Yet another thumb of the nose from publishers

[DMcCunney]

Originally Posted by vaughnmr

Doesn't the Agency Crook (err, Publisher) rules apply to all, not just Amazon? Why are you saying that it's an "Amazon" thing?

Because it was specifically imposed to assert publisher control over Amazon pricing, though it doubtless applies elsewhere.

These particular cases came about because Amazon discounted the hardcover to a point below the one they were required to charge for the ebook. I doubt it will happen elsewhere, and I'd be a bit surprised if it happened again at Amazon. (The fact that it happened at all sounds like an "Oops!" moment to me.)
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Dennis

[DMcCunney]

Originally Posted by mrscoach

The two titles REPRESENT a trend. Just because they only used two titles doesn't negate the facts. There are other books that could have been used as well, but the list is too long and would make the article unbearable to slog through. No one wants to sift through a long list of books to read an article.

You can point to many other books that are suddenly appearing with the hardcover priced below the ebook on Amazon?

What the Agency 5 are doing to ebooks is wrong, and should be pointed out as much as possible. Maybe shame will change their ways, but I think they have none.

Let's understand what the publishers are up to here: this is not about greed, it's about survival.

Publishing has been suffering since long before ebooks were a gleam in anyone's eye. There have simply been too many books chasing too few readers. Everybody knew it, but nobody wanted to be the first to address it. Back in the days before ebooks, there was a reason for that: addressing it meant publishing less books. In the genre I'm most conversant with - SF - you could have cases where an editor would say "I'm scheduled to release four books in month X, but I only have three thus far. What's the least bad manuscript in the slush pile to fill out the schedule?" Publishing only three titles in month X wasn't an option, because the assumption was they'd lose the retail shelf space occupied by the fourth title, and not get it back.

Those too many books were not merely competing for too few readers, they were competing for limited space on retailer's shelves. Some years back, before ebooks, I saw specs that there were 50,000 titles published in the US each year, and the average bookstore had space to shelve and display 5,000 - 8,000. Books that didn't fly off the shelves did not get reordered, and were returned to make room for new releases. Returns provided another source of problems, because publishing had historically used a 100% returns policy. Unsold books could be returned for full credit, so the retailer bore no risk if they guessed wrong on what might sell. Hardcover books were simply returned. Paperbacks weren't. The covers were stripped off and returned, but the bodies of the books became trash (and all to often wound up being sold without covers for a fraction of the normal price.) To make things more interesting, the distribution system was convoluted enough that it could be six months to a year before the publisher knew whether a book had sold.

So there would be periodic wrenching spasms as a publisher trimmed it's lines and published less books, and others followed suit. Authors found themselves without contracts, and people involved in producing the books found themselves without jobs.

Consolidation has been at work, as publishers bought smaller houses, and retailing has contracted as well, as major chains like Barnes and Noble drove smaller booksellers out of business, because they couldn't compete with B&N's pricing. And B&N and fellows were under pressure from warehouse stores like CostCo and Sam's Club, who had even greater economies of scale and pricing power. Amazon became the 800 lb gorilla in book retailing, putting pressure on everyone.

And the consolidation put another form or pressure on publishing, as publishers were acquired by media conglomerates who saw supposed advantages in having all forms of media under one roof. The conglomerates had revenue and profitability targets publishers couldn't meet, and the efforts to do so provided additional issues for the industry.

The Agency Pricing model had a simple goal: protect the hardcover best seller. Those are the industry crown jewels. They generate the highest revenue and carry the highest margins. For most publishers, best sellers make the difference between whether they make money or show a loss for the year.

Amazon was selling Kindle editions at their default $9.99 price at the same time that they were selling the hardcover. Many readers just wanted to read the book now, had the capability of reading the electronic version, and didn't care about the paper volume, so they bought the cheaper ebook. The publishers were seeing declining revenue.

The Agency Pricing model effectively says "If you want to sell the ebook at the same time as the hardcover, you have to charge a higher price and remit a greater percentage to us, to make up for what we are losing by not getting a hardcover sale. If you want to sell the ebook cheaper, you must wait for several months to give the hardcover time to sell before competing with it." Mass market paperbacks don't get released until a year after the hardcover for a reason, and the same reason applies to ebooks.

