Interesting article on book pricing and why it might rise

[DMcCunney]

Originally Posted by Purple Lady

Why aren't I entitled to a discount that a retailer offers? It is an option and if they choose to offer it to me I should be allowed to use it.

What if the discount isn't offered to you?

Part of the problem is that many folks have become accustomed to discounts as "normal", and there's a hue and cry if the discount goes away. It may go away because the retailer decides it doesn't need to offer it. It may go away because the producer of the products the retailer sells institutes changes that prevent its being applied. Either way, it's no longer there.

As a general rule, taking away something people are accustomed to having produces strong reactions, and this is an example.

The publishers are not allowing the discount according to the retailers - just like the retailer is not allowed to set their own price because the publisher forbids it.

<shrug>

The discount went away. The question is what you do about it.

You can choose to not buy books that don't get the discount you expect, and pass on books you might otherwise like to read, or you can grit your teeth and pay a higher price for a title you really want.

I'm philosophical about it. In part, it's because I'm not affected: I don't buy ebooks from Amazon, so price raises or declines make no difference. (I don't buy from them because I don't like vendor lock-in and don't feel like going through the bother of stripping DRM, and because I have more ebooks from other sources than I have time to read now.)

In part, it's because I recognize the motives of the publishers for going to the Agency Model. This isn't about greed, it's about survival. The intent was to protect the hardcover best seller, which is a critical part of the industry's revenue.

But fundamentally, I don't feel I'm being gouged. Prices go up. It happens for any product or service. Producers charge what they think they can get. The producer's ultimate goal is to stay in business. They want to be able to open their doors tomorrow to do more business with me and other customers. I expect them to do what they feel is in the best interests of their organization to insure their continued existence. That does not include giving me lowball prices.
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Dennis

[DMcCunney]

Originally Posted by Barcey

IBM has never left the Wintel server business and has regained market share by changing their strategy. They lost significant business because they tried to protect their old business segmentation rather then trying to make the best product they could in every segment. At the time of the speech Compaq was number one, Dell was a growing second and IBM was a has been. I'm not sure why you think they would have been better off giving up the billions of dollars of revenue they've made in this segment.

It depends upon who you are, what business you are in, and what your business model is.

Like I said, IBM has never been the low cost producer, and Intel compatible machines are commodities. Note that IBM also sold their PC business to Lenovo.

For a company like IBM, the question may come down to whether they want to compete in a low margin commodity market at all? The answer may be "no - stick to higher margin lines where it's easier to add value and charge higher prices with better margins." IBM was broadly enough based that they could survive without the Wintel server business.

If you are Dell, set up to be a low cost producer and sell in huge volume, it's one thing. If you are IBM, who historically has not been that sort of company, it's another.

And billions in revenue is all very well, but you have to actually make money out of it. If you don't, it doesn't matter how many billions of revenue you have.

IBM's strategy these days focuses on adding value in other areas. They don't just want to sell you a box - they want to sell you software, integration, and consulting services.

(And yeah, their business segmentation model led to unintentional humor. The AIX based supermicros were competing against the AS-400s, and IBM reps would do these interesting little shuffles when this was pointed out.)

The cannabilization concept is only important on the original decision to release the new product. Normally it doesn't matter because if you don't release it somebody else will. You are never guaranteed to keep the old business, you have to compete under the new terms.

Certainly. And note there have been classic cases of companies that did try to eat their own children and failed. Where are Digital Equipment (once the second largest computer manufacturer in the world) and their arch-rival, Data General? After selling off pieces in an attempt to survive, what remained of DEC was bought by Compaq, and is now part of HP. DG's Clariion disk storage products are still made, sold, and serviced by EMC, but the rest of DG is gone.

Both had existing bread-and-butter mini-computer lines. Both were responding the the growing use of supermicros running Unix that competed with their minis. Both developed their own supermicros running Unix (DEC's Alpha and DG's Aviion lines). Neither could ramp up the sales of the new products fast enough to stem the bleeding as customers abandoned the minis.
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Dennis

[Elfwreck]

Originally Posted by DMcCunney

In part, it's because I recognize the motives of the publishers for going to the Agency Model. This isn't about greed, it's about survival. The intent was to protect the hardcover best seller, which is a critical part of the industry's revenue.

