Interesting article on book pricing and why it might rise

[tompe]

Originally Posted by DMcCunney

No dodging is necessary. Baen's model works for Baen. It will not work for most other publishers, especially the big ones.

For reasons why, see Kris Rusch's blog posts on the topic. Kris knows whereof she speaks: she has been a publisher (she and her husband Dean Wesley Smith published an innovative hardcover fiction magazine called Pulphouse back in the late 80's/early 90's), and editor (she was editor of the Magazine of Fantasy and Science Fiction for a few years, before Mercury Press sold it to Gordon Van Gelder), and is a current full time freelance writer.

See http://kriswrites.com/2010/10/28/the...-times-part-2/ and following columns.
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Dennis

A good series of articles. The span from breaking even (10000) to certain bestseller (miljons of copies) is worth remembering. It illustrates just how important the best sellers are for the big publishers. And a good point was made that big publishers are good for the readers.

[GA Russell]

Originally Posted by DMcCunney

You pirate it. I don't get your sale. I may not care.

Dennis, aren't the book publishers threatening to sue pirates like the music companies have done? If so, then apparently they do care. If not, then I guess you are right, at least for the time being.

[Sil_liS]

Originally Posted by DMcCunney

The problem is, that statement is largely true. One of the pressures publishers are under is that many are units of larger outfits, with an expected contribution to the parent's revenue and profit. They are expected to make a 10% return on investment minimum. Good luck. Historically, publishing's returns have been maybe half that.

But the problem starts with the fact that they sell the books half-price, or rather that they double the "value" to be able to give a discount to the big retailers. They don't mention the profit they make from selling to small retailers. It should be considerably more / book.

Originally Posted by DMcCunney

Correct. Value has nothing to do with cost. If the buyer buys a print edition of a PD work, it's worth it to them, or they wouldn't have bought it.

But they make a bigger profit than they would for new authors. And I don't see any publisher commenting on that, as they aren't commenting on the fact that with ereaders, people aren't going to need them for PD books.

Originally Posted by DMcCunney

Hardcovers cost more to manufacture than paperbacks (and paperbacks exist to be a cheaper alternative). But in most cases, I think buyers buying hardcovers are paying the premium to read the book now instead of waiting for the PB edition. The fact that it's a hardcover is secondary.

But it has an effect on buyer psychology, making bigger = more expensive. And now we have the really tiny ebooks, and publishers are just shocked that most buyers aren't going for the ebook = hardcover value idea.

Originally Posted by DMcCunney

Who told you hardcovers don't cost all that much more to make? "Trade paperbacks" exist to provide a cheaper edition than the hardcover, because there are costs in hardcover binding.

You're joking, right?

Originally Posted by DMcCunney

Manufacturing costs are generally about 50 cents - $1.00 for PBs, and perhaps $2 for HCs.

Did you miss the fact that I quoted you? You say that it costs $1 more to manufacture a HC, and since the other costs are the same, it would mean that HC would cost $1 more to make than the PB. To me $1 difference means that it doesn't cost that much more to make.

Originally Posted by DMcCunney

And the point of printing hardcover editions of PD titles? Easy enough: there are people who will buy them.

Well, if the publishers want people to stop associating the physical appearance of the book with the price, they should really stop doing that.

[doreenjoy]

I haven't noticed the music companies going out of business despite all the mistakes they made with DRM.

Same will be true of publishing. Publishing companies aren't going anywhere.

[Elfwreck]

Originally Posted by Fbone

Please don't take offense but it isn't really the author's or publisher's fault if your budget is "$5/bag" or similar. You can't expect a publisher to sell you a hot-off-the-press bestseller through Borders for a $1. Even most DRM-free ebooks from an Indie will set you back a few bucks. To be honest even indie prices vary from $0.99 - $8.99 and rising.

My budget isn't $5/bag, but that's how I often discovered several new authors at once. For $5-10/book, I stick to material I'm fairly sure I'll like--especially if I don't have the legitimate option of handing it to a friend if I didn't care for it. At $7 each, I don't buy new books because the cover & blurb sounded interesting.

And yeah, that's a problem with my budget and not the ebook industry. But the fact that I don't hand along my recommendations, because I can't legitimately say, "I liked this; here, you read it & see if you like it," is the industry's problem.

Without any free/cheap sharing options, authors and publishers are stuck doing a lot of advertising that isn't necessary for print books because of the used book market. There isn't any ebook equivalent of "moving out of parents house and into my own apartment; never reading these again--here, you take three boxes of books and see if you like them"--and deciding that one or two of those authors, you like very much and want to buy their newer books.

