that all other publishers should aspire too - ok maybe not quite that way but still they are often referred when people argue pricing.

I like Baen, love their price structure, the authors, and what I perceive as their corporate philosophy. I have to wonder though if it isn't that they aren't worried about eBook sales reducing pBooks, as much as it's simply a moot point right now in that eBooks are such a small percentage of sales that it doesn't matter and they can almost be treated as a loss leader.

What happens 10, 15, 20 years from now and eBooks are a bigger percentage of sales? Can they still sustain those low prices and continue to deliver a quality product? If the answer is "no" then raising prices now, as some publishers are doing (or trying to do), makes more sense and would be less painful than doing it after 10 or 20 years of readers being used to lower prices.
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Old 02-12-2010, 09:59 AM   #2
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If they raise prices now gradually for the next 20 years, then when paper becomes very expensive due to deforestation, then no one will notice.

Computers are cheaper than they were 20 years ago. Milk and bread is more expensive than they were 20 years ago. Prices change in accordance to what the market will bear. Unless someone has the foresight of Hari Seldon, I don't think the market can be artificially altered for the long term.
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Old 02-12-2010, 09:59 AM   #3
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For publishing as a whole, ebooks are a small percentage of sales, but not for Baen. I forget the statistics, and I'm sure someone here can supply them, but ebooks actually make up a large part of Baen's profits. It's one of the reasons that people keep pointing to them as a successful ebook publisher.

It's not just because we like what they do - it's because it works for them, too. Win-win.
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Old 02-12-2010, 10:29 AM   #4
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I really like the $9.99 price point and I believe it gives the publishers a fair return. However, I don't have any problem with Baen's pricing model-- an ebook released at $15 before the hardcover, discounted to below the hardcover price when it is released, and discounted further as time goes on, and always below the print price; plus bundled pricing, etc. If the "big six" publishers had announced that they would be adopting the Baen pricing model I think you would have heard applause, but that wasn't the model the "big six" adopted.

One of the reasons that Baen is able to offer their books at these prices and do so well is that they cut out the retailer. Baen doesn't have to give Amazon a cut of the revenue, whereas the "big six" publishers selling through Amazon do have to give Amazon its share. Of course the "big six" could sell directly to the consumer, but then they lose Amazon's marketing. Plus, people like going to one site to shop and don't want to go to six sites (but nothing stopping the "big six" from creating their own ebook site -- especially if they opened it up to smaller publishers so that they didn't run into antitrust problems). If the "big six" wanted to continue selling ebooks from their site that were readable on the Kindle it would also mean that they would have to sell their versions in a DRM-Free format (Amazon use the Kindle PID in the DRM and the "big six" wouldn't have access to this info).

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Old 02-12-2010, 10:36 AM   #5
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Baen's publisher actively converses with their reading, customers over at Baen's Bar.
Giving customers what they want, just might lead to a winning Business Model
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Old 02-12-2010, 11:51 AM   #6
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Will Baen's be around in 20 years? Being a small organization, I don't know. They seem to have made it through Jim Baen's death, so I am hopeful. Their model should survive quite nicely.

As to the big six, I'm not so optimistic. They are all trapped as part of larger comglomerates, all of whom follow the Hollywood big hit/big profit model, rather than the old large variety/steady modest profit models. They have large, expensive, management superstructures and other higher embedded costs. They are neither nimble or end-customer oriented.

Frankly, the day Baen determines they can run a profitable e-book only line, is the end of the big six as far as entertainment reading goes. Why? Because they are limited by TOR for shelf space/release count currently. In an e-book only world, they could publish a huge amount of backlist works that the big six have no interest in. leaving the big hit/big gamble world to the big six....
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Old 02-12-2010, 01:27 PM   #7
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[SNIP] Why? Because they are limited by TOR for shelf space/release count currently. In an e-book only world, they could publish a huge amount of backlist works that the big six have no interest in. leaving the big hit/big gamble world to the big six....
That would be "...limited by Simon & Schuster" not Tor!

Otherwise, agree heartily!
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Old 02-12-2010, 02:15 PM   #8
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Anyone who insists they know how the landscape will look in 20 years is a fool. That said....

I have no idea what specific organizations will be around. However, I suspect that in many ways, things will look fairly similar to they way they are now: a handful of big publishers and big retailers, and a diversity of smaller organizations, with most of the public buying big hits. AFAIK this is the way it has been for decades. For example, smaller specialty music labels like Stax, Motown, Chess, Nonesuch, Impulse and so forth were doing business whilst giants like Warner, EMI, Columbia were much larger.

And big hits aren't getting killed by the Internet. Apparently both the blockbusters and the "long tail" (obscure low-selling titles) are doing better, and mid-range titles are losing out.

Anyway, the reality is that the overwhelming number of writers simply cannot or will not want to write, edit, proofread, format, promote, market, retail, shop movie rights and manage their works single-handed -- especially those who aspire to "blockbuster" status. For example, as distribution costs fall, more books written by amateurs and aspiring pros will be published; getting noticed amidst that froth will become increasingly difficult. So while ebooks will likely cut out one intermediary (namely, book distributors), there will always be a role for publishers and retailers.

