Amazon vs. Hachette Update - It's About Price

[ApK]

Originally Posted by tompe

I wonder why people ignore that very true point all the time.

Who's ignoring it? It takes nothing away from the genius or success of an old system to notice that the world is changing and that it may be time for some new genius to create a new and better system.

Don't make me make a "world's best buggy whip" reference...

[howyoudoin]

*Ignore this post. Typed out by mistake and the forum won't let me delete it*

[howyoudoin]

Originally Posted by Crusader

Scalzi has an interesting take on things (the voice of reason, methinks) - http://whatever.scalzi.com/2014/07/3...latest-volley/

How does he know that Amazon's comparing different books at those price points? Perhaps they're comparing the sales of a book priced at 14.99 initially, and then reduced to 9.99 after a few weeks.

[tompe]

Originally Posted by howyoudoin

How does he know that Amazon's comparing different books at those price points? Perhaps they're comparing the sales of a book priced at 14.99 initially, and then reduced to 9.99 after a few weeks.

Because then it would be valid for one specific book and that was not what they said. And if they has statistics that more supported their position they would tell it. So yes you can know what they mean. Nothing strange with that.

[JSWolf]

What I'd be interested in knowing is how do sales compare when the eBook is priced $14.99 initially and then when the pBook goes to paperback, the prices of the eBook drops to $7.99 to just pricing the eBook initially at $9.99 and leaving it there.

[BearMountainBooks]

Originally Posted by JSWolf

What I'd be interested in knowing is how do sales compare when the eBook is priced $14.99 initially and then when the pBook goes to paperback, the prices of the eBook drops to $7.99 to just pricing the eBook initially at $9.99 and leaving it there.

One of the things that is unfair about many of these comparisons is that Amazon gives books more visibility if they sell well out the gate (rankings). So ANYONE doing well in pre-order or for the first week (consistently) is going to enjoy more visibility.

There's more to sales than just price. Part of the problem is that Amazon controls some of that visibility. So while they have probably tried all kinds of algorithms with visibility and their own profitability, there's more to the picture.

I even agree with them that in general, a lower price is going to sell better. But in the past they used to give a lot of visibility to books selling at 99 cents because 1. it was working and 2. that low price probably got people's attention because it was new/different for the book world. They don't do that anymore. Quite some time ago, they began adding price/sales into the visibility ratio. So now they APPEAR to give a bit more weight to the price--if a book sells at 2.99 versus one that sells at 99 cents, the 2.99 book may gain more visibility faster. This trend started when they began separating out "free" books from rankings/lists and visibility.



Having a book in front of readers is going to mean more sales. And from the retailer standpoint, it may make it more "worth their while" to push a book (visibility) with books in the pricing sweetspot--they may favor books under 9.99 because their overall profits are larger than if they push a book that is 14.

And what works today with readers might not work tomorrow.

[pwalker8]

Originally Posted by ApK

It's been sustainable for centuries. Both sides negotiate and come up with a deal they can both be happy with. If not, either party can walk away. Amazon would be reluctant to send Hachette customers to competitors, even as Hachette would not want to lose a major retail outlet.
If they negotiate, they will both likely win.



I read "The Walmart Effect" and the poor quality of my post-Walmart Levi's jeans makes me tend to agree, but the vendors who succumb are the ones greedily seeking growth at any cost. Companies fail that way every day without Walmart's help.
Some vendors (the book mentions Snapper lawnmowers IIRC) simply said, "No deal , Walmart, you're not the only retailer, and we'll do just fine by keeping our quality high." Apple has a similar attitude.
And some companies can meet Walmart's demands without sacrificing quality, but by becoming more efficient, just as many companies do without Walmart involved.

The model I was talking about not being sustainable was screwing your suppliers.

[ApK]

Originally Posted by pwalker8

The model I was talking about not being sustainable was screwing your suppliers.

But what you described did not appear to be "screwing your suppliers." It appeared to be "a normal business negotiation." Both sides wanting a deal in their own best interests.

[eschwartz]

Originally Posted by darryl

Or perhaps inspired by Chinese history they may lead a revolution in the US and create a totalitarian state with much bloodshed.

BAN ALL CHINESE BOOKS!!! QUICK!!!!! BEFORE IT'S TOO LATE!!!!!!!

[eschwartz]

Originally Posted by rhadin

Not necessarily true. The publisher and the author bear all the upfront costs and risks; the only thing Amazon bears is a bit of cyberspace. Every ebook sold by Amazon is profit to Amazon, whether the selling price be $1 or $15. That is not true for publishers or authors.

The breakeven number for a publisher might be 100,000 sales so that a profit first occurs with sale 100,001. In contrast, Amazon's first profit is with the sale of the very first unit.

Your excellent piece of nonsense applies only to pbooks, and is thus completely irrelevant.

A pbook that costs x to make and store and ship must be sold for x+profit, and it is possible to lose money on it.

An ebook costs 0 to make and store and ship, and any price = profit.

Both have the overhead to pay off, but that is the same no matter how many sell, so the only thing that matters is maximizing revenue.

And if Amazon makes more revenue by selling more books for less per-unit cost (which they claim), the publisher gets an equivalent amount more under Agency, and under wholesale the unit price doesn't matter so they make even more.

[SteveEisenberg]

Originally Posted by Barcey

1) There isn't a benefit for them to lie.

