Quote:
Originally Posted by Derf
I like hearing that there is a subscription model for eBooks, but I don't really like that business practice - it just sounds terrible.
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It isn't.
It is actually a fair (and delicate) balance between the interests of readers, willingly participating authors, and Amazon.
You clearly have a firm grasp of the digital economy for most forms of media but when it comes to books you need to factor in that there are *two*distinct and separate economies.
The traditional, legacy economy from past centuries revolves around "curation" and the power to say no. ( "No, we won't sell your book.")
The traditional consumer book supply chain runs from aspirant author through agents, acquisition editors, big chain (or Amazon) purchasing managers to store managers to (publisher paid-for) shelving. And at every step there is a gatekeeper judging the content by their own criteria. Typically: the odds that *they* can move the product. (There is a lot of blather about literary merit but it is just hot air. Everybody down the chain is focused on sale-ability. It's a for-profit business.)
Now, over the past few decades what used to be a diverse economy of hundreds of publishing houses has consolidated down to a handful of giant multinationals publishing thousands and tens of thousands of books a year, a few dozen mid-size publishers releasing hundreds of titles, and hundreds of "small press" publishers releasing a dozen or so titles a year. Now, obviously, the tens of thousands of books from the big publishers can and do crowd out the releases from smaller publishers. Mostly through paid placement. Pay to play.
If you walk into a brick and mortar bookstore (other than AmazonBooks) you'll quickly notice a pecking order: some books are sitting cover up on promo tables or face out on endcaps, some are shelved face out, but most are shelved edgewise and practically hidden deep in the store. The front table and endcap books are all supported by publisher payments, pre-designated as big sellers before consumers even hear of them. The face out books on shelves are prominent new releases the store thinks will move fast. And the rest...well, the rest might as well be decoration, honestly. They fill out the shelves, move slowly and for some stores cost more in floor space rent than they earn.
That is why you see the exact same new books in all stores. Those are termed front list and you find them everywhere,bookstores, newstands, dept stores, drug stores... The other books are called midlist and (if older) backlist. Those you only find in bookstores and online.
As you can see these practices lead to limited price competition. Same books from the same sources at the same prices. With one enormous caveat: volume discounts. In the 80's and nineties, as the hundreds of publishers were consolidating down to the "Big 5", the big publishers found that instead of dealing with thousands of individual stores and dozens of regional distributors (they were called jobbers) their life was sooo much simpler (and cheaper) if they only dealt with a few national distributors and a dozen or so bookstore/newstand chains. Everybody else, mostly smaller independent bookstores, could go through the distributors. And then they added in volume-based discounts for the biggest accounts. Naturally, small stores couldn't order as many copies of a given book so they had to sell at or near list price. A few miles away, Borders, Walden, B&N, and other chains offered 10%, 20%, even 30% discounts off list.
Smaller stores closed by the thousand. A lawsuit ensued in the mid 90's. Money was paid, promises made and ignored.
More consolidation. Less players, less competition, resulting in uniform prices.
Then Amazon came. Initially they were small and had to go through distributors to get books but they were also efficient, low-overhead, and willing to live off low single-digit margins. They grew big enough the publishers were willing to deal with them direct. Lower costs passed to consumers; Amazon *thrived* on low single-digit margins. The more books they sold, the bigger the discounts they got and the lower their prices. Even bigger volumes. Soon, not even the biggest chains could compete and still the big publishers stuck with volume discounts. These days Amazon easily gets 45-50% off list. They sell half the books in the land.
Now, lets turn to ebooks and the second economy.
Very different story.
Commercial ebooks have been available in hit or miss form from the big publishers since the PDA era in the late 90's. It was a niche market and the books were priced like hardcovers. Being a niche, sales were low, and discounts were low. $35 ebooks were not unheard of. $17-25 prices were common.
Retailers were few, catalogs were small--9000 titles was considered huge. Kindle launched with about that many.
Since the ebooks were priced like hardcovers, they were discounted like hardcovers. And Amazon moved lots and lots of hardcovers. But since ebooks are a lot cheaper to store and distribute, Amazon's other costs were near zero. And they wanted to take ebooks beyond hobbyists and techie enthusiasts to mainstream readers so, instead of pocketing the savings, they discounted ebooks below the pbook sale price. The $9.99 price point was born.
At that same time, few noticed but something else was born along with the Kindle. Today it is called KINDLE DIRECT PUBLISHING. It was meant to streamline ebook publishing for smaller publishers. And authors. Few noticed but those that did acted on what they saw coming.
Now Kindle made a big noise when it released. Not totally sure why. It was clunky, ugly, pricey. And it sold out in a day or so. Amazon had ordered 25000 built and they just vanished. It took them six months to get more. In that time they grew their catalog to tens of thousands of ebooks. Other ereaders joined Sony (they were the first eink reader) and Kindle. Publishers saw the margins and rushed to digitize their backlist for fun and profit.
All was well until mid 2009. Kobo was in planning. Nook was in planning. Kindle sales were outstripping Sony and other ereader vendors because Kindle was a standalone device. You didn't need a PC to buy ebooks. It was a BIG thing at the time.
Suddenly, the big publishers stopped looking at ebooks as another book format like hardcovers and paperbacks and started talking of them as something alien and different. Not real books. A different product. And a different product where 90% was sold by Amazon. (Yeah, and at one time IBM sold 100% of PCs. First movers in new markets start big and quickly lose their dominance as competitors emerge.)