And of course, what works well for Baen will not necessarily work for larger or different organizations. Baen has a specific genre and an existing brand identity, and as such they (and similar organizations like Harlequin or O'Reilly) have better options for side-stepping retailers and thus reducing costs. However, they still lose sales opportunities by not being on the "virtual shelves" and getting tagged with the "if you like X, try Y" recommendation engines, for example. More critically, this approach won't work if the publisher wants to publish a diverse range of books, and thus cannot build much of a brand identity.

So while I do not know how the future will work, I find the idea that "Baen is a blueprint for the future" has a limited utility.

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Old 02-12-2010, 02:56 PM   #9
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Anyone who insists they know how the landscape will look in 20 years is a fool.
Well according to all the global warming proponents it will look like this

Back to the topic though...

I guess where I was headed with this was, if, in say 25 years, eBooks represent the majority of books sales and hardcovers and paperbacks are the minority, is that going to force prices of eBooks into the realm of where the $25 hardcover is now? Implying at least a 6 month wait for any sort of price break?
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Old 02-12-2010, 06:07 PM   #10
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Anyone who insists they know how the landscape will look in 20 years is a fool. That said....

I have no idea what specific organizations will be around. However, I suspect that in many ways, things will look fairly similar to they way they are now: a handful of big publishers and big retailers, and a diversity of smaller organizations, with most of the public buying big hits. AFAIK this is the way it has been for decades. For example, smaller specialty music labels like Stax, Motown, Chess, Nonesuch, Impulse and so forth were doing business whilst giants like Warner, EMI, Columbia were much larger.

And [url=http://www.economist.com/displaystory.cfm?story_id=14959982]big hits aren't getting killed by the Internet. Apparently both the blockbusters and the "long tail" (obscure low-selling titles) are doing better, and mid-range titles are losing out.

Anyway, the reality is that the overwhelming number of writers simply cannot or will not want to write, edit, proofread, format, promote, market, retail, shop movie rights and manage their works single-handed -- especially those who aspire to "blockbuster" status. For example, as distribution costs fall, more books written by amateurs and aspiring pros will be published; getting noticed amidst that froth will become increasingly difficult. So while ebooks will likely cut out one intermediary (namely, book distributors), there will always be a role for publishers and retailers.

And of course, what works well for Baen will not necessarily work for larger or different organizations. Baen has a specific genre and an existing brand identity, and as such they (and similar organizations like Harlequin or O'Reilly) have better options for side-stepping retailers and thus reducing costs. However, they still lose sales opportunities by not being on the "virtual shelves" and getting tagged with the "if you like X, try Y" recommendation engines, for example. More critically, this approach won't work if the publisher wants to publish a diverse range of books, and thus cannot build much of a brand identity.

So while I do not know how the future will work, I find the idea that "Baen is a blueprint for the future" has a limited utility.

Me, I'm a cold-blooded mercenary about the publishing business. Who's consistently making money and who's not. Who's market share is increasing and who's not.

Any business in any industry who's both increasing market share and being profitable while doing so, is doing something right. That's investing 101. Anyone who wants to grow a business should pay attention to why such a business is succeeding. It may be applicable.

This is particularly important in the digital I.P. business. It is currently in a deflationary phase, because the end customer, who is the only one who matters is not willing to pay the prices the producers say they need.

There are only two answers to this impasse. One, the customer will grow so desperate for the product they will pay a higher price, (which I consider unlikely in large enough quantities to meet the producers costs) or; Two, the producer will have to find a way to reduce their costs to make a profit at the prices the end customers find acceptable. Because the firms that already have are in a position to slowly take end customers away from the big boys. Look at GM from 1970 to date. From the biggest carmaker in the world to a bankrupt basket case. And I'm certain that no one would have picked Toyota and Honda to eat the American big three's lunch in 40 years, either. But Toyota and Honda were small, growing, and profitable, with an eye to expand with their profits. I can't believe that O'Reilly, Harequin and Baen, will stay as small as they are today...

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Old 02-13-2010, 12:37 AM   #11
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Frankly, the day Baen determines they can run a profitable e-book only line, is the end of the big six as far as entertainment reading goes.
Well, you could argue that the Grantville Gazette is that. Okay, I know it's not precisely Baen (although Baen can and does cherry pick for print runs), and that it's an ezine rather than novels...but it's an web ezine with the vast vast majority of stories from fans, paying professional rates.

This is something new.

I'm also interested to see what Baen will do to replace Baen's Universe - as they've said, the specific arrangements they made for the Universe were not working out in the longer term*, but if they could start over (and they've indicated they are) with a clean slate, well...