It's not about survival. It's about trying to prop up a business model that's not thriving in the face of new technology; trying to force customers to continue to buy things with habits based on distribution limitations that no longer exist.

Or rather, it's about survival, but not of "the publishing industry" but instead of "the way we've found to make money." It ignores several crucial aspects of non-commercial support for the publishing industry (book sharing among friends, used book market), and assumes that the publishing industry will be economically viable if the digital market focuses only on the hardcover sales market as the potential ebook market.

[ficbot]

The issue with discounts is not that ebook readers should be 'entitled' to it, per se. It's that paper books continue to get them. So the reader feels cheated when s/he sees an ebook listed at $20 and that's final, when meanwhile the paper book (which costs, even by the publisher's own admissions, 20% more to make) is on sale for $15 at the bricks and mortar store down the street.

[DMcCunney]

Originally Posted by Sil_liS

But it *is* a benefit. Plus Kindles have the options that most of the buyers need. But buyers also have other toys, so the next choice was no DRM or Kindle app. Did you notice that Amazon also sells iPads?

Sure. They are the world's largest catalog retailer. There's not a lot Amazon doesn't sell.

(And incidentally, there is evidence that the Amazon unit that developed the Kindle is working on device for other media, like video. No surprise: if it's in electronic form, it's something Amazon can sell you, and try to become the dominant retailer selling it.)

So Amazon can decide to stop being a retailer for a publisher and effectively destroy them? How is it then that the Agency pricing was enforced if Amazon has that much power?

How much power they have depends on who you are. If you are a small niche publisher, their power is enormous. If you are a consortium of 5 of the 6 biggest trade publishing entities, it's another matter.

The Agency Model folks actually cut off sales of ebooks for a bit, and Amazon had to capitulate. They were in a position where they could do that for at least some period. But they would hardly want to do without Amazon permanently. It was ultimately a negotiating ploy.

Amazon gets to "have their cake and eat it, too". They have to charge more for some ebooks (and make more doing so), but can point at the publishers and say "It's all their fault!"

How is that a way "keep costs low"? If the royalty is higher, then the cost is higher. Plus how many housewives have ereaders now and know about Carina Press? It doesn’t sound like people thought this thru.

Did you miss the bit about not paying an advance? Royalties are only due on books sold. The advance is the largest variable in the costs of producing a book, and the amount of the advance will be predicated on the publisher's best guess at the sales potential of the book.

If you don't pay an advance, you considerably reduce your risk in publishing a title.

And as for "how many housewives have ereaders now and know about Carina Press?" First, don't assume the market is all housewives. Second, don't assume the market is non-technical. Many Harlequin readers will have ebook viewing devices (which don't have to be dedicated readers with eInk screens), and there are an assortment of ebook publishers specifically targeting the romance market.

It makes perfect sense for Harlequin to try this. The question is whether they'll succeed, and that will be determined by the quality of what Carina releases. That will be the tough part, as attracting quality submissions when you aren't paying advances is not easy.

But it takes up shelf space. Of course people are still buying these books, it's what they see when they go in a shop.

Yes, so? Retailers devote shelf space to stock that sells. They have sales/square foot to be concerned with and products that don't sell don't last long on the shelves.

You seem to be suggesting that the shelf space devoted to vampire fiction could be allocated to something else, if only it would go away. Allocated to what? And would it sell as well?

No, people don't buy it just because they see it on the shelves. It has to be on the shelves to be bought at all, but the mere fact that it's there won't magically entice someone not into vampire fiction to buy it.

You are still not reading what people are quoting. Tompe was talking about Amazon extorting the publishers. I was saying that it isn't extortion.

I would.

