[DMcCunney]

Originally Posted by Kali Yuga

It's not about the size of these markets. It's an issue of the likely rates of return, the costs of doing international business and the most effective use of scarce capital (aka "opportunity cost.")

Let's be clear what we mean by an opportunity cost. In economics, an "opportunity cost" is the cost of the next highest valued alternative use of the resource. If I choose to invest in a speculative venture, my opportunity cost is what I could make putting my funds into a safer investment, like a Certificate of Deposit. The CD is a pretty well guaranteed rate of return. The speculative investment is not. I'm seeing an attractive enough return on the speculative investment to take the risk of getting no return if it fails. I'm placing a bet, because I like the odds, and I can afford to lose.

For example, let's say B&N has $10 million to spend in an effort to increase their ebook revenues. They could spend it on US education, and leverage their existing systems, college stores and connections, and increase profits (not revenues, but profits) by $20 million over the next year.

Which assumes that they would, in fact, make that $20 million in profit over the next year from that $10 million investment. I'm not sure I would view it as certain enough to make the decision as clear cut as you suggest.

Or, they could spend $10 million, and barely make a dent in the UK where they are (I presume) unknown. They'll have to spend a lot of that on UK office space, accountants, taxes, advertising, web servers, wireless contracts, customer service ("Why can't I get book X in the UK, they have it in the US") and so on.

We need to consider time frames. One of the complaints (justifiably) leveled at a lot of US enterprises is an emphasis on short terms results at the expense of long term growth and profitability. If I'm B&N, looking at expanding overseas, $10 million will be a drop in the bucket, and it will be a multi-year effort. You don't create an international sales infrastructure fast or cheap.

And if I'm B&N, and I'm intending to do it, I'm almost certainly not going to fund the effort out of ongoing revenues. I'll attempt to raise funds to do it through equity or debt, and my challenge will be convincing the prospective new shareholders or lenders that the potential returns justify the investment, that I have a coherent plan, and that I can execute on it given funding, and that I will get returns that will justify the investment. (But I will not get those returns immediately - I am investing for the longer term.)

Amazon is already doing lots of business abroad, so I am assuming several of the hard parts were already done. All they had to do was clear up what they could sell with the publishers, modify their databases, and Bob's Yer Uncle.

And how did those hard parts get "already done"? Someone was thinking longer term and made the investments needed to put those pieces in place.

Amazon is a catalog retailer. The catalog is on the Internet. The Internet is global. It's a short step to realizing that if the entire globe can view your catalog, you have the potential of selling to them, and should put the pieces in place to do so.

The fact that Amazon has already done it doesn't mean that no one else should try to.

I might add we've already seen Waterstones drop international ebook sales. Although the reasons are still unclear, I'd assume the reason why they aren't throwing millions into the international markets is that it's too complex and/or expensive and/or has a low ROI.

Waterstones is a unit of HMV, and HMV is having problems. Waterstones likely doesn't have the money to throw at it, and given the issues faced by the parent, can't get the money.

I have serious doubts that "one publisher, global rights" will end up as the solution to the geo-restrictions issues.

A US publisher is probably not going to be the optimal company to translate and market an English book abroad. However large the "International English" market is, it's highly unlikely that 90% of French citizens will prefer to read an ebook in English than in French. (Or: Who do you want as your customers -- the 35% of French citizens who read English, or the 95% that read French?) Small publishers in particular will be ill-equipped to handle those tasks.

Who's talking about translations? That's a whole separate issue. There are people all over the globe who can read books in English, even if it isn't their native tongue, but who can't get some books in electronic form because the publisher of the ebook edition doesn't have the right to sell it where they are. Those books were published under contracts written before ebooks began to become pervasive and the Internet became an international delivery medium. Going forward, I expect contracts to change to reflect the reality of a global market.

The US company also won't have a clue how to really push sales abroad. Heck, consider the Harry Potter books; they were in English to start with, and still had separate publishers for the US and UK.

Yes. So? they began in England, published by Bloomsbury, who is a UK publisher. Bloomsbury doesn't have a US operation, so there had to be a separate US publisher. Scholastic picked them up here.

(And I suspect Scholastic has had the odd thought that they might have been better all told not to. The HP books were a phenomenon overshadowing everything else they did. A few years back, Scholastic's then President resigned when yearly results were off. Why were they off? Rowling was behind schedule delivering the next HP book, and it didn't make it's expected contribution to revenue and profit in the expected time frame.
I'm not sure what Scholastic's President was supposed to have done. Fly to the UK and hold a gun to Rowling's head to get her to write faster?

Personally, I'd have shouted as loud and often as I could that the HP books should be considered a completely separate extraordinary event outside of Scholastic's normal operations, and people looking for meaningful numbers should consider year to year comparisons of continuing Scholastic operations excluding HP.

A friend who works for HarperCollins says their numbers people say exactly that about the hugely popular Lemony Snicket titles, as they are a limited series with a distinct ending point, and should be considered a separate thing, nice to have while it lasts, but not expected to continue indefinitely.)

The authors may also take the "international rights" opportunity to get another advance and/or a higher royalty rate.

Depends on what rights you are talking about. For print editions, that may be the case. I might have a book published in the US by one publisher, and in the UK by another. But does having the electronic edition of my book offered by several different publishers with restrictions on where they might sell it make sense?

If my US publisher thinks my book has international appeal, they might well make global erights a non-negotiable part of the contract. "Sell print rights to publishers abroad where we don't do business all you want, but we get global ebook rights, or there's no deal..."

And, of course, you still have decades of existing international contracts that are unlikely to be broken, bought out and/or forgotten. So if every new book had one global publisher, you'd still have the issues outstanding for almost the entire back catalog.

The only authors who will grant a single publisher all international rights are the ones with bad lawyers and/or no interest in significant overseas sales.

Again, I said publishers would increasingly try to acquire global electronic rights. I was not, and am not, talking about print editions.

Yes, there is all that back catalog tied up by existing contracts. But the contracts aren't forever. Rights eventually lapse and revert. What happens then?
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Dennis