Hachette complains about eBook prices

[Kali Yuga]

Originally Posted by Ralph Sir Edward

I are one of those IT'ers. Soon I may be selling burgers (at 52). You don't hear me complaining about it on these threads. The world changes, and I must change with it.

Then I salute you for your enlightened attitude... but I still think yours is a minority view. I've heard lots of complaints over the years about H1-B tech visas as well as offshoring (and not just in IT).

Originally Posted by Daithi

If I go to Amazon's site, and view the books section (not the Kindle section), I see that in the first 3 pages or so of newly released books that the price for hardbacks is between $13 and $16....

The wholesale price can be up to $14. Again a lot of hardcover best-sellers are also loss leaders for the retailers. The key (and unanswerable) question is if Amazon or B&N lose more or less money with e-books than paper books.

Originally Posted by JSWolf

The reason to get rid of hardcover and other overly expensive editions (IMHO) is that eBook prices are based upon them.

Well that's an innovative argument. Ebooks are still a fraction of the market, and publishers don't want ebooks to cannibalize the high-margin sales or for the public to devalue the worth of their product. It seems much more likely that the wholesale prices are set based on the publisher's expected margins than an arbitrary link to another edition's pricing.

Originally Posted by JSWolf

eBooks don't have different bindings and the price to produce an eBook has nothing to do with the price of the pBook.

On the contrary, the majority of costs of publishing a title apply equally to paper and digital -- i.e. the aforementioned author's advance, editorial costs, marketing costs etc. The paper-specific portion is allegedly around 12% of the cost of a title, so a $25 hardcover less 12% is only $22.

I may be in the minority, but I don't object to $12-15 prices for a limited time on selected / new ebooks.

Originally Posted by JSWolf

One other reason for lower eBook prices is also due to the restrictions placed on them vs. placed on pBooks.

So should we then pay extra for the added advantages of ebooks?

Granted you can't resell or loan out an ebook. Then again, I can't feasibly make 3 duplicates of my 1500-page paper copy of The Tale of Genji, shrink one of them to pocket size, keep another on my computer as backup, and burn another to DVD and store it outside my house in case of a fire.

[ahi]

Originally Posted by dadioflex

It'll be a boon for freelance editors. Other than that all the publishers do that's relevant to the ebook world is promotion, and promotion is reserved for their AAA+ clients. Take away the giant printing presses, and distribution and traditional publishers look dead in the water.

Oh cover design - but I think Moejoe could take up the slack there, single-handedly.

Oh! I didn't know that.

[nomesque]

Originally Posted by Kali Yuga

The problem isn't that publishers aren't "keeping up with the times." They've adapted reasonably well to many industry changes such as online and discount-chain sales (e.g. Walmart), and POD.

Now, some have, some haven't. I've read over the years about publishers who are embracing new technologies (ebooks, authonomy, POD), new author relationship models (eg. ditching advances and raising royalty percentages), etc - and those who seem to be reluctantly accepting the new technologies but not changing their business models at all.

Originally Posted by Kali Yuga

The problem is that it's quite plausible, although not yet certain, that reducing the wholesale price for a high-margin book could destroy their profit margins.

OK. Won't argue there

Originally Posted by Kali Yuga

I might add that I have a sneaking suspicion that at least some of the people who deride an industry for failure to adapt to a disruptive technology would not be too thrilled if it was their industry, livelihood and/or profits that were under threat. This is quite evident, for example, when you examine how negatively programmers and IT workers react to their own jobs getting outsourced to India.

First - I think individual workers more deserving of sympathy when changing world markets kill their jobs, because businesses are supposed to have people qualified to recognise these issues and help them react. Individuals can't always have the know-how to do that. HOWEVER... I'm in IT. I'm an ex-programmer. Years ago I saw the writing on the wall for my particular little specialty, and moved slowly into technical writing. Not JUST because I thought it most likely to survive as a local industry, but that was a big factor. Why would tech writing survive? Because it requires local knowledge, local language, and a high degree of technical know-how. So, you know, I'm speaking as someone who thinks that individuals really should move with the times and continually watch the trends, too. I think I'm fairly consistent in my opinion on this.

[ficbot]

Originally Posted by Kali Yuga

Well that's an innovative argument. Ebooks are still a fraction of the market, and publishers don't want ebooks to cannibalize the high-margin sales or for the public to devalue the worth of their product.

