Interesting article on book pricing and why it might rise

[Sil_liS]

Originally Posted by b0ned0me

With luck, things will improve from 'rubbish' to merely 'mediocre' in the next few years, and there is still a small hope of achieving 'efficient and rational'.

The problem that I have with the lack of logic is the fact that they tie down the price of ebooks to that of pbooks. Yes, it is true that as more and more people decide to buy only ebooks, the cost of a pbook (1 unit) will increase, but that should go together with a decrease in the cost of an ebook (1 unit). And they lock the price to a % smaller than the hardcover, and with the Agency you also get the very nice no discount possible rule. Of course the prices of ebooks will go up.

The price of paper, gas (leading to transport) and rent will increase, but it becomes cheaper and more efficient to store and transport digital information. Do you see the publishers deciding to decrease the price of ebooks because the price of external HDD decreases? They are more likely to increase the price since it would be cheaper for the buyer to backup the ebooks.

[murraypaul]

Originally Posted by DMcCunney

Costs of print/bind/warehouse/distribute are perhaps 20% of the total.

Total of what?
Total of 'price' of book from the point of view of the publisher, ignoring retail markup and all the distribution costs that retailers incur?
Total per book printed, regardless of whether that book is actually sold?
Total excluding returns, which are hidden somewhere else?

[BearMountainBooks]

Originally Posted by DMcCunney

The question is what those meetings and approval steps actually cost. The people involved will be at them in any case, and are on salary.

Yes, but if they ran a subsidiary that had less people, less approval required--like a small publisher, they would save money.

Interest from agents/publishers on places like Kindleboards is a mixed blessing. It depends upon just which agents and publishers.

Don't worry; with the number of people on Kindleboards, there's plenty of expertise to steer people. There are many traditional publishers and ex-editors and whatnot. Most of us actually have a range of experience and we're all aware of the predators by now. If any newbies show up and aren't, they learn fast. The deals I spoke of were the GOOD ones, not the occasional shady one that pops up.


As for the other points...it's all going to be up to the individual houses. There's a wave of change going on, but it too will subside into...something.

And yes, Tor is a good house. Not quite so nimble now they're run by MacMillan if I recall correctly, but both TOR and Baen--they have a special magic.

[DMcCunney]

Originally Posted by murraypaul

Isn't that exactly what the Agency agreement is, a requirement that the price is fixed by the publisher and not lowered by the retailer?

Yes. Like I said, the discount may go away because the retailer chooses to stop offering it, or because the producer of the products the retailer sales makes it impossible to offer it.

The issue is the number of folks who seem to feel that getting a discount is some sort of inherent right they are entitled to. Not so, alas.

Until and unless it is found to be unlawful. In the UK I can't see how they can get away with exactly what they were forced to stop doing for pBooks.

I don't know what the UK law on the matter is, though I expect it's broadly similar to the US.

In the US, it's legal so far (and you may assume the publishers had their legal staffs burning the midnight oil to confirm it was legal before proceeding.) What they've done is to alter the relationship between the publisher and the retailer. In the new model, the retailer isn't a traditional retailer, reselling goods it buys from a producer. It's an agent selling for a producer, at a price the producer sets, and getting a specified cut for its services.

This has interesting implications I haven't seen discussed here, like taxes: in an agent relationship, the producer is responsible for applicable taxes, not the agent. So Amazon, which has a plethora of local tax codes to deal with in web sales that determine whether an item is taxable where the buyer lives and how much tax is charged, charges and remits the applicable sales taxes on items it resells as a retailer, but apparently isn't responsible for those taxes on items sold under Agency Pricing. I have no idea how this is being handled by Amazon and the publishers.
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Dennis

[DMcCunney]

Originally Posted by murraypaul

Total of what?
Total of 'price' of book from the point of view of the publisher, ignoring retail markup and all the distribution costs that retailers incur?
Total per book printed, regardless of whether that book is actually sold?
Total excluding returns, which are hidden somewhere else?

The total that it costs the publisher to actually prepare the book for publication, in any format. Acquisition with attendant advance, contract, line edit, copy edit, proofread, cover design and art, markup and typeset and the like will happen regardless of output format. So will allocation of a share of corporate overhead. If the book is being published in hardcover, paperback, and ebook format, the costs will be allocated across all three. If ebook is the only format, it will bear the full load.