Any producer wants control over pricing. Amazon was attempting to assert control by imposing a default standard price lower than the producers wanted. It was part of a larger strategy for Amazon: they want to be the defacto supplier for purchased ebooks. If you want to buy an ebook, you have to buy it from them. They use selection, pricing, convenience, and DRM in attempts to reach that goal.

Consider what happens if Amazon succeeds and has an effective monopoly on ebook sales? You might benefit from it now, if your device can display DRMed Amazon ebook titles. What happens down the road? What occurs if Amazon says "We have the majority of ebook buyers locked in to us as the supplier. We can raise prices as a consequence." I wouldn't bet Amazon wouldn't do that if they were in a position to do it and make it stick, and thought that business conditions required it.
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Dennis

[DMcCunney]

Originally Posted by ficbot

The issue with discounts is not that ebook readers should be 'entitled' to it, per se. It's that paper books continue to get them. So the reader feels cheated when s/he sees an ebook listed at $20 and that's final, when meanwhile the paper book (which costs, even by the publisher's own admissions, 20% more to make) is on sale for $15 at the bricks and mortar store down the street.

Agreed. There's an awful lot of wishful thinking on the part of some publishers about how much they'll be able to charge for an ebook.

Ultimately, I think they'll be forced to rethink their expectations, and we'll see ebook pricing comparable to paper editions.

The question will be "comparable to which paper edition?" If the ebook is offered at the same time as the hardcover release, expect it to be priced comparably to the HC release. If you want it cheaper, expect to wait, like you do now if you buy PBs instead of HCs.
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Dennis

[Purple Lady]

Originally Posted by DMcCunney

What if the discount isn't offered to you?

well then duh, I don't get a discount. I never said I should get a discount on everything. I just said that if the retailer chooses to offer it to me I should be allowed to use it.

Part of the problem is that many folks have become accustomed to discounts as "normal", and there's a hue and cry if the discount goes away. It may go away because the retailer decides it doesn't need to offer it. It may go away because the producer of the products the retailer sells institutes changes that prevent its being applied. Either way, it's no longer there.
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Dennis

I don't know about anyone else, but I'm not accustomed to discounts - I just like it when I find them. It just makes me PO'd when the publisher won't let me use it. But the discount doesn't go away - I can still use it on other books from the retailer that is offering it. The discount offered by the retailer is limited by the publisher.

[Sil_liS]

Originally Posted by DMcCunney

The Agency Model folks actually cut off sales of ebooks for a bit, and Amazon had to capitulate. They were in a position where they could do that for at least some period. But they would hardly want to do without Amazon permanently. It was ultimately a negotiating ploy.

But Amazon must have known it was just a strategy. It makes no sense to capitulate. If a buyer looks for a book and doesn't find it in ebook form, he is left with 4 options: buy another ebook, wait for the ebook, buy the pbook or look for the ebook at a different store. If it gets out that the reason that the book wasn't there is because the publishers want to increase the prices, Amazon still wins.

Originally Posted by DMcCunney

Did you miss the bit about not paying an advance? Royalties are only due on books sold. The advance is the largest variable in the costs of producing a book, and the amount of the advance will be predicated on the publisher's best guess at the sales potential of the book.

No, I didn't miss it, but the advance is on the royalties. At the end of the day, in the case of pbooks, the author has an advance *or* royalties (depending on what is higher, and from what I understand, for most authors it is the advance that is higher). And as you said, the publisher estimates how many books will be sold, and gives the advance accordingly. This means that usually the advance will be in the range of the royalties, unless the book becomes a bestseller.
But the fact remains that with these ebooks the royalties are higher, and therefore the costs are higher.

Originally Posted by DMcCunney

And as for "how many housewives have ereaders now and know about Carina Press?" First, don't assume the market is all housewives. Second, don't assume the market is non-technical. Many Harlequin readers will have ebook viewing devices (which don't have to be dedicated readers with eInk screens), and there are an assortment of ebook publishers specifically targeting the romance market.

It's a numbers game, and "many" are not "most". It would go like this: from the total number of romance market, you take the percentage of those with ereaders (and I didn't say eInk) and multiply by the percentage of those who know about Carina Press and you wouldn't get a very big number. Considering the fact that many that hear about this will also hear that the quality isn't very good, or maybe even buy a book that isn't very good, and the number becomes smaller.