See, I think THAT is the 'innovative' argument. You are assuming that my hypothetical ebook purchase is REPLACING what would otherwise have been a hardback or paperback purchase, and for many people on this forum, that is not true at all. It is replacing a non-purchase of anything. I have never bought a hardback in my life because they are too expensive, and I do not buy paperback anymore because they are too bulky to store. I prefer ebooks because there is no storage issue. So my ebook sale is replacing what would otherwise be 'get the hardback from the library.' You are going from no sale at all, in any form to one sale, in ebook form. There would be no benefit to you, from the viewpoint of my individual sale, to holding back or not offering at all an ebook version. In fact, you would lose a sale.

As for the 'benefit' you speak of---that is only true if the book is an unencumbered DRM. There is no use to me to have eleven million copies of a book in one format if my next device uses a different format and I can't read it anymore.

[DawnFalcon]

Originally Posted by Xenophon

It's important to note that Baen does this, in part, by cutting out one-and-a-bit levels in the distribution chain. Their eBooks skip the "distributor" step entirely (that would be Ingrams, etc. in the paper book world), thus skipping their cut of the selling price as well. In addition, the cut taken by Webscriptions (which is a separate business from Baen Books, although it's occasionally hard to tell that from the outside) is rather lower than that taken by Amazon, for example. Finally, Webscriptions takes on a larger portion of the preparation of eBooks than do other eBook retailers (thus reducing costs for Baen). So most of the improved pricing at Webscription comes from disintermediation, rather than from getting rid of paper and its associated costs.

Xenophon
(All of the above written from memory, so apply an appropriate amount of salt.)

That sounds right. But.

It's hardly something which can't be replicated by another company, given the will. Heck, several smaller scifi/fantasy presses are now using Webscriptions (and Tor briefly did, before their corperate parent freaked).

I think the future is grim for "mainstream" hardbacks at the big companies. That is, smaller publishers will still do limited print runs of hardbacks for collectors, art books are not going away and small kids books are going to still be hardback.

Or, more simply: "if all you're gonna do is moan they should take your teeth away!"

[rhadin]

Originally Posted by Daithi

Rhadin,
If I go to Amazon's site, and view the books section (not the Kindle section), I see that in the first 3 pages or so of newly released books that the price for hardbacks is between $13 and $16. Even at my local Barnes & Noble, Borders, Target, and Walmart, I rarely see books at the $26 range that publishers often indicate they receive. Whenever I actually buy a fiction hardback it is almost always between this $13 to $16 price point (usually at Walmart or the grocery store). The only time I've paid in the $26 range is for non-fiction.

I understand what you are saying but you are asking the wrong question. Your question is whether Amazon is losing money. To that the answer is yes.

If your question is are the publishers losing money, the answer is no. The publisher receives its 50% of the retail price regardless of what price Amazon sells the book at. When Amazon sells a $26 list price hardcover book for $13, it is breaking even if the discount is 50% and making a few dollars if the discount is 60% (i.e., publisher receives 40% of list price).

If the publisher is charging Amazon $15 for the ebook and taking a 50% discount, then Amazon would be making money on the ebook at $10. But the publishers claim and no one has proven otherwise (and the analysts agree) that the ebook price is the same as the hardcover price. Consequently, it is a loss leader for Amazon.

[rhadin]

Originally Posted by pdurrant

Counter-example:

Baen Books produces two $25 hardbacks each month. All their hardback releases for the past ten years have also been available for $6 as an ebook, two weeks before the hardback hits the shelves. Indeed, their entire output each month (6 books on average) is available in ebook form for a total of $15.

Baen are profitable, and continue to sell hardbacks, paperbacks and ebooks.

There's no reason why other publishers couldn't do the same, if they stopped wasting money on DRM, and told Amazon and other retailers that insisting on the same cut for ebooks as for paper books was ridiculous.

The couterexample is not really a counterexample to the discussion. It doesn't matter what Baen does because Baen is both publisher and retailer. However, Random House, for example, doesn't adhere to the Baen formula and the bestsellers under dscussion don't come from Baen, then come from publishers like Random House.

Also, as a niche publisher, which is what Baen is, its costs are less than those of the major publishers. Dave Freer, for example, is asking for donations to help him move (see Teleread). John Grisham gets paid a significant advance so he doesn't have to ask for donations. Dave Freer's books costs are less so Baen can work a different model.

[pilotbob]

Originally Posted by JSWolf

The reason to get rid of hardcover and other overly expensive editions (IMHO) is that eBook prices are based upon them.