Ebooks have simply added a whole new level of uncertainty to the equation. The dust has yet to settle, as everyone in the industry gropes for a successful strategy including ebooks that will let them remain in business.
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Dennis

[mrscoach]

You are assuming the publishers got LESS from Amazon for the Kindle version of the books than they did the HB version. If that is the case then I can see your point, but I don't believe this is so. I could be wrong. Amazon pays contracted price per Kindle version sold, no matter how much Amazon sells to the public for.

Yes, the publishers ARE being greedy, when they could lower the price a little and sell MORE books. Then, once the pbooks come out lower the electronic price even more. But they don't want to do that. They want to whine and moan that making electronic versions is SO much work, and they can't make any money on them.

If the publishing industry was in trouble before then maybe they need to look at their practices, and maybe see electgronic publishing as a savior. Remember, insanity is doing what you have always done and expecting to get different results. Publishing is trying to get different results by using the same tactics, when the market has clearly changed.

[DMcCunney]

Originally Posted by mrscoach

You are assuming the publishers got LESS from Amazon for the Kindle version of the books than they did the HB version.

Yes.

If that is the case then I can see your point, but I don't believe this is so. I could be wrong. Amazon pays contracted price per Kindle version sold, no matter how much Amazon sells to the public for.

And that contracted price is?

The standard discount to a retailer like Amazon from a publisher is probably around 60%. A hardcover with a $30 list price will cost Amazon $12. Like other retailers, they can choose to accept less margin on the book to boost sales. Some brick and mortar retailers might treat a really popular title as a "loss leader", and sell it for less than they paid for it, with the goal of attracting customers to the store and selling them other things once they got there.

You might not be willing to believe Amazon gives the publisher less on a Kindle edition than on a corresponding hardcover. I'm not willing to believe they they are making no money or taking a loss on Kindle sales.

If the publishers were getting as much from the Kindle sale as the hardcover sale, I don't think they would have felt the need to impose the Agency Pricing model.

Yes, the publishers ARE being greedy, when they could lower the price a little and sell MORE books.

You are assuming price is a dominant factor. Is it really?

Remember, books compete for the reader's discretionary time. There are any number of other things the reader could be doing instead of reading a book. Why read a book when you can watch TV?

While I certainly won't complain if I can get books cheaper, the limit here isn't the money required to buy them - it's the time available to read them once I have. I tell people one advantage to ebooks is that you don't have to call the paramedics if my unread stack topples over on me.

Then, once the pbooks come out lower the electronic price even more. But they don't want to do that. They want to whine and moan that making electronic versions is SO much work, and they can't make any money on them.

There is a cost to making ebooks, though publisher's comments on them tend to heavily overstate the case. The bigger problem is that most of the costs of a book are incurred before it ever reaches the stage of being issued, as a paper book or an ebook. Those costs will be there regardless, and will set lower limits on how cheap a book can be.

If the publishing industry was in trouble before then maybe they need to look at their practices, and maybe see electgronic publishing as a savior. Remember, insanity is doing what you have always done and expecting to get different results. Publishing is trying to get different results by using the same tactics, when the market has clearly changed.

They are being forced to reexamine their practices. But while ebooks are an opportunity, they are also a danger.

The fundamental question from our point of view is probably "Can publishers survive selling ebooks at the sort of prices a lot of folks here would like to see?" From what I can tell, the answer is "No. They can't."

Ultimately, you get what you're willing to pay for. If you aren't willing to pay what it costs to produce something, and make some money for the producers, it won't be made.
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Dennis

[ficbot]

You are assuming that people who would buy the ebook would have bought the hardcover version if the ebook was not available, which is not necessarily a true assumption. An ebook sale does not necessarily represent a lost hardback sale.

You are also assuming that the publishers can be trusted to actually lower the ebook price later, which again, is not necessarily true...

[DMcCunney]

Originally Posted by ficbot

You are assuming that people who would buy the ebook would have bought the hardcover version if the ebook was not available, which is not necessarily a true assumption.