And the system that I was suggesting was for all the books to get the same treatment. Actually only the first chapter, so the author wouldn't gave to work on the whole book before he finds out if it is worth it or not. It would clear out the problem of market research and marketing, and maybe even the medium. If all the people who want the book prefer paper we get a pbook, if they prefer digital, we get an ebook.

Originally Posted by DMcCunney

No, people don't buy it just because they see it on the shelves. It has to be on the shelves to be bought at all, but the mere fact that it's there won't magically entice someone not into vampire fiction to buy it.

If I walk in a bookstore and all I see are vampire books and other books that I already bought, then I'll probably walk out with a vampire book. Sure I could boycott the system, but it would hurt me more than it hurts them, plus this will be over eventually, and then we will get an overdose of the new whatever.

Originally Posted by DMcCunney

I would.

Read that post again. By the dictionary definition, you can't say that Amazon was extorting the publishers because Amazon is the one giving money to the publishers.

BTW, I don't buy anything from Amazon, because I just don't like their website, but I disagree with the publishers increasing prices because they have a pissing match with Amazon.

[DMcCunney]

Originally Posted by Purple Lady

well then duh, I don't get a discount. I never said I should get a discount on everything. I just said that if the retailer chooses to offer it to me I should be allowed to use it.

Agreed. But whether the retailer chooses to offer it may be affected by external factors, like the producer.

I don't know about anyone else, but I'm not accustomed to discounts - I just like it when I find them. It just makes me PO'd when the publisher won't let me use it. But the discount doesn't go away - I can still use it on other books from the retailer that is offering it. The discount offered by the retailer is limited by the publisher.

I understand being PO'd. There's just a limit to how PO'd I get over stuff like that.

So what do you then do? Do you have a hard and fast rule that you won't buy books that aren't discounted, or are there titles you want badly enough that you'll pay the higher price?
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Dennis

[EricDP]

Originally Posted by DMcCunney

Do you have a hard and fast rule that you won't buy books that aren't discounted, or are there titles you want badly enough that you'll pay the higher price?

This gave me a thought: discontinued is somewhat of an obsolete idea. It costs a lot of money to run another printing of a pbook when you think you'll only sell a few more. But for eBooks, it costs almost nothing to keep them "in stock" once you've put the content into your database. I've lost count of the number of books I didn't buy because they weren't in stock that day or they were discontinued. In many cases I didn't buy anything and just re-read an older book instead. If books were to remain for sale (for cheaper) rather than be discontinued, how much extra money would that make for everybody?

[BearMountainBooks]

One of the things that always gets me when these "cost" discussions start is that publishers try to point out that the cost of ebooks isn't that much smaller--well, no, not if they keep doing things the way they always have done them. Not if they don't go for some innovation--or how about cutting some expenses? Like for a few books, go ebook only--go with a cheaper cover, cut some of the approval steps, but keep the copyediting and proofing and formatting?

Why not say, "With today's mechanisms, it is just as expensive. But we need new ways of doing things to make books cheaper, because there is huge demand for a less expensive product???"

Just a thought...

[DMcCunney]

Originally Posted by Sil_liS

But Amazon must have known it was just a strategy. It makes no sense to capitulate. If a buyer looks for a book and doesn't find it in ebook form, he is left with 4 options: buy another ebook, wait for the ebook, buy the pbook or look for the ebook at a different store. If it gets out that the reason that the book wasn't there is because the publishers want to increase the prices, Amazon still wins.

Amazon is a retailer. They sell other people's products. The people whose products they sell do not have to sell to Amazon (though you better be a really big player to do without Amazon sales.) The Agency Model folks cut off ebook sales to Amazon, and they were five of the six largest publishers. If Amazon wants to be the dominant force in ebook retailing (and they do), it's a little hard to do that when most of the ebooks you might want to offer are not available to you.