Right now, ebooks are piggybacking on the print industry for publicity; that's not going to work for e-only publishers.

Even new, single-novel authors benefit from the exchange of older books; if someone's book is advertised as "like Heinlein's early works!" or "if you liked The Shining, this will blow you away!" those let readers know something about whether they'd like it.

[Elfwreck]

Originally Posted by Sil_liS

I never read fanfic so I didn't think about it. The number of works in the Archive is impressive. Could you recommend some? I have the very unhealthy habit of going the methodical way when I read webcomics and blogs and I don't think that I can go that way here.

I can recommend plenty... what kind of tastes do you have? What fandoms might you be interested in? Check the ratings & warning codes before you click on stories, unless you don't mind jumping into the middle of a Harry/Draco BDSM sex scene. (Some of which are excellently written. But probably not the easiest place for a fanfic newbie to start.)

If you go browsing through the archive, starting with things with high hit counts and lots of comments is generally a good indicator of quality. Not that no comments is a bad sign; a lot of fanfic there is new imports from elsewhere. And some terrific stories just don't get comments. But lots and lots of comments are a good sign.

Last year's Yuletide collection might be a good place to start; that's an annual "small fandom" gift fic exchange where people are semi-randomly assigned what to write. (Sort of. It's complicated.) It gets a lot of very short stories (minimum entry is 1000 words, and then there are 'stocking stuffers' that can be shorter), and lots of them that are just single scenes or character studies--and if you like the author's style, you can check out their other works; if you don't, you haven't wasted much time.

3 great stories from last year:
Wait Wait Don't Eat Me, National Public Radio: "We're going to be cutting our show a little short today, because, as you may have heard, there's an apocalypse happening! But we didn't let the election of Barack Obama stop us, and we're not going to let the zombie hordes stop us either."

The Lengthy Dimly Lit Coffee Break of the Psyche, Calvin & Hobbes: Calvin looks for a job. Hobbes and Susie look after Calvin.

Most Likely To, Breakfast Club: If there had been gossip after the reunion, Brian's life might have looked something like this. (Includes explicit sex scenes.)

The standard method for dealing with fanfic: click around until you find something you like. Read everything by that author. If they collaborate with anyone, read everything by their collaborators. Then go looking for recommendation lists that include those authors.

[Purple Lady]

Originally Posted by DMcCunney

The fly in that ointment is that I'm not gouging you. I'm simply trying to stay in business.

I publish a book at $27 that you can't find discounted, so you pirate it. I don't get your sale. I'm betting that enough other people will find the book of sufficient value that they will spend $27 to buy it, and that I'll make money on the title.
Dennis

How is the publisher not gouging me when they won't let the bookseller give me a coupon for 30% off? The publisher has already got their money, it's the bookseller that will make less, not the publisher. That's what's got me upset - not the list price, but the fact that the publisher won't let the bookseller give me a discount below their stated minimum price. I can't find it discounted because of the publisher, not because of the bookseller.

[Elfwreck]

Originally Posted by DMcCunney

No dodging is necessary. Baen's model works for Baen. It will not work for most other publishers, especially the big ones.

For reasons why, see Kris Rusch's blog posts on the topic. ...

See http://kriswrites.com/2010/10/28/the...-times-part-2/ and following columns.

Good columns; good info... they explain why big publishing hasn't used Baen's model; they don't explain why Baen's methods can't work for them.

Can't work as well as their current 90% cut with the several stages between author and reader, sure. But their current system is falling apart--they've gutted it themselves for ebooks by demanding the agency model, insisting that they want to sell directly instead of hiring someone to manage marketing to the customers. The new book market is panicking in competition with Amazon's used book listings; turns out a lot of people will buy a $5-with-shipping book instead of the $14 TPB or the $25 hardcover.

Baen's method is not "give away free ebooks and sell new ones at $6." It's more abstract than that.
Know your market.
Find out what they're willing to pay.
Sell to them at that price.

As long as that allows for *any* profit, it's a successful business model.

The big publishers are flailing because for a long time, that hasn't been their business model. They've been deciding what books will be popular, and promoting those extensively, and selling others as smaller runs/paperback only; they set the price based on what they want to make, on the theory that the market will have to pay whatever price they set; they sell to distributors who sell to stores who sell to readers, so they've got no direct influence on or feedback from the people who, ultimately, are buying their products.