If they don't want it that badly, they wait for the PB. If they want it that badly, they buy the hardcover, or the ebook at higher than previous prices.

Pricing is always "what the market will bear", and the publishers are in the process of finding out what that is.

An ebook sale does not necessarily represent a lost hardback sale.

If the user wants to read the book now, the choice is hardcover or ebook, and the ebook is significantly cheaper than the hardcover, which one do you suppose the reader will buy? I'd call that a lost hardcover sale, unless you assume the higher price of the hardcover would trigger the "Wait for the paperback" reflex if there were no ebook.

And perhaps it would, but the publisher will still want to get a price premuim from those who don't want to wait.

You are also assuming that the publishers can be trusted to actually lower the ebook price later, which again, is not necessarily true...

I trust them to want to make money. I think they'll find out the hard way that ebooks released along with the MMPB version will have to approximate the MMPB pricing. Pricing will be what they think they can get, and they'll find out as they progress what that is.
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Dennis

[mrscoach]

Dennis, do you have anything to backup that Amazon pays less per Kindle book than it does hbacks?

As for competing for time? Yes, but also for dollars. I don't buy hardbacks. The exception was the Harry Potter books. I also don't pay the outrageous prices the agencies now want for ebooks. Yes, the ones I want are less than the hbacks, but I found a few that are out in paperback, and the prices is between the two. Surely they have made their money from the hback sales? Or at least the hback time? Why have the electronic version be MORE than the pback? What is their cost?

Most people I know that read are willing to pay pback prices for electronic versions, or a little more if no out in pback yet, but not a huge amount. Thirteen dollars is a standard price I have seen, and we won't pay it. But again, if I wait will the price of the ebook come down? Or will the price stay the same, even as the hback price comes down?

I think if they really want to the publishers can make this work, but that is the point. They. Don't. Want. To.

I feel they forced agency pricing on ebooks because they are afraid of the medium, not because they were getting less per book from Amazon. If I contract for you to sell wigglies for me I can set the price I charge you, and suggest a MSRP that I tell everyone, but I do not have the right to tell you that you cannot sell wigglies for LESS than you paid me. That is your business, I get $X/wigglie either way.

[DMcCunney]

Originally Posted by mrscoach

Dennis, do you have anything to backup that Amazon pays less per Kindle book than it does hbacks?

Common sense and some knowledge of publishing. (I've been an active observer of publishing for decades, and most of the folks I know and hang out with these days are in publishing, as writers, artists, agents, editors, production people, contracts folk and the like. I know a bit about the topic.)

Amazon's standard price for a Kindle edition is $9.99. The list price for a current hardcover will be around $25 - $30. The standard discount to a retailer like Amazon is something around 60%. So Amazon probably pays the publisher between $10 and $12 for each hardcover.

You are asking me to believe Amazon either sells the Kindle edition of a new hardcover at cost or takes a loss on each sale when it sells at $9.99.

Sorry, I don't believe that. Why on earth should it?

A brick and mortar retailer might have an incentive to do that on selected titles to get people into the store, where they might buy other things as well. (That happened with the Harry Potter titles.) Amazon has no brick and mortar store to want to entice people into, and no incentive to play the "loss leader" game. You can assume Amazon makes money on Kindle sales, and pays the publisher less than what they charge you.

As for competing for time? Yes, but also for dollars. I don't buy hardbacks. The exception was the Harry Potter books. I also don't pay the outrageous prices the agencies now want for ebooks. Yes, the ones I want are less than the hbacks, but I found a few that are out in paperback, and the prices is between the two. Surely they have made their money from the hback sales? Or at least the hback time? Why have the electronic version be MORE than the pback? What is their cost?

The publisher wants to make money. Any vendor of any product will charge what the market will bear. If the publisher thinks they can get more money for the ebook, they'll charge more for it.

(Yes, there's some extreme wishful thinking among publishers about how much they can charge.)

I do buy hardcovers, but hardcover, paperback, or ebook, the same issue arises: I have to find time to read it. Lower prices aren't likely to make me buy more books I don't have time to read than I already do.

