Amazon eating the difference

dhume01 · 12-09-2010, 02:08 PM

http://www.alternet.org/books/149124...n_evil_?page=6

Quote:

E-books reduce the cost of printing, binding, and paper, but royalties tend to run higher, and all other costs are largely unchanged. Publishers account for these costs when they slap a price tag on a book, so Amazon’s decision to set the price irrespective of them set off a wave of anxiety.

Amazon, hardly oblivious to these economics, chose to absorb the loss, paying publishers for the price of the equivalent printed book in order to make the deal more appealing. But Amazon has successfully established customer expectations at an impossibly low rate, and publishers worry that at some point the retailer will no longer take on losses to sustain it.

“There’s no way they can continue to sell . . . at a loss,” says Johanna Vondeling, vice president of business and development at Berrett-Koehler. “Eventually, they’re going to change their minds on this, and I think all publishers should be worried about what happens when they do. They’re going to keep that e-book price where it is. They’re going to turn around and say to the publishers, ‘Tough. All we’re going to pay you on is the split of $9.99.’”

I didn't realize amazon was paying the difference between $9.99 and the publisher's price....

daffy4u · 12-09-2010, 02:33 PM

Yep. It's been worth it to them to grow the market. IMO, If Amazon hadn't been doing it, ebook prices would be a lot higher (more than agency pricing). They forced the competition to lower prices and until agency pricing, the majority of the time you could find lower prices in the Kindle store without memberships and coupons.

ATimson · 12-09-2010, 02:36 PM

Quote:

Originally Posted by dhume01

I didn't realize amazon was paying the difference between $9.99 and the publisher's price....

They were until eight months ago.

daffy4u · 12-09-2010, 02:38 PM

Quote:

Originally Posted by ATimson

They were until eight months ago.

They still are on the non-agency pricing books.

wvcherrybomb · 12-09-2010, 02:48 PM

Amazon rocks!

It doesn't surprise me that they would take a loss in order to help establish an eBook market. They have always been a forward thinking company.

I have been a customer since the early days when they were just an online book store. I buy everything from them except for my groceries. Their customer service is second to none and shipping fast and free with Amazon Prime - which they have given me free of charge. I will always be a loyal Amazon customer.

I am not affiliated with Amazon in any way.

queentess · 12-09-2010, 03:28 PM

Quote:

Originally Posted by wvcherrybomb

Amazon rocks!

It doesn't surprise me that they would take a loss in order to help establish an eBook market. They have always been a forward thinking company.

Yes, well. It's not exactly out of the goodness of Amazon's heart. It's in Amazon's best interest to corner the ebook market early so they can reap the profits later.

edbro · 12-09-2010, 03:45 PM

I have serious doubts about the "and all other costs are largely unchanged" statement.

What about not needing physical storage space for your inventory? What about no shipping costs? What about no waste when the product doesn't sell. No need to rip the cover off and/or ship it back.

wvcherrybomb · 12-09-2010, 03:48 PM

Quote:

Originally Posted by queentess

Yes, well. It's not exactly out of the goodness of Amazon's heart. It's in Amazon's best interest to corner the ebook market early so they can reap the profits later.

Well, duh! They're not a charity or non-profit. I said they were "forward thinking" not stupid.

slm · 12-09-2010, 05:02 PM

The numbers I've seen suggest that Amazon was not usually taking a loss--it is said to pay 40-50% percent of the cover price on a non-agency book, which means a $9.99 book isn't a "loss" unless the cover price is over $20 or so. On the hottest titles it takes a small loss (as it often does on the hardcover version of the same book).

Worldwalker · 12-09-2010, 05:05 PM

So if a publisher's costs for a book require it to be sold at $25 ... how do they account for mass market paperbacks? Or the fact that from publisher to bookstore there is usually a distributor, taking their cut, in the middle, a cost which doesn't exist when the publisher sells direct to a retailer like Amazon?

And it's not just "printing, binding, and paper"; it's shipping, warehousing, taxes (in the US, unsold books are taxed as inventory), etc. And, most important of all, it's returns, which can account for as many or more books as actual sales -- books which have to be printed, stored, shipped, taxed, and then shipped back and stored again, before they finally go to the paper recycler for pennies on the dollar. Returns, of course, don't exist with ebooks.

In short: they're lying.

dkperez · 12-10-2010, 06:50 PM

OK, I"m new to the whole e-book world, and ignorant beyond belief about publishing, but I've gotta be missing something.......