So it's a game of chicken. Amazon may know it's a strategy. They won't know how long the Agency Model folks are willing to withhold product from them. But since the Agency Model folks are still primarily selling print editions, Amazon is still selling those, and ebooks aren't yet critical to their success, they might just be willing to hold back product a long time.

If I'm Amazon, I'll probably do what they did: accept the demands to charge higher prices, sell the books to folks who want to buy them, and point at the publishers as the villains.

The truth, as usual, is muddier. Amazon wants to extend its dominance in retail through pricing, and has been pushing hard for even greater discounts from publishers, to give them more margin to play with in discounting. The squabble over ebook pricing is a facet of a larger tug-of-war.

No, I didn't miss it, but the advance is on the royalties. At the end of the day, in the case of pbooks, the author has an advance *or* royalties (depending on what is higher, and from what I understand, for most authors it is the advance that is higher). And as you said, the publisher estimates how many books will be sold, and gives the advance accordingly. This means that usually the advance will be in the range of the royalties, unless the book becomes a bestseller.

But the fact remains that with these ebooks the royalties are higher, and therefore the costs are higher.

Only for books that actually sell.

For print books, the publisher offers an advance against royalties. They give the author a chunk of the anticipated royalties up front to acquire the right to publish the title, expecting to recover it once the book is issued and selling. The hope is the book will "earn out" - sell enough copies to cover costs, make money, and generate additional royalties paid to the author in quarterly statements. Most books don't earn out. The advance is all the author sees. (And agents try to negotiate an advance high enough that the book won't earn out.)

If the publisher errs badly enough in estimating demand for the book, a hefty advance can be a large component in a nasty loss on the title.

Publishing a book is always a risk. The publisher is betting that the book will sell, and the size of the bet they place is determined by the sales potential they see. Sometimes they lose, and the book doesn't sell. They are out most of the costs of producing it, with the advance a large component of the loss.

If a Carina title doesn't sell, they are out the editorial and production costs (which they try to keep as low as possible.) They are not out the advance, because they don't pay advances. If the book does sell, they must pay royalties, but those royalties will be on copies sold. They'll be crying all the way to the bank.

It's a numbers game, and "many" are not "most". It would go like this: from the total number of romance market, you take the percentage of those with ereaders (and I didn't say eInk) and multiply by the percentage of those who know about Carina Press and you wouldn't get a very big number.

You wouldn't? How do you know?

Harlequin is the behemoth in romance publishing. You may not care for what they publish, but they are very good at what they do. Aside from the "cookie cutter" Harlequin Romance titles people love to sneer at, they've been diversifying into genre crossovers, like the Luna fantasy romance line (where the fantasy is the dominant element, and the romance is a sub-plot), or the Silhouette suspense/romance line. (Some of the Luna titles are quite good.)

They are also very aware of ebooks, and have an existing ebook program. (They just announced that going forward, all titles would be issued in ePub format, and they were dropping support for MobiPocket, MSReader, and PDF editions.)

Part of the requirements when they decided to do the Carina line was that it would be profitable "out of the box".

So you can assume they did their homework, and see a big enough market to make Carina a successful venture. I'll take their guess over yours or mine about how big the potential market is.

Considering the fact that many that hear about this will also hear that the quality isn't very good, or maybe even buy a book that isn't very good, and the number becomes smaller.

Maybe. The quality in any slush pile is generally poor, but readable books come from somewhere. You can assume books published electronically by Carina may not be up to the rest of Harlequin's offerings, but that won't make them "bad". Carina won't survive publishing bad books. If they publish books that sell well enough to make it worth doing, and a few of those titles go on to bigger and better things, like print editions with Harlequin, it's gravy.

They've been in operation for months now and the plug hasn't been pulled, so I have to assume they are meeting projections.

I think the despairing noises about quality from the friend who was editing for them are reflections of the fact that she'd been executive editor of an imprint before going freelance, and hadn't had to read slush in years. She paid other people to do that and forward the stuff worth a look. Reading slush is soul destroying.