The big publishers panicked and without waiting for bigger competitors to jump in and the market to mature, cutting Amazon down to size naturally, decided all ebooks everywhere would be sold at prices *they* set, not the retailers, with no discounting allowed. Then they got...stupid is the only word that applies, really. They conspired with Apple to not only do away with discounting, bad enough right there, they openly raised prices on all ebooks the exact same amount, the exact same day, and they DOCUMENTED everything in their email archives! (Easiest antitrust case the DOJ ever prosecuted.)
Now, Amazon was the target of the conspiracy but they were big and entrenched. And they had a secret weapon. The real victims were Amazon's other competitors. Smaller epub ebookstores, hardware-only ebook readers, and of course readers. This was because to do away with discounting, the big publishers had to cancel all existing ebook contracts, leaving retailers with no books to sell from those publishers. And those publishers provided over 60% of all the ebooks sold at the time. And they took their own sweet time negotiating new contracts. Up to six months. For some vendors, they never did.
The conspirators controlled over half the ebooks sold but they didn't control the rest and they did them a big favor in raising prices 30% overnight.
People who had spent $300 on an ereader weren't going to just trash them and go back to print. So they went looking for other, better priced ebooks. And found them. And liked them. Some were older books from familiar authors (especially in the Romance genre) but many were from previously unknown authors. There was life in ebookland beyond the valleys of the big publishers. And these books were cheaper because they were based on an entirety different economic framework. One that isn't based on the power of "no" and instead on the power of "yes", "go ahead. See who likes your book."
There is a fancy word, disintermediation, that means "cutting out the middleman". And in the second ebook economy the middlemen being cut out is everybody except Amazon. (Or Kobo, but Kobo is at a big disadvantage. Apple and Nook even morecso.) All that remains is the author and the reader in the economy of Independent Author/Publishers, better known as Indie publishers (as a parallel to indie movie makers and indie musicians) and collectively increasingly known as Indie, Inc. It is currently several tens of thousands of authors; some are veteran tradpub authors dropped by their publishers, some walked away from tradpub, some never bothered to play the tradpub game at all.
These days, Indie, Inc makes up nearly half all ebooks sold. About two million, at last count. A million and a half are exclusive to Amazon. You will not find them anywhere else.
The Indie economy is built on two pillars: margins and choice.
Choice is easy to understand: without gatekeepers saying "no" authors can write whatever they like and readers can read whatever they like. You can find entire genres that traditional publishers never bothered with because they considered them too niche (say superhero fantasies), sleazy (twenty types of erotica, probably more), or simply non-profitable (poetry, for ine).
The second pillar is margin. Or as some Indie authors put it "What part of 70% royalties don't you get?" .
Indie author/publishers are small businessmen. They own their books, they control their copyrights, they set their own prices (daily, if they feel like it) and the sales revenue goes direct to them. Some price their books at $9.95 or even high. Some price them as low as $0.99. The vast majority price them, according to genre, between $2.99 and $5.99. The average for Romance is around $3 and for SF&F around $4. And they generally get to keep 65-70% of the sale price. For comparison, tradpub hardcover royalties run *at best* 15% or so after everybody upstream has been paid. For ebooks the rate is 25% of the publishers' 70% cut minus the agent's 15%. Works out to just under $15% of the sale price.
It's trickle down economics on the tradpub side. The reader pays $13 and the author sees $1.97.
On the Indie side, the same book might cost the reader $2.99 but it'll deliver $2.10 to the author's pockets. For twelve bucks, a reader can buy one "curated" tradpub book or three Indie books and have change left over. Maybe four if they're into romance. (Which is why almost 90% of romance ebook sales are indie.)
So, back to the top:
On the tradpub side you have virtually no price competition between vendors, occasional sales from publishers mostly on backlist, and higher than print ebook prices. You will find mostly familiar names that have been filtered by perceived marketability.
On the Indie side there are lower prices, less familar names, and a broader range of subjects. You are the filter.
Two parallel economies.
And then there are the subscription services.
Two.
Scribd and Kindle unlimited.
Scribd is small, grossing a few tens of millions, and pays the publisher between 60-80% of sale price if you read at least ten percent of a book. There's people around here who can tell you how they like. It's not a big money maker for Scribd but they haven't folded yet.
And then there is kindle unlimited which is like nothing else.
It's economics are...interesting...
Authors get paid in direct proportion to the amount of the book read.
The per page payout varies month to month, hovering around Whereas at Scribd if somebody reads 9% of a book and decides it's not for them the publisher gets nothing.
At KU if somebody reads 9% of a book and moves on, the author gets 9% of a full read. Eleven people rejecting a book can be as profitable as one person loving it.
A weird economic proposition.
But one that makes sense for readers--risk free discovery of new to them voices--and for authors, who get paid while searching for new readers. They get paid less than for a sale--a 200 page book might only bring in $1.80, though some longer books bring in more from a full read than a sale--but it's not a sale, just a rental. And fans can and do go on to buy other books from the same author at full price.
As for Amazon, they get the competitive advantage of of a million and a half exclusive books.
So no, ebook subscriptions are not a terrible business practice.
Kindle Unlimited by itself delivers more revenue to Authors than any non-Kindle store. $250-300 million a year. That is billions of pages read each month.
More than Kobo, Apple, Google, Microsoft. Oh yeah, and more than Nook but that goes without saying.
The only real question is whether or not you need curation on the books you read and are willing to pay as much as $10 each ebook for that service.
If not, those same $10 will buy you a month of an all you can eat buffet. The buffet may not be gourmet-approved but lots of people seem to enjoy it: it's grown 5x over 4 years.
Regardless, welcome to the world of ebooks.
Hope you find good reads.