Reserve against returns should apply only to print editions, since it's meaningless for ebooks. (I say should because I can imagine publishers silly enough to try to apply it to ebooks, too...)

The suggested retail price is a rather different matter, as it does include things like retailer markup and distribution costs in the case of physical books.

The costs the publisher incurs to make the book will govern the wholesale price charged to the retailer, and will be set at a level that covers the publisher's costs and makes a sufficient amount of profit.
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Dennis

[DMcCunney]

Originally Posted by BearMountainBooks

Yes, but if they ran a subsidiary that had less people, less approval required--like a small publisher, they would save money.

I don't see levels of approval as adding all that much to costs. But yes, less people would be an important factor.

Don't worry; with the number of people on Kindleboards, there's plenty of expertise to steer people. There are many traditional publishers and ex-editors and whatnot. Most of us actually have a range of experience and we're all aware of the predators by now. If any newbies show up and aren't, they learn fast. The deals I spoke of were the GOOD ones, not the occasional shady one that pops up.

I'm quite pleased to hear that. There are a lot of sleazy types infesting publishing, preying on the gullible and unwary. Some of them are like cockroaches. You think you've stepped on them, and they pop up doing business somewhere else under a new name but practicing the same scams.

As for the other points...it's all going to be up to the individual houses. There's a wave of change going on, but it too will subside into...something.

<chuckle> "Something". Yeah, that's a good word for it. "And the something was without form, and void, and darkness was upon the face of the deep..."

And yes, Tor is a good house. Not quite so nimble now they're run by MacMillan if I recall correctly, but both TOR and Baen--they have a special magic.

Tor is pretty nimble. Tom Doherty saw problems approaching, and decided that Tor was too small to go it alone. He sold the company to St. Martin's Press, a unit of Holtzbrink in Germany. He could have gotten a higher price elsewhere, but thought the corporate parent he sold to would be a better fit.

Macmillan doesn't exactly run Tor. They are the US umbrella for Holtzbrink's North American operations. I don't know the exact details of the relationship, but Tom seems to largely run his own shop without too much interference. As long as he produces satisfactory results, I don't think his superiors are inclined to piss in the soup. The impression I get is that they are aware of just how savvy Tom is, and watching what he does to see what might be applied elsewhere in their organization. (If I were them, it's what I'd do. Tom is one of the sharpest guys in publishing, and if he can't sell books, it's not clear anyone can.)

Tom is also a minority investor in Baen. Jim Baen used to work for Tom, when Tom was publisher and Jim was Editor at Ace Books. They stayed friends and in touch, and when Jim set up his own shop as Baen Books, Tom was a backer. (I said Tom was sharp... )

I would not be at all surprised by more outfits like Baen, possibly spun off by larger corporate parents, precisely to be smaller, nimbler, lower cost operations, better suited to compete in the new environment. The limiting factor will be the supply of Jim Beans to provide the vision and run them.
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Dennis

[BearMountainBooks]

Well the parent company DID stop TOR from putting out ebooks on BAEN's site. There was a nice little agreement early on to sell ebooks through Baen (this was before Kindle) and somehow...someone up in corp. didn't like the idea of ebooks and the program was canceled. Now, of course, the ebook direction is changing, but Baen has been out there with ebooks from early on (and Tor was briefly a part of it.)

The big guys/boss must stir the pot now and again if for no other reason that to give chaos a chance.

Have a good evening!

[DMcCunney]

Originally Posted by BearMountainBooks

Well the parent company DID stop TOR from putting out ebooks on BAEN's site. There was a nice little agreement early on to sell ebooks through Baen (this was before Kindle) and somehow...someone up in corp. didn't like the idea of ebooks and the program was canceled. Now, of course, the ebook direction is changing, but Baen has been out there with ebooks from early on (and Tor was briefly a part of it.)

Tom cut the deal with Baen to sell Tor content through Baen's Webscriptions. It got to the point of being announced by both Tor and Baen when Holtzbrink pulled the plug. The problem was that Baen does not apply DRM to Webscriptions offerings, and Holtzbrink had the unreasoning fear of piracy that causes DRM to be applied in the first place.