The economy in the US is "down" (more PC than "in the toilet"), real unemployment is around 17%, there are MANY other ways for people to spend their limited entertainment time and money (movies, cable, DVDs, video games, Facebook, etc)... And yet, I read the article, and in THIS environment, McMillan decides an e-book should cost $13 - $15 instead of $10? Which is ALREADY significantly higher than the paperback cost of the same book...

For a book in a format that can't be resold, can't easily be shared, has NO residual value... I can't hand it to a friend to read. I can't take it into Half Price books and get a couple dollars back on my $6 paperback.

I don't want to start a big urination festival here (I imagine this subject has been beaten to death, but I'm new here), and I'm far from being an expert on publishing, so I don't know if it's reasonable to charge $35 for a hardcover to cover the advance, editing, binding, printing, transportation, advertising, returns, and whatever all the costs are. BUT, if the same publisher can sell the same book in paperback for $5 or $6, a paperback that STILL has to be bound, printed, transported, displayed, returned, and so on, it seems bizarre to me that an e-book, which incurs NONE of these costs, should cost 2-3 TIMES as much...

What am I missing? Are the publishers, in fact, lying?
And will the marketplace make it painfully clear (in the pocketbook) that readers are NOT willing to pay higher prices for ebooks?

SensualPoet · 12-10-2010, 07:05 PM

The article is full of out of date facts and a "anything big is bad" attitude.

A standard practice in retailing is to discount a handful of items as "loss leaders" or "bargains" knowing most consumers will buy other things at the same time or later. Amazon was discounting a few dozen titles out of 700,000 sold at "normal" rates (and normal discounts). Five of the six largest publishers, on the other, colluded to create price fixing and, apparently, that's ok.

Amazon is not the villain in this, no matter how many times people claim it is.

Worldwalker · 12-10-2010, 07:45 PM

The short version:

The publishers are lying like rugs.

SensualPoet · 12-10-2010, 08:01 PM

Also missing is the notion that consumers are ultimately the deciders. If Amazon's service is so terrible, consumers will make other choices. If consumers prefer cozy local independent bookshops, that's where they will spend their money. And the claim, again, repeated without context (or proof), that Amazon is using predatory pricing -- selling below cost to drive competitors out of business -- is galling.

Also the notion that $9.99 for ebooks was a price Amazon created "without consulting publishers" is simply bizarre: a free market is supposed to be about choice, not price fixing by suppliers. If consumers prefer to pay $24.95 for a physical book at their indie bookshop vs. $9.99 for an ebook, let them. I am certain that over time the Agency Five will figure out that $14.99 for an e-book won't make them the same profits as a $9.99 best-seller. Funny thing about the free market: the consumer is driving the outcome.

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12-09-2010, 02:33 PM	#2
daffy4u I'm Super Kindle-icious Posts: 6,734 Karma: 2434103 Join Date: Apr 2008 Location: Long Drive, Calinadia Candafornia Device: KDXG, KT, Oasis	Yep. It's been worth it to them to grow the market. IMO, If Amazon hadn't been doing it, ebook prices would be a lot higher (more than agency pricing). They forced the competition to lower prices and until agency pricing, the majority of the time you could find lower prices in the Kindle store without memberships and coupons.

12-09-2010, 02:48 PM	#5
wvcherrybomb Sharp Shootin' Grandma Posts: 847 Karma: 1123940 Join Date: Nov 2010 Location: Sunny Florida Device: Kindle 3, Kindle Fire, Literati (has been adopted by my daughter)	Amazon rocks! It doesn't surprise me that they would take a loss in order to help establish an eBook market. They have always been a forward thinking company. I have been a customer since the early days when they were just an online book store. I buy everything from them except for my groceries. Their customer service is second to none and shipping fast and free with Amazon Prime - which they have given me free of charge. I will always be a loyal Amazon customer. I am not affiliated with Amazon in any way.

12-09-2010, 03:45 PM	#7
edbro Banned Posts: 640 Karma: 4911 Join Date: Jul 2007 Location: Grapevine, TX Device: iPad4	I have serious doubts about the "and all other costs are largely unchanged" statement. What about not needing physical storage space for your inventory? What about no shipping costs? What about no waste when the product doesn't sell. No need to rip the cover off and/or ship it back.

12-09-2010, 05:02 PM	#9
slm Fool Posts: 456 Karma: 4103210 Join Date: Feb 2003 Device: Kindle: Voyage,PW1,KOA, Kobo: Clara Colour, Nook GLP, Pocketbook verse	The numbers I've seen suggest that Amazon was not usually taking a loss--it is said to pay 40-50% percent of the cover price on a non-agency book, which means a $9.99 book isn't a "loss" unless the cover price is over $20 or so. On the hottest titles it takes a small loss (as it often does on the hardcover version of the same book).