They've got several more years of being able to decide what the bestsellers are--the literature community moves a lot slower than the music communities, and they've got a lot of inertia built up. But they're going to watch the industry schism into a thousand POD and ebook publishers who *are* willing to find out what people want to read and provide it to them.

[DMcCunney]

Originally Posted by Sil_liS

The publishers focus too much on the fact that ebook sales can cut into the pbook sales. They treat the two as separate, so they want to increase both prices in order to make the same profit from each as they would have had if there were only pbooks. They seem horrified by the thought of any bargain sale for ebooks, and they are spending too much on the wrong type of marketing because they don't understand how the internet works.

The issue that publishers are dealing with is that ebook sales will cannibalize pbook sales. How many people are likely to get both for the same book?

My feeling is that ebooks will eventually cannibalize the market for mass market paperbacks, and it may reach the point where a print edition of an MMPB title will be offered via Print On Demand at a higher price than is the current norm, because not enough people will want the print edition to make a standard MMPB edition economic.

Meanwhile, if I'm a publisher, I'm going to want to maintain pricing, and price my ebook edition comparably to to my MMPB edition, and maintain that pricing when I'm no longer doing MMPB editions.
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Dennis

[DMcCunney]

Originally Posted by tompe

A good series of articles. The span from breaking even (10000) to certain bestseller (millions of copies) is worth remembering. It illustrates just how important the best sellers are for the big publishers. And a good point was made that big publishers are good for the readers.

And how important best sellers are for publishers was the reason the Agency Model was implemented in the first place: the intent was precisely to protect the hardcover best seller. Those are the crown jewels of the industry, generating the most revenue and profit, and having best sellers may mean the difference between showing a profit or having a loss for the year.
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Dennis

[DMcCunney]

Originally Posted by GoversAU

I believe most if not all your arguments are defeated by what we've seen in the music market over the last few years.

I don't, because I don't see them as equivalent, but that's a different discussion.

I think Sonist pretty well does sum up a large expanse of the market.

How large an expanse? Don't assume you're representative of the market. Don't assume MR as a whole is representative. The folks who hang out here are "early adopters", and tend to be more savvy about the technology and the market place. You're comfortable finding things on torrent sites and doing conversions to get a format you can read. How about your grandmother?

And perception is the thing: you'll never convince the book-buying public that an ebook is worth even 50% of the price of a paperback let alone a hardcover. They know they aren't buying a book: they can never sell it, loan it, pass it to their kids. Ebooks make books a disposable commodity and the public will expect them to be priced accordingly.

Oh, really? Explain how Amazon is so successful selling ebooks at a default $9.99 price when the corresponding PB edition is cheaper.

A lot of folks are simply going to be disappointed if they expect ebooks from anyone but self-publisher to be priced at half the price of a mass market PB edition. That simply isn't possible for any regular publisher who wants to stay in business. (And contrary to what you might like to believe, they aren't going away any time soon.)

I've bought nearly 300 ebooks since May, most in the 99c to 3.99 price range from indie authors. Only two cost more than $10, and about 10-15 around $9. Very few of those indie books failed to maintain my interest for whatever reason; I don't think the ratio would be much worse than with big name authors and publishing houses.

I don't. I'm happy that you found enough stuff from indie authors that you found readable. My mileage would vary. I've been conditioned by publishers serving as crud filters. I read a fair bit of off beat and experimental fiction, but there's a limit to the time and effort I'll spend panning for literary gold in the Great Slushpile of the Internet. I have better uses for the time, and I'll happily spend more for a book published by a house whose taste I trust with editors to help an author turn a manuscript from "good" to "great".

And I know an assortment of authors trying to make a living writing (or at least a good chunk of it). They will not do that as indies.

Either publishers get rid of agency models and adapt very quickly, or they will be dinosaurs. The ebook leaps ahead very quickly and the Agency 6 are being left behind.

It's the Agency 5. Random House did not jump on that bandwagon.
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Dennis

[DMcCunney]

Originally Posted by Elfwreck

Good columns; good info... they explain why big publishing hasn't used Baen's model; they don't explain why Baen's methods can't work for them.

What part of Baen's methods do you think they can adopt? See below for constraints.

Can't work as well as their current 90% cut with the several stages between author and reader, sure. But their current system is falling apart--they've gutted it themselves for ebooks by demanding the agency model, insisting that they want to sell directly instead of hiring someone to manage marketing to the customers. The new book market is panicking in competition with Amazon's used book listings; turns out a lot of people will buy a $5-with-shipping book instead of the $14 TPB or the $25 hardcover.