Subsequently, Holtzbrink got a new CEO who was opposed to DRM, and the deal was supposedly on again. A note from Tor Senior Editor Patrick Nielsen-Hayden indicated it was in the hands of lawyers for both sides for the proper dotting of Is and crossing of Ts, but that was a while back. (Patrick also stated that Macmillan was in the process of digitizing Tor's back catalog, and ebook editions would be forthcoming at some point.)

My guess is that Holtzbrink is trying to craft a coherent digital strategy across all their lines. I had a conversation with Pablo Defendini, the former Producer at Tor.com, where he freely admitted that what he was doing had visibility beyond Tor, and was being watched by other parts of Holtzbrink. (In fact, Pablo didn't work for Tor when running Tor.com, though he started out there as a Junior Book Designer. At Tor.com, his boss was a Macmillan VP in charge of digital initiatives.) I suspect Holtzbrink has decided that they are a global publisher, and if ebooks are to be sold, they'll do it, rather than have a unit contract with a tiny independent to do it for them.

The big guys/boss must stir the pot now and again if for no other reason that to give chaos a chance.

Yes, unfortunately.
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Dennis

[murraypaul]

Originally Posted by DMcCunney

Yes. Like I said, the discount may go away because the retailer chooses to stop offering it, or because the producer of the products the retailer sales makes it impossible to offer it.

So you were completely wrong in your original quote, where you said that the retailer could still offer a discount?

[murraypaul]

Originally Posted by DMcCunney

The total that it costs the publisher to actually prepare the book for publication, in any format.

Which is not the cost of the book, from the point of view of the consumer.

Reserve against returns should apply only to print editions, since it's meaningless for ebooks.

But if half the books are returned, then the actual print/distribution cost per unit sold are twice what is being discussed.

The suggested retail price is a rather different matter, as it does include things like retailer markup and distribution costs in the case of physical books.

And those costs are the ones which are most significantly reduced by moving to eBooks, so it seems rather disingenuous to exclude them.

The costs the publisher incurs to make the book will govern the wholesale price charged to the retailer, and will be set at a level that covers the publisher's costs and makes a sufficient amount of profit.

But we don't have wholesale prices and retailers any more for eBooks, do we? We have agents, and the publishers are setting the retail price, not the wholesale one.

[DMcCunney]

Originally Posted by murraypaul

Which is not the cost of the book, from the point of view of the consumer.

No, it's the price of the book.

The problem here is precisely that the price the consumer is charged is determined in part by the costs of the producer, and there's an enormous amount of confusion about what the producer's costs are and wishful thinking about what the price charged to the consumer could be.

But if half the books are returned, then the actual print/distribution cost per unit sold are twice what is being discussed.

That's what reserve against returns is all about. But that shouldn't be a factor in ebooks.

And those costs are the ones which are most significantly reduced by moving to eBooks, so it seems rather disingenuous to exclude them.

Who is excluding them? Are you suggesting that reserve against returns be applied to ebooks as well as print editions?

The costs I mentioned above are all of those involved in acquiring a manuscript and preparing it for production, incurred before publication takes place. They apply to paper and ebook editions.

I exclude reserve against returns at that point. If I'm only publishing an electronic edition, they are meaningless. If I'm publishing paper and electronic, they should only be applicable to paper.

But we don't have wholesale prices and retailers any more for eBooks, do we? We have agents, and the publishers are setting the retail price, not the wholesale one.

We don't have wholesale prices and distributors?

If I publish an ebook, and sell directly to you, there's no wholesale price. Wholesale is what gets charged to a reseller. If I sell through someone else who takes a cut for providing the service, I'd call my price to them the wholesale price. Their price to you is the retail price. I'd call that true regardless of whether the reseller is a retailer in the usual sense, or an agent under the Agency Model. What would you call the price Amazon pays the publishers under the Agency Model, since it's not the price they charge you?

