WSJ: E-Book Sales Fall After New Amazon Contracts

[Shane R]

From the "everyone saw that coming" file:

When the world’s largest publishers struck e-book distribution deals with Amazon.com Inc. over the past several months, they seemed to get what they wanted: the right to set the prices of their titles and avoid the steep discounts the online retail giant often applies.

But in the early going, that strategy doesn’t appear to be paying off. Three big publishers that signed new pacts with Amazon— Lagardere SCA’s Hachette Book Group, News Corp ’s HarperCollins Publishers and CBS Corp. ’s Simon & Schuster—reported declining e-book revenue in their latest reporting periods.

Publishers said the current pricing model involves some sacrifice but they felt it was worth it to keep Amazon in check. What’s more, they have noticed a bump in sales of physical books that is possibly related to the higher price of digital books.

http://www.wsj.com/article_email/e-b...MzAxNDUwMjQ2Wj

I'd bet they'll tell us next that consumers aren't interested in e-books, and they're going to start phasing them out.

[Cinisajoy]

If I read the quote right,
Yes if you put your best selling ebooks at either 99 cents or $1.99, yes your revenue will fall.
Note: I picked up Grey by E.L. James for 99 cents shortly after the book came out.

[crossi]

I think you have it backwards. When Amazon was free to set the prices of books low the publishers and authors actually made MORE money because Amazon took the discount from THEIR portion while paying the publisher (and author) the full non-discount share.

With the new contracts that prevent Amazon from setting any discount the publishers set the prices (generally higher which means less books sold) and also if the publisher itself decides to discount a book the discount comes from the PUBLISHERS (and authors) part of the price.

The publishers seem to think Less money for both the publisher and author is a good trade off in exchange for a forlorn hope of driving customers back to paper books and generally hurting Amazon (their largest source of income). If I was one of those publisher's authors I wouldn't be too happy with them. Hurting both the authors that make your business possible and your biggest source of sales Amazon seems poor policy.

[fjtorres]

Originally Posted by crossi

The publishers seem to think Less money for both the publisher and author is a good trade off in exchange for a forlorn hope of driving customers back to paper books and generally hurting Amazon (their largest source of income). If I was one of those publisher's authors I wouldn't be too happy with them. Hurting both the authors that make your business possible and your biggest source of sales Amazon seems poor policy.

The funny thing about that delusion is that Amazon's response has been to give them what they "want" by helping them sell more pbooks. Of course, they are doing it by discounting pbooks below competitor prices, thereby increasing publisher dependence on Amazon and squeezing B&N on the non-Nook side. (To say nothing of Indies caught in the crossfire.)

Also, shifting BPH sales from ebook to print takes money away from Apple, Google, and Kobo, none of which sell pbooks.

And making BPH titles more expensive makes non-BPH titles from smaller tradpubs, Indies, and APub more visible and more attractive.

Just like the first round of Agency did nothing to hurt Amazon but killed or crippled a lot of their competitors and drove others out of the business, this new round is just tilting the pbook side to Amazon's strength.

All they are doing is selling less high margin product valued by heavy buyers and more low margin product valued by occasional shoppers. In other words: they're killing their midlisters to prop up their one percenters.

Real smart.

Edit: Point to consider, half of BPH sales go to the randy penguin, which only moved back to Agency this last week. Also, currency exchange is making euro denominated reporting look better than it is.

The real impact will be felt next year.

[pwalker8]

Books aren't widgets. There is a lot of truth to the statement in the article that books are a title driven business. 2014 didn't have any super popular books. Neither did 2013. On the flip side, 2012 had 50 shades of Grey, which regardless of what people might think about it, reportably has sold 125 M copies.

Yes, I know the Amazon can do no wrong crowd will sneer at the truth of this, but truth it is. Very few of the top sellers are effected by price.

[dickloraine]

Originally Posted by pwalker8

Books aren't widgets. There is a lot of truth to the statement in the article that books are a title driven business. 2014 didn't have any super popular books. Neither did 2013. On the flip side, 2012 had 50 shades of Grey, which regardless of what people might think about it, reportably has sold 125 M copies.

Yes, I know the Amazon can do no wrong crowd will sneer at the truth of this, but truth it is. Very few of the top sellers are effected by price.

But midlist is affected. And that's the biggest bulk of books.

[Apache]

There are also a lot more very good indie titles available than there used to be and that cuts into BPH sales.
Apache

[Cinisajoy]

Originally Posted by pwalker8

Books aren't widgets. There is a lot of truth to the statement in the article that books are a title driven business. 2014 didn't have any super popular books. Neither did 2013. On the flip side, 2012 had 50 shades of Grey, which regardless of what people might think about it, reportably has sold 125 M copies.

Yes, I know the Amazon can do no wrong crowd will sneer at the truth of this, but truth it is. Very few of the top sellers are effected by price.

Huh?
So you are saying that if a top seller sells 1 million copies at $10 they will make the same if they sell 1 million copies for $1.
Obviously they got an advance, but they still have to earn that advance and by my simple math, they just got screwed out of major money.
Note those royalties come out of the revenue of the book. For simple math, I will use 10% royalty.
Book makes 10 million dollars, author cut will be $1 million.
Book makes 1 million dollars, author cut will be $100,000.

I don't know about you, but that seems like a huge pay cut.
Before you mention the advance, it has to be earned out before the author can get more money off the book. Which means the book has to sell 10 times as many for the author to make money.

[crossi]

I forgot the exact percentages but say Author 10%, Publisher 60% and Amazon 30%. The way Amazon used to work the publisher set the price at $10. The author got 10% so earned $1 million, the publisher got it's $6 million but Amazon instead of getting it's $3 million chose to give up some of it's profits and instead discount it and only take $1 million by cutting the price and recoup the price cut by selling a lot more of the books.