I think you misunderstand the motivations for the Agency Model.

Baen's method is not "give away free ebooks and sell new ones at $6." It's more abstract than that.
Know your market.
Find out what they're willing to pay.
Sell to them at that price.

Not really.

Baen does know its market. That's it's real strength: it is a mid-level action/adventure SF/fantasy publisher. It knows who its readers are, and produces what they want to read. It has extended that to branding. In that sense, Baen is like Harlequin. Harlequin produces romances, with the assumption that if you like one of their titles, you are likely to like the others. Baen is nowhere near as "cookie-cutter" as the Harlequin offerings, but a similar dynamic applies. People know what Baen publishes, and know that if they like a Baen title, they are likely to like others. Baen is this generation's DAW Books. DAW started with the same model - mid-level action/adventure SF/fantasy, where if you liked one DAW title, you were likely to like others. They drifted away from that model when founder Donald A. Wollheim died and his daughter Betsy took over. These days they produce fantasy "bricks".

Baen is unlikely to have best sellers, save for the Honor Harrington books, but Baen is also unlikely to have the "shipped gold, returned platinum" issues common to major houses that have what they think might be a bestseller and guess wrong. Baen has a high sell through rate, and likely has less returns of books than other SF/fantasy lines.

But "Find out what they're willing to pay. Sell to them at that price." isn't as simple as it sounds. What if "What they're willing to pay" is less than it costs to produce the product? Selling to them at that price is just a good way to go belly up fast. (And that question underlies a lot of the posts I've made on such topics at MR, because I think the prices a lot of folks here would like to see for ebooks are less than it would cost to produce the books.)

Baen is making money (though I don't know how much) on ebook sales. But Baen is also a successful print publisher, with a 70% sell-through rate on hardcovers. The costs of making the book to begin with are spread over HC, PB, and ebook editions. If the print books went away, and Baen was only making/selling ebooks, do you think the $6 price would remain? I don't. It would have to go up to cover the costs.

As long as that allows for *any* profit, it's a successful business model.

Absolutely not!

A successful business model doesn't allow for "any" profit: it allows for enough profit to remain in business. Simply being profitable in the sense of showing an excess of revenues over expenses is not sufficient.

The big publishers are flailing because for a long time, that hasn't been their business model. They've been deciding what books will be popular, and promoting those extensively, and selling others as smaller runs/paperback only; they set the price based on what they want to make, on the theory that the market will have to pay whatever price they set; they sell to distributors who sell to stores who sell to readers, so they've got no direct influence on or feedback from the people who, ultimately, are buying their products.

Nope. Publishers will always make the best guess they can at what books will be popular. Their guess as to the popularity of a title will determine all else, from the amount of the advance paid to the author to the press runs for the print edition and the marketing dollars put behind the books.

In that respect, publishing is no different from the film or record industries. Some properties will be perceived as being $100 million grossers or multi-platinum sellers and get treated accordingly. Others will get less attention and support. Back when, Richy Furay, singer/guitarist for country rock band Poco complained that record companies "could break any act they wanted!". An exec from his record company said "No, if we could do that, we'd break everything!". He was right.

Publishers haven't been "deciding what books would be popular". They've been making their best guesses as to what books they think might become popular. They can't all be bestsellers, so guesses have to be made about which have the potential. Sometimes they guess wrong.

And they don't set prices based on what they want to make: they set prices based on what they have to make to remain a going concern.

They've got several more years of being able to decide what the bestsellers are--the literature community moves a lot slower than the music communities, and they've got a lot of inertia built up. But they're going to watch the industry schism into a thousand POD and ebook publishers who *are* willing to find out what people want to read and provide it to them.

Most of whom will fail, and readers will be left with a real challenge in finding anything worth reading. The industry is already schisming into a thousand ebook and POD publishers. How many of those outfits do you think are making money? More important, how many of the authors being published that way are making any money (where "any money" is more than "a couple of beers now and then".)
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Dennis

[DMcCunney]

Originally Posted by doreenjoy

I haven't noticed the music companies going out of business despite all the mistakes they made with DRM.

No, but they're struggling. Their problems had far less to do with DRM than with saturation of the market and a failure to develop new acts.

Same will be true of publishing. Publishing companies aren't going anywhere.