And while we don't have distributors in the sense of selling physical goods, who distribute products to retailers too small to deal directly with manufacturers, we do have resellers who sell directly to customers, and differences in the price they pay to the publisher and the one they charge you.
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Dennis

[Sil_liS]

Originally Posted by DMcCunney

This has interesting implications I haven't seen discussed here, like taxes: in an agent relationship, the producer is responsible for applicable taxes, not the agent. So Amazon, which has a plethora of local tax codes to deal with in web sales that determine whether an item is taxable where the buyer lives and how much tax is charged, charges and remits the applicable sales taxes on items it resells as a retailer, but apparently isn't responsible for those taxes on items sold under Agency Pricing. I have no idea how this is being handled by Amazon and the publishers.

So is this the reason behind georestrictions? An American publisher isn't allowed to sell a book in Europe, so the retailer, now an agent for the ebook is also restricted. Nice.

Originally Posted by DMcCunney

Acquisition with attendant advance, contract, line edit, copy edit, proofread, cover design and art, markup and typeset and the like will happen regardless of output format. So will allocation of a share of corporate overhead. If the book is being published in hardcover, paperback, and ebook format, the costs will be allocated across all three. If ebook is the only format, it will bear the full load.

That is strange, because in the articles about costs, all of the things you mention are counted for the hardcover price, after which it is said that the ebook will have the same costs, so the publishers effectively count everything twice, plus they ignore the paperbacks.

So please quote an article that talked about "acquisition with attendant advance, contract, line edit, copy edit, proofread, cover design and art, markup and typeset and the like" costs being distributed on all the forms of the book. I dare you.

Originally Posted by DMcCunney

I don't see levels of approval as adding all that much to costs. But yes, less people would be an important factor.

Have you actually been in meetings to approve something? Think about it: the hours it takes to make a proposal, getting it to meet the expectations of the person directly above only to have a person one step higher have the completely opposite idea. Those hours for all the people involved, plus the overhead costs, plus all the stuff that clutters the network because everything will get mailed, and every person will have a copy of the same document on their computer, and in their email, with everything backed-up for safety; those, if I'm not mistaken, imply costs.

[BearMountainBooks]

Actually ever since agency pricing, I get taxed collected BY AMAZON for any publisher who has a base in my state (Texas). So with agency pricing, Amazon is responsible for collecting the tax. I know this because I get taxed on certain publisher's books and not others. And yes, out of spite, once I learn those publishers...if it comes down to two books...one by one publisher and the other by the other...

In the end, the Fed is going to go after Amazon and get some sort of tax. Those pols are salivating, whining and generally fit-to-be-tied that they haven't yet gotten their slimy paws on more of our money via the success of Amazon.

[murraypaul]

Originally Posted by DMcCunney

That's what reserve against returns is all about. But that shouldn't be a factor in ebooks.

Who is excluding them? Are you suggesting that reserve against returns be applied to ebooks as well as print editions?

The costs I mentioned above are all of those involved in acquiring a manuscript and preparing it for production, incurred before publication takes place. They apply to paper and ebook editions.

I exclude reserve against returns at that point. If I'm only publishing an electronic edition, they are meaningless. If I'm publishing paper and electronic, they should only be applicable to paper.

And they should be included in the proportion of costs that are attributable to producing a physical book.

You are defining cost in such a way that excludes:
- Warehousing and distribution
- Retail cost and markup
- Cost of returns
And then saying that the costs attributable to the physical nature of books are only a small proportion. Of course they are, because you have excluded most of the components that go into those costs.

We don't have wholesale prices and distributors?

If I publish an ebook, and sell directly to you, there's no wholesale price. Wholesale is what gets charged to a reseller. If I sell through someone else who takes a cut for providing the service, I'd call my price to them the wholesale price. Their price to you is the retail price. I'd call that true regardless of whether the reseller is a retailer in the usual sense, or an agent under the Agency Model. What would you call the price Amazon pays the publishers under the Agency Model, since it's not the price they charge you?

If a producer sells their goods to a retailer, who then sells them to a customer, then you have two sales, one at a wholesale price, and one at a retail price. But as we keep being told, Amazon et al are just acting as agents for the producers, they never actually own the goods themselves, do they. So only a single sale has taken place.
The producers are directly setting the retail price for Agency eBooks and paying the retailers