Meanwhile, as mentioned, most of the costs of a book are incurred before it reaches the point of actual publication, whether it's a paper edition or an ebook. The cost of printing, binding, warehousing and distribution of a printed book is about 20% of the total book budget.

And the ebook version doesn't get to tag along free with the assumption the production costs are covered by the paper edition. The accounting doesn't work that way. The ebook will be expected to make a contribution to covering the costs. (What happens if the ebook is the only edition?)

Most people I know that read are willing to pay pback prices for electronic versions, or a little more if no out in pback yet, but not a huge amount. Thirteen dollars is a standard price I have seen, and we won't pay it. But again, if I wait will the price of the ebook come down? Or will the price stay the same, even as the hback price comes down?

That will depend upon the publisher, and what it thinks it can get. When the dust settles, I think you'll see publishers roughly matching ebook prices to PB prices, once the PB is released. (They may be dragged kicking and screaming to that point.)

I think if they really want to the publishers can make this work, but that is the point. They. Don't. Want. To.

They want to survive. They want to be around tomorrow to sell you more books. They are all trying to figure out how to do that.

What will you do if they can't survive selling ebooks at the price you would prefer?

I feel they forced agency pricing on ebooks because they are afraid of the medium, not because they were getting less per book from Amazon.

They may be afraid of the medium, but the reasons are bound up in economics. The question for the publisher is how to make money selling ebooks.

If I contract for you to sell wigglies for me I can set the price I charge you, and suggest a MSRP that I tell everyone, but I do not have the right to tell you that you cannot sell wigglies for LESS than you paid me. That is your business, I get $X/wigglie either way.

So you do. And indeed, I can go the loss leader route and sell the wigglies below cost, but why should I? I'll only do that in special cases where I think I can make up the lost revenue other ways. Otherwise, all I'll do is go belly up.

The fundamental question is "How much does Amazon remit to the publisher for each Kindle edition sold at the same time as the hardcover is issued?" You appear to believe they pay the publisher the same amount for each sale whether it's a hardcover book or a Kindle edition.

I don't. I assume the electronic edition is covered by a different contract with a different price schedule, and that the publishers did not anticipate that Amazon would sell Kindle editions competing with the hardcovers at substantially lower prices. When Amazon did so and they lost revenue, they countered with Agency Pricing.
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Dennis

[ficbot]

Originally Posted by DMcCunney

I'd call that a lost hardcover sale, unless you assume the higher price of the hardcover would trigger the "Wait for the paperback" reflex if there were no ebook.

That is exactly what I think. I am an avid reader but have never bought a hardback in my life. No way am I paying hardback prices for an ebook where I have less rights and can use it less flexibly! If they won't offer it at a reasonable price, I wait---and fwiw the last three times I did this, the results were 1) it became a best-seller and dropped to $10.99 2) a coupon code became available and I got it at a discount and 3) the public library got it in ebook and I read it from them.

What publishers need to balance is whether it is worth it to them to sell it to me at a paperback price, or not to sell to me at all, because those are the two choices. Paying hardback price is not a choice for me. I simply won't do it, never did in the print days and certainly won't do it for something loaded with DRM that restricts my rights and uses.

[DMcCunney]

Originally Posted by ficbot

That is exactly what I think. I am an avid reader but have never bought a hardback in my life. No way am I paying hardback prices for an ebook where I have less rights and can use it less flexibly! If they won't offer it at a reasonable price, I wait---and fwiw the last three times I did this, the results were 1) it became a best-seller and dropped to $10.99 2) a coupon code became available and I got it at a discount and 3) the public library got it in ebook and I read it from them.

Okay. Where you are coming from affects how you see the issue. I do buy hardcovers, and the principal reason is wanting the read the book now rather than waiting a year for the PB. I'm willing to pay a premium for the faster access.

If everyone thought like you, there wouldn't be hardcover bestsellers, most of which are bought by people not willing to wait a year for the PB to be released.

What publishers need to balance is whether it is worth it to them to sell it to me at a paperback price, or not to sell to me at all, because those are the two choices. Paying hardback price is not a choice for me. I simply won't do it, never did in the print days and certainly won't do it for something loaded with DRM that restricts my rights and uses.