(*The Gazette, using much the same business model, IS working out - so it's a specific case rather than their picking a bad business model per-se)

Look at the people here who said they've bought every single month's webscription. Sure, there probably isn't a great number of them overall...but how many many mop's purchase everything - or even a set proportion - of the major publishers output? Baen and their authors are engaging their market in a way the majors simply are not*, which is why I'm confident they will be around for the long run.

(*And Tor.com is not quite doing from my perspective, but let's not get into that here, it's long and has a bearing on some commercial work I might be doing)
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Old 02-13-2010, 01:18 PM   #12
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I guess where I was headed with this was, if, in say 25 years, eBooks represent the majority of books sales and hardcovers and paperbacks are the minority, is that going to force prices of eBooks into the realm of where the $25 hardcover is now? Implying at least a 6 month wait for any sort of price break?
Again, IMO it's rather difficult to predict something like this -- there are just too many possible factors. Agency pricing may not work or might take off, today's publishers could be replaced by different entities fulfilling similar roles, retailers could be replaced, taxes altered (e.g. the US could add VAT), and so forth. And don't forget inflation. Even with low inflation, the cost of an item roughly doubles every 20 years.

So unfortunately, I don't think anyone is "in the know" enough to predict this. What you'll get is a variety of opinions and predictions; anyone who gets it right will be as much by chance and coincidence as by knowledge.
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Old 02-13-2010, 01:35 PM   #13
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If they raise prices now gradually for the next 20 years, then when paper becomes very expensive due to deforestation, then no one will notice.
Paper is an agricultural product. The trees (Actually more like scrubby bushes if it is for newsprint) for wood pulp are farmed.

Just as Kellog's frosted flakes aren't going to cause the world to run out of corn because we greedily cut down all the corn stalks, printing paper books isn't going to cause the end of trees.
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Old 02-13-2010, 04:05 PM   #14
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This is particularly important in the digital I.P. business. It is currently in a deflationary phase, because the end customer, who is the only one who matters is not willing to pay the prices the producers say they need.
It's obvious some consumers are wiling and able to pay $15 for new content. The open question is whether they will pay $15 for new digital content. Similarly, it's an open question as to how much older ebooks will get discounted in an agency model. My expectation is that if the publishers utilize dynamic pricing, and a new ebook's price drops to $10 or $12 in a few months, consumers will have less reason to fear or complain -- especially since $15 is still a price drop for many new hardcover releases, just not the blockbusters that retailers like Amazon and Walmart use as loss-leaders.

As to digital content being "deflationary," ebooks have barely gotten started; as such the pricing is not really set, nor is there likely to be a drastic reduction in the costs of, for example, converting a title into electronic form. Paper costs for books aren't that huge anyway, that's a public misperception. Those paper costs are also far from gone, and won't be eliminated any time soon, ergo the cost of producing a new title isn't changing much yet.

More importantly to the OP's point: There is just no way to predict future pricing. If I told you 3 months ago that Apple was going to use agency pricing, or that Macmillan would browbeat Amazon into agency pricing and accepting a $15 price on new ebooks, you'd probably tell me I was nuts. I don't think we can accurately forecast typical prices a year from now, let alone 20.


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Because the firms that already have are in a position to slowly take end customers away from the big boys. Look at GM from 1970 to date. From the biggest carmaker in the world to a bankrupt basket case. And I'm certain that no one would have picked Toyota and Honda to eat the American big three's lunch in 40 years, either.
You may have a point, but this is a terrible example.

• American auto manufacturers have been terrified of the Japanese since the mid-1970s.
• Toyota was not a scrappy upstart in the 60's when it started importing cars to the US, let alone in the early 00's when they really started killing Detroit; they were already a sizable company in the 60's.
• GM didn't fall apart because of the factors you imply. E.g. Ford avoided bankruptcy and bailouts, for example, not because they offered better or more popular or less expensive cars or were a more efficient producer than GM. Ford stockpiled cash and reduced dealerships in the mid 00's, sold off brands like Jaguar and Land Rover, and largely avoided the subprime mess that GMAC got into.
• GM still has the highest market share in the US, by the way; Ford is #2 and Toyota recently fell to #3.

There are definitely instances were an upstart surpasses an established giant, but:
- Typically this is due to the smaller company taking advantage of a disruptive technological shift (e.g. Amazon vs B&N, Microsoft vs IBM, Google vs Microsoft).
- We usually notice this when the upstart becomes the New Giant.
- On occasion, the Old Giant survives or revives anyway (IBM, HP), or the upstart collapses (Sun) or gets utterly clobbered by the Old Giant (Netscape).

Ergo I don't think we can accurately pick the identities of the Winners of 2030 today, let alone how anyone will price books in 20 years. But I think we can reasonably infer that even if today's big publishers get railed, there will be companies performing highly similar roles to today's retailers and publishers, and some of these will be quite large.
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Old 02-13-2010, 04:09 PM   #15
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20 years is always a crapshoot. I mean look what happened in the last 20. 1990 was only the beginning of the internet, no Ebay, no Amazon, no Itunes, before facebook and twitter and even limited cell phone coverage and types.
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