Agreed. Too much risk of being accused of stock market manipulation.

Originally Posted by Barcey

2) They're in the best position to have this data across all ebooks and publishers.

Agreed again. Individual publishers only know about their own books.

Originally Posted by Barcey

3) Their entire business (beyond ebooks) is built on knowing this type of data.

Agreed again.

But because I agree with you, I know that Amazon knows what happens to the total Amazon sales of a book, eBook and paper, when they change the eBook price. That's what's they have to care more about internally than the effect on eBook sales alone. And yet they only released the effect on eBook sales. It's not lying. But it's an attempt to make a case rather than to be informative.

The publishers should have this data as well but only for their own books.

Yes, in that way Amazon has more data. But if someone at Amazon wants to know what happens to the total sales, paper and eBook, of a title, when Amazon changes a price -- they are out of luck. Amazon knows when it raises an eBook price the extent to which Amazon paper and eBook sales change. But they don't know what the effect is on sales of that title at independent books stores, or at other internet retailers. Only the publisher knows the whole sales story for any particular book.

Originally Posted by Barcey

Amazon is in the business of giving the customer what the customer wants. The publishers are in the business of giving the customer what the publishers want.

They all are in the business of compromising between what they want (more money, more power) and what the customer wants (products they like for close to free). Look at all the right-wing titles on the nonfiction New York Times bestseller list. You really think New York publishers want people reading that

[pwalker8]

Originally Posted by Barcey

I have no question about Amazon's data on this:

1) There isn't a benefit for them to lie.
2) They're in the best position to have this data across all ebooks and publishers.
3) Their entire business (beyond ebooks) is built on knowing this type of data.

The publishers should have this data as well but only for their own books. They have enough popular authors that write generic books and have a relatively stable fan base that they can compare how many units sold at $9.99 versus when the tried jacking up the prices.

What Amazon isn't saying is that this is looking at ebooks in isolation. The publishers are arguing that they're trying to protect their higher margins on hard cover editions. The heavy discounting (actual competition) on hard covers means that Amazon is probably making a lot less then 30%. They also have to inventory, manage and ship it so I suspect they make more money selling the ebook at $9.99. Like any smart business man will say though, your profit margin is my opportunity. Amazon is in the business of giving the customer what the customer wants. The publishers are in the business of giving the customer what the publishers want. We'll see who wins.

We have seen in the past that one can make the numbers come out any way one wants by cherry picking data. Without the supporting data, it's simply an unsupported assertion. I'm sure that Amazon knows the data, but that doesn't mean that the actual data supports their assertion. What Amazon is basically saying is that you can sell more generic product at X than you can at 2X. That's a basic economic truism.

What they don't say is what is the proper price point to maximize profit, and how that price point changes based on specific authors, genres and subject matter. From the publisher's point of view, if they can sell X number of copies of a book at $15 and 1.2 X copies of a book at $10, then they are leaving money on the table. That money is important to publishers because unlike Amazon, they actually have expenses for each and every book in their catalog and the majority of books don't ever earn out that expense.

[pwalker8]

Originally Posted by ApK

But what you described did not appear to be "screwing your suppliers." It appeared to be "a normal business negotiation." Both sides wanting a deal in their own best interests.

Not really. Normal business negotiations tends to be lets find a point where we are both are satisfied. Sometimes, companies are willing to take a short term loss to enter into a market, with the idea that they will eventually raise prices. Amazon did that in the ebook trade by running the $9.99 price on best sellers as a loss leader to get people into the habit of buying ebooks from them. What is going on between Amazon and Hatchette is that Amazon is trying the leverage their dominate market position to force Hatchette to chose between two losing propositions, sale their books at a loss to Amazon, or be locked out of the ebook market.

[ApK]

Originally Posted by pwalker8

Sale their books at a loss to Amazon

No, I don't think so. Just less, not a loss.

or be locked out of the ebook market.

No, not that either. Amazon is a major player in market but not the only one, and they will not maintain their position if people can't get the books they want there.

For reference, see this thread above.

But you are doing a swell job of mimicking Hachette's spin doctors.

[dickloraine]

Originally Posted by pwalker8

We have seen in the past that one can make the numbers come out any way one wants by cherry picking data. Without the supporting data, it's simply an unsupported assertion. I'm sure that Amazon knows the data, but that doesn't mean that the actual data supports their assertion. What Amazon is basically saying is that you can sell more generic product at X than you can at 2X. That's a basic economic truism.

What they don't say is what is the proper price point to maximize profit, and how that price point changes based on specific authors, genres and subject matter. From the publisher's point of view, if they can sell X number of copies of a book at $15 and 1.2 X copies of a book at $10, then they are leaving money on the table. That money is important to publishers because unlike Amazon, they actually have expenses for each and every book in their catalog and the majority of books don't ever earn out that expense.

But they do talk about profit, not unit sales. Of course does nobody know, if the data given is correct and of course one price maybe does not fit every book. But I make the assumption it is about agency pricing. And that would mean, there is one price set. So amazon is not able to sell the books as they would do it under wholesale. It is a little absurd: the business partner with no (or at least much less) knowledge about pricing would then set the price. Of course amazon would not accept this, if said pricing is way out of line to what they see best.

More or less hatchett just want to still protect the hardcover pricing...