And the system that I was suggesting was for all the books to get the same treatment. Actually only the first chapter, so the author wouldn't gave to work on the whole book before he finds out if it is worth it or not. It would clear out the problem of market research and marketing, and maybe even the medium. If all the people who want the book prefer paper we get a pbook, if they prefer digital, we get an ebook.

I see the concept, and it's an interesting idea. The question is how many folks will spends the time reading first chapters and voting? I'm not one of them. I have other uses for the time, and the first chapter may not be a good indicator for the rest of the book. (More than a few titles out there that take a bit to kick in but are superb once they have, which would fare poorly under such a scheme.)

If I walk in a bookstore and all I see are vampire books and other books that I already bought, then I'll probably walk out with a vampire book.

You would have to be desperate for stuff to read. And if all you see are vampire books and books you already bought, you buy an awful lot of books, or have a very small local bookstore, or both.

Granted, my experience skews the other way: the bookstores close to me are large, with a broad selection, thank you, so there will be far more than just vampire novels and stuff I already have. And if by some chance vampire books and stuff I already have is all that's available, I'll walk out with nothing. I'm not that desperate. I have too many existing titles worthy of a re-read.

Sure I could boycott the system, but it would hurt me more than it hurts them, plus this will be over eventually, and then we will get an overdose of the new whatever.

Exactly. I am a little curious about what that will be. At the moment, I call zombies the new vampires, given the popularity of things zombie. I'm comforted by the fact that a generation of teenage girls isn't likely to suffer huge amounts of angst over a potential zombie boyfriend, and we'll be spared a variant of Twilight with zombies as romantic leads. What we might get instead is another matter. (Someone elsewhere described Twilight as "A teenage girl's hard choice: necrophilia or bestiality" I'm a little scared about how the Next Big Thing might be summarized.)

Read that post again. By the dictionary definition, you can't say that Amazon was extorting the publishers because Amazon is the one giving money to the publishers.

Extortion defines as obtaining money, property, or services through coercion.

If you are a producer, I sell your goods, and I try to use my position as a dominant seller to extract terms more favorable to me from you, that might well be called "extortion". (Whether is is is a matter of viewpoint. If I'm a retailer, I don't want to kill the goose that lays the golden eggs by getting terms from you that mean you don't make money on sales to me. It's possible that's the sort of terms Amazon was trying to get.)

BTW, I don't buy anything from Amazon, because I just don't like their website, but I disagree with the publishers increasing prices because they have a pissing match with Amazon.

The publishers aren't increasing prices because they have a pissing match with Amazon. They have a pissing match with Amazon because they wanted higher prices.
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Dennis

[DMcCunney]

Originally Posted by BearMountainBooks

One of the things that always gets me when these "cost" discussions start is that publishers try to point out that the cost of ebooks isn't that much smaller--well, no, not if they keep doing things the way they always have done them. Not if they don't go for some innovation--or how about cutting some expenses? Like for a few books, go ebook only--go with a cheaper cover, cut some of the approval steps, but keep the copyediting and proofing and formatting?

See Charlie Stross's blog post referenced earlier in the thread about some of the steps in the process before a book reaches the stage of actual publication. Tell me which you suggest not be done to save money.
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Dennis

[EricDP]

Originally Posted by DMcCunney

Only for books that actually sell.

And for eBooks that don't sell, at least you don't have a warehouse full of them to deal with. How much does the industry lose in unsold print copies, and the cost of building/leasing warehouses?

[EricDP]

Originally Posted by DMcCunney

See Charlie Stross's blog post referenced earlier in the thread about some of the steps in the process before a book reaches the stage of actual publication...

Which we've already established says it only costs about $8,000 - $20,000 in total. I would assume $8,000 is what would be invested in books expected to have low sales. Unless they have fewer than 8,000 sales, it would be less than $1/book. If only 4,000 sales, it's still only $2/book.

For the books expected to sell well, they could invest up to $20,000. I assume most of those books would certainly sell more than 20,000 copies, which means less than $1/book.

And yet these books are selling for >$10/book. Clearly those preparation costs are not the bulk of the costs to produce the books.