It's worth the publisher's while to sell to you at PB prices rather than not at all. It's not worth their while to compete with their hardcover releases to do it. Want the PB, or the ebook at PB prices? Wait.
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Dennis

[murraypaul]

Originally Posted by ficbot

That is exactly what I think. I am an avid reader but have never bought a hardback in my life.

Same here, I don't buy hardback fiction and never will.
Quite apart from the expense, a hardback is simply a less convenient version of the book. I'm not going to pay more for an inferior (to me) product.

[murraypaul]

Originally Posted by DMcCunney

You are asking me to believe Amazon either sells the Kindle edition of a new hardcover at cost or takes a loss on each sale when it sells at $9.99.

Sorry, I don't believe that. Why on earth should it?

A brick and mortar retailer might have an incentive to do that on selected titles to get people into the store, where they might buy other things as well. (That happened with the Harry Potter titles.) Amazon has no brick and mortar store to want to entice people into, and no incentive to play the "loss leader" game. You can assume Amazon makes money on Kindle sales, and pays the publisher less than what they charge you.

Amazon does have a very good reason to run loss-leaders (in the short to medium term), to build market share.
Once someone has bought a Kindle, the only type of DRM they can use directly (without stripping) is Amazon DRM. The device has an automatic way to buy from the Amazon store. Whispernet is designed to deliver books from Amazon. They are selling a platform, not just either a device or ebooks.

Look at the situation in the UK, Amazon have just arrived and are simply buying marketshare by offering books much cheaper than the established ePub stores. Every Kindle sold is a customer taken away from those stores forever.

Steven Fry's new autobiography is £20 list/£9 Amazon for the hardback, £19.57 list/£6.30 Amazon for the Kindle version. At Waterstones it is £11 for the hardback, £14 for the ePub.
Tony Blair's new autobiography is £25 list/£12.50 Amazon for the hardback, £25 list/£7 for the Kindle version. At Waterstones it is £14 for the hardback, £15 for the ePub.
The Girl with the Dragon Tattoo is £4 paperback, £2.68 Kindle at Amazon. At Waterstones it is £4 for the paperback, £5.50 for the ePub.
Eat Pray Love is £3.27 paperback, £3.11 Kindle at Amazon. At Waterstones it is £4.50 for the paperback, £8.85 for the ePub.

The Kindle editions are not just cheaper than the ePub, they are half the price, significantly more than the discount for the physical books.
And in each case, Waterstones is charging more for the eBook than the physical one, and Amazon is charging less.

Edit: To show that I wasn't cherry-picking results from Amazon, I went to the Waterstones ePub main page and checked the bestseller/recommends/favourites/new and bestselling sections, 22 books in all. Every single one is cheaper at Amazon, and in general significantly so, not just a couple of pence.

[Seli]

Originally Posted by murraypaul

Same here, I don't buy hardback fiction and never will.
Quite apart from the expense, a hardback is simply a less convenient version of the book. I'm not going to pay more for an inferior (to me) product.

The same for me, in regards that I do not like hardcovers as a format to read from. On the other hand I have found myself willing to pay the price for trade format just for early access (here in continental Europe it is released at the same time as the hardcover).
For some books I am perfectly fine to wait (price or format change) but for others I want to pay extra for immediate access. So the current trend in ebook-pricing makes perfect sense to me.

[avidone]

It is not just a matter of costs being less or slightly less for ebooks versus printed books-- there is also the matter that these ebooks are DRM'ed in such a way that does not allow easily sharing them with friends or re-selling them-- something with which you have absolute freedom with a printed book

[mrscoach]

I don't buy that publishers DIDN'T know Amazon would sell electronic books at the same time as hardbacks. You mean to tell me that not one person, not one lawyer at any point of the process, from any of the agencies, said "Hey, we haven't given them different release dates for these two editions. Do you think they might sell them at the same time?" only to turn around and say "Nah, they wouldn't do that, even though Dennis thinks we are getting less per Kindle edition. Let's just stick our head in the sand and hope for the best".

If no one figured out that they had given Amazon the go ahead to sell both editions at the same time then jobs need to be on the line. But I think they knew.