Lets say the discount doubled the sales, now the author gets $2 million, the publisher gets $12 million and Amazon almost makes up for the discount by getting $2 million.

You keep assuming the discount comes from what the publisher/author got. It didn't. The only one taking a cut in the profit/book sold was Amazon. This is not a difficult concept. Try to take it in. The Publishers/authors did NOT take a pay cut even if the number of books sold didn't increase.

Lets say you sold me something. I give you your money, whatever price you ask. I turn aound and sell it to someone else at half the price you asked me. Do you lose anything? No. You already have your money at your asking price. What do you care if I give away what I already paid you for? Especially if I keep buying things from you and then giving them away. The more gifts I give to people the more you make. Even at a 200% discount where I PAY people to take the item you would still be making money hand over fist.

[Cinisajoy]

Originally Posted by crossi

I forgot the exact percentages but say Author 10%, Publisher 60% and Amazon 30%. The way Amazon used to work the publisher set the price at $10. The author got 10% so earned $1 million, the publisher got it's $6 million but Amazon instead of getting it's $3 million chose to give up some of it's profits and instead discount it and only take $1 million by cutting the price and recoup the price cut by selling a lot more of the books.

Lets say the discount doubled the sales, now the author gets $2 million, the publisher gets $12 million and Amazon almost makes up for the discount by getting $2 million.

You keep assuming the discount comes from what the publisher/author got. It didn't. The only one taking a cut in the profit/book sold was Amazon. This is not a difficult concept. Try to take it in. The Publishers/authors did NOT take a pay cut even if the number of books sold didn't increase.

Lets say you sold me something. I give you your money, whatever price you ask. I turn aound and sell it to someone else at half the price you asked me. Do you lose anything? No. You already have your money at your asking price. What do you care if I give away what I already paid you for? Especially if I keep buying things from you and then giving them away. The more gifts I give to people the more you make. Even at a 200% discount where I PAY people to take the item you would still be making money hand over fist.

I love your math.
Now here is the thing. Amazon can no longer discount the books. As a matter of fact, if one of the big publishers discount a book, it says in the buy box, "price set by the publisher".
So yes, that now hurts the authors because they don't get list price. They get whatever their publisher thinks the book is worth.

Ok discounting a 4 year old book by Pat Benatar is one thing. Note it was $1.99. Discounting "Grey" by EL James while it was still hot is quite another. That one was 99 cents.
One probably helped the author, the other one probably hurt the author.

I would also recommend the Pat Benatar book to all creative people.

[crossi]

Yes, that is why the publishers shot themselves in the foot with the new contracts. Amazon used to subsidize the publishers by paying for the discounts out of their own pocket. Now the publishers have a beautiful situation of higher prices so less sales (business 101), if they DO discount it comes out of their pocket (and the authors). More and more authors jumping ship and going directly to self publishing so a greater chance the next runaway best seller will be a self or Amazon published book. Authors who do consider the BPH publication now have options so are in a position to bargain for better terms. Editors going indie too. Lots of experienced retired editors willing to work part time at home. Lots of competion for readers time and money from indies especially from those heavy buyers who buy a lot of books and so compare prices. Not a particularly cheerful picture for the BPHs.

[JSWolf]

Originally Posted by Cinisajoy

Huh?
So you are saying that if a top seller sells 1 million copies at $10 they will make the same if they sell 1 million copies for $1.

But, if you charge say $12.99 (agency) you'll sell less than you would if you sold for $9.99. You could enough that you make more at $9.99 than you would at $12.99.

[Cinisajoy]

Originally Posted by JSWolf

But, if you charge say $12.99 (agency) you'll sell less than you would if you sold for $9.99. You could enough that you make more at $9.99 than you would at $12.99.

I will concede part of the argument. Now my question is, if you sell a $10 book for a dollar will you sell enough to make up that difference? Or even say a $5 book for a dollar.
More people will pay under $10 than over $10 for a book.
So in my argument will you sell an extra 9 million copies to make up the difference?

[fjtorres]

Originally Posted by Cinisajoy

I will concede part of the argument. Now my question is, if you sell a $10 book for a dollar will you sell enough to make up that difference? Or even say a $5 book for a dollar.
More people will pay under $10 than over $10 for a book.
So in my argument will you sell an extra 9 million copies to make up the difference?

Dollar books are a separate issue since those extreme prices tend to be short-term promotions, shorts, or PD titles.

They are no more representative of the economics of ebooks than perma-free titles when taken alone. (Perma-free works as a loss leader entry into a ladder-priced series.)

Amazon discourages $0.99 ebooks as much as they discourage $20 ebooks, maybe more.

Amazon explained their view on the non-linear price elasticity of books way back in summer 2014:

http://www.forbes.com/sites/ryanmac/...r-9-99-prices/

“For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99,” the company wrote. “So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000.”

Fundamentally, the BPHs and their apologists don't believe in price elasticity but they do believe in the divine infallibility of BPH execs. In that worldview the BPHs only publish great books and people will pay any price to buy those books because only those specific books will meet their needs.

The idea that somebody might see a book priced at $20 and choose instead to buy two other books at $9.99 each is alien to them. Of course, the reality is that a more typical reader with buy two $6 books and a month of Hulu or Netflix.

[loco]

well this seems like a farce to me. ebooks are here to stay. i would prefer a digital book to one weighing a pound in weight. as technology is making roots into more countries, this fact cannot be overlooked. this behavior by publishers will lead to the following:







the credit for summing this up goes to mathew inman from www.theoatmeal.com. and the comic can be read in it's entirety at http://theoatmeal.com/comics/music_industry

we might not see this happening for book authors tomorrow but the day is not far enough. And when that day comes, i will have my chai in peace.