Correct. The big guys are all units of multi-billion dollar corporations. Things like that don't go boom that easily.
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Dennis

[DMcCunney]

Originally Posted by Sil_liS

But the problem starts with the fact that they sell the books half-price, or rather that they double the "value" to be able to give a discount to the big retailers. They don't mention the profit they make from selling to small retailers. It should be considerably more / book.

Dream on. Small book retailers are increasingly a thing of the past in the US. They can't match the buying power and pricing of the big chains, and can't match the big chains on price. They ones still around are specialty stores targeting niche markets.

And there are more layers in the chain. A big outfit like Barnes and Noble or Amazon will buy in bulk directly from the publisher, at a substantial volume discount. A smaller bookstore will have to go through a distributor like Ingrams or Baker and Taylor, who take their cut first. So the price at which the smaller bookstore gets the book determines the amount of discount the bookstore can give and make money on the title.

But they make a bigger profit than they would for new authors. And I don't see any publisher commenting on that, as they aren't commenting on the fact that with ereaders, people aren't going to need them for PD books.

You won't, and why should they? The market for print editions of PD books, in hardcover or paperback, is a niche market. Some houses address it, and some don't. But the money made from it is unlikely to be any significant fraction of their total revenue. It's small potatoes in the larger scheme of things.

But it has an effect on buyer psychology, making bigger = more expensive. And now we have the really tiny ebooks, and publishers are just shocked that most buyers aren't going for the ebook = hardcover value idea.

The value was never in the size. Hardcovers are durable reading copies, and the largest single customer for them will be libraries. But for the bestseller, the value is early access. The buyers want to read the book now, and are willing to pay for the privilege.

You're joking, right?

Unit costs of manufacture: (Accurate as of 2008)
Mass Market: $.50 - $1.
Trade Paper: $1-2
Hardcover: $2-$4.

Did you miss the fact that I quoted you? You say that it costs $1 more to manufacture a HC, and since the other costs are the same, it would mean that HC would cost $1 more to make than the PB. To me $1 difference means that it doesn't cost that much more to make.

No, I was wrong in the last post. Subsequently I checked back. Better numbers are the ones I mention above, from someone in book production, in the context of a discussion of pricing.

And even if it did cost $1 to make a book a hardcover instead of a PB, the price would not increase by just that dollar. It couldn't.

Well, if the publishers want people to stop associating the physical appearance of the book with the price, they should really stop doing that.

They won't. People who want a paper copy want a paper copy, and are paying for one. There is labor involved on the publisher's part to produce the book: editing my not be required, but proofreading, typesetting and markup are, to produce a book people will find readable. They make more money per copy on PD books, but the number of copies will be dwarfed by the other company sales.

The ultimate value is "how much do you want to read that book?" If you want to read it badly enough, you are willing to pay a higher price. That's what keeps hardcover sales worthwhile, as the majority of folks are paying for early access. Expect the same "early access" pricing applied to ebooks, for the same reason.
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Dennis

[DMcCunney]

Originally Posted by Purple Lady

How is the publisher not gouging me when they won't let the bookseller give me a coupon for 30% off? The publisher has already got their money, it's the bookseller that will make less, not the publisher. That's what's got me upset - not the list price, but the fact that the publisher won't let the bookseller give me a discount below their stated minimum price. I can't find it discounted because of the publisher, not because of the bookseller.

Dead easy. You don't have to buy the book.

When I was a child, I learned that I couldn't have everything I wanted. As an adult, I learned to prioritize and make choices. Since I can't have everything I want, what do I want most and what am I willing to pass up?

So it is with books. I can't have all the books I want. Not only do I not have enough money to buy them; I don't have the time to read them if I could buy them. So when I go book shopping, I keep time as well as money in mind, and buy what I most want to read now. I may pass on a book because the price is more than I want to pay, but I don't feel I'm being gouged.

They are free to publish at whatever price they choose. I am free to decline to buy at that price. If enough buyers are willing to buy at their price, they make their target numbers, and have no particular reason to cut the price for me. So it goes. I don't take it personally, and don't feel like I'm getting shafted, because I'm not.

Discounts are used by retailers to attract traffic. They hope to make other sales to people who come in the get the discounted item, or to make up what they lose in margin by volume and generate more total revenue and profit, or both. Not all books get discounted. Most of the stuff I buy falls into the "not discounted because we hope you'll buy it at regular price when you come in to buy the discounted title" category. I don't particularly expect discounts, don't feel entitled to them, and don't get upset if they aren't there. They are a happy circumstance, and not a matter of inherent rights.
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Dennis