12-09-2010, 05:05 PM	#10
Worldwalker Curmudgeon Posts: 3,085 Karma: 722357 Join Date: Feb 2010 Device: PRS-505	So if a publisher's costs for a book require it to be sold at $25 ... how do they account for mass market paperbacks? Or the fact that from publisher to bookstore there is usually a distributor, taking their cut, in the middle, a cost which doesn't exist when the publisher sells direct to a retailer like Amazon? And it's not just "printing, binding, and paper"; it's shipping, warehousing, taxes (in the US, unsold books are taxed as inventory), etc. And, most important of all, it's returns, which can account for as many or more books as actual sales -- books which have to be printed, stored, shipped, taxed, and then shipped back and stored again, before they finally go to the paper recycler for pennies on the dollar. Returns, of course, don't exist with ebooks. In short: they're lying.

12-10-2010, 06:50 PM	#11
dkperez Groupie Posts: 184 Karma: 1047931 Join Date: Dec 2010 Device: nine	OK, I"m new to the whole e-book world, and ignorant beyond belief about publishing, but I've gotta be missing something....... The economy in the US is "down" (more PC than "in the toilet"), real unemployment is around 17%, there are MANY other ways for people to spend their limited entertainment time and money (movies, cable, DVDs, video games, Facebook, etc)... And yet, I read the article, and in THIS environment, McMillan decides an e-book should cost $13 - $15 instead of $10? Which is ALREADY significantly higher than the paperback cost of the same book... For a book in a format that can't be resold, can't easily be shared, has NO residual value... I can't hand it to a friend to read. I can't take it into Half Price books and get a couple dollars back on my $6 paperback. I don't want to start a big urination festival here (I imagine this subject has been beaten to death, but I'm new here), and I'm far from being an expert on publishing, so I don't know if it's reasonable to charge $35 for a hardcover to cover the advance, editing, binding, printing, transportation, advertising, returns, and whatever all the costs are. BUT, if the same publisher can sell the same book in paperback for $5 or $6, a paperback that STILL has to be bound, printed, transported, displayed, returned, and so on, it seems bizarre to me that an e-book, which incurs NONE of these costs, should cost 2-3 TIMES as much... What am I missing? Are the publishers, in fact, lying? And will the marketplace make it painfully clear (in the pocketbook) that readers are NOT willing to pay higher prices for ebooks?

12-10-2010, 07:05 PM	#12
SensualPoet Wizard Posts: 2,302 Karma: 2607151 Join Date: Nov 2009 Location: Toronto Device: Kobo Aura HD, Kindle Paperwhite, Asus ZenPad 3, Kobo Glo	The article is full of out of date facts and a "anything big is bad" attitude. A standard practice in retailing is to discount a handful of items as "loss leaders" or "bargains" knowing most consumers will buy other things at the same time or later. Amazon was discounting a few dozen titles out of 700,000 sold at "normal" rates (and normal discounts). Five of the six largest publishers, on the other, colluded to create price fixing and, apparently, that's ok. Amazon is not the villain in this, no matter how many times people claim it is.

12-10-2010, 07:45 PM	#13
Worldwalker Curmudgeon Posts: 3,085 Karma: 722357 Join Date: Feb 2010 Device: PRS-505	The short version: The publishers are lying like rugs.

12-10-2010, 08:01 PM	#14
SensualPoet Wizard Posts: 2,302 Karma: 2607151 Join Date: Nov 2009 Location: Toronto Device: Kobo Aura HD, Kindle Paperwhite, Asus ZenPad 3, Kobo Glo	Also missing is the notion that consumers are ultimately the deciders. If Amazon's service is so terrible, consumers will make other choices. If consumers prefer cozy local independent bookshops, that's where they will spend their money. And the claim, again, repeated without context (or proof), that Amazon is using predatory pricing -- selling below cost to drive competitors out of business -- is galling. Also the notion that $9.99 for ebooks was a price Amazon created "without consulting publishers" is simply bizarre: a free market is supposed to be about choice, not price fixing by suppliers. If consumers prefer to pay $24.95 for a physical book at their indie bookshop vs. $9.99 for an ebook, let them. I am certain that over time the Agency Five will figure out that $14.99 for an e-book won't make them the same profits as a $9.99 best-seller. Funny thing about the free market: the consumer is driving the outcome.

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