Right... I am pretty sure that a hard cover doesn't cost much more to produce and ship than a MMPB or TPB but they seem to charge alot more for them... 2 to 3 times what the MMPB might be.

People are going to say, hey... why am I paying more for this than for a paperback.

I think the prices should be based on market demand. When a new book first comes out, price the ebook higher, close to the hard cover price. Then, when interest dies down, drop the price a bit. I don't have a problem paying the same price for the least expensive pbook on the shelves for the same ebook price. (But I repeat myself, gotta avoid these threads that never end).

BOb

[rhadin]

Originally Posted by JSWolf

The reason to get rid of hardcover and other overly expensive editions (IMHO) is that eBook prices are based upon them. eBooks don't have different bindings and the price to produce an eBook has nothing to do with the price of the pBook. And until the publishers learn this, we can do without the expensive eBook price raising editions.

Jon, it is not a reason to get rid of hardcover books because publishers are fools. If that were true, there would be lots of fools we could get rid of for lots of reasons.

You might have a better case if you could prove that getting rid of hardcover books would, in fact, translate to lower ebook prices, but there is nothing to indicate that is precisely what would occur.

It might be better to simply educate publishers that those who buy hardcovers will continue to do so even if ebook pricing is lowered.

[Barcey]

I've found that Amazon has been pretty consistent in saying that the $9.95 is for New York Times best sellers and they don't make money on these anyway. These are the books that the big box stores like Walmart sell for reduced prices. It's the publishers that are have been putting into the public's mind that this is the Amazon price point.

If they are so concerned about Amazon setting the prices what is stopping them from selling direct to the public at the wholesale price that Amazon is buying them? Sell them without DRM and Amazon would be out of business. Instead they lose all credibility by trying to sell at the same price as hard cover books.

[rhadin]

Originally Posted by Barcey

If they are so concerned about Amazon setting the prices what is stopping them from selling direct to the public at the wholesale price that Amazon is buying them? Sell them without DRM and Amazon would be out of business. Instead they lose all credibility by trying to sell at the same price as hard cover books.

Yes, they could sell only directly but then they wouldn't sell very much. Places like B&N and Amazon would retaliate by not carrying any of the publisher's books. Just as Amazon and B&N need the publishers for product to sell, the publishers need the distribution of the stores.

Most people do not want to spend their days searching multiple places in hopes of finding a book. They want to go to one or two sources and look. I have 25+ bookmarks for ebook stores in my web browser but I end up going to no more than 3-4. I have better things to do with my time, and the consuming public doesn't have much more -- if any more -- patience than I have.

[CleverClothe]

Originally Posted by rhadin

I can't give you exact figures, each publisher is different. But I ran a publishing company (and I'm still involved in publishing), so I can give you some generalizations.

1. Amazon is losing money on the $9.99 bestsellers. Books are "sold" to retailers with a percentage discount based on the listed retail price. The discount is generally 50 to 55 percent. Even with a 60 percent discount, Amazon would need to pay the publisher $10.38 on a book that has a suggested retail price of $25.95. Probably the breakeven point is a suggested retail price of $19.95, but few new bestsellers in hardcover have such a price point.

Why this question keeps surfacing, I do not understand. The publishers themselves have said that Amazon is taking a loss and none of the analysts have disputed this. Seems to me that that this question should be laid to rest permanently.

Amazon charges 65% of suggested retail (seller gets 35%). On a $25 ebook, I calculate a possitive revenue for a best seller:

$25.00 * 35% = $8.75 (Amazon's cost [to seller])

$9.99 - $8.75 = $1.24

Now consider that Amazon has very tiny warehouse and delivery costs. This is what allows them to give such deep discounts.

[pilotbob]

Originally Posted by CleverClothe

Amazon charges 65% of suggested retail (seller gets 35%). On a $25 ebook, I calculate a possitive revenue for a best seller:

I'm pretty sure that is on self-published books. I very much doubt that is the revenue split with the major publishing houses.

BOb

[AnemicOak]

Originally Posted by pilotbob

I'm pretty sure that is on self-published books. I very much doubt that is the revenue split with the major publishing houses.

BOb

Yeah, I'm pretty sure the big guys are getting around 50%.

[CleverClothe]

Originally Posted by pilotbob

I'm pretty sure that is on self-published books. I very much doubt that is the revenue split with the major publishing houses.

BOb

No one has said otherwise and it is written into Amazon's contract. I suppose it is possible they may have some secret deals. But do you think it is likely that Amazon is secretly taking a loss on its most popular merchandise?

It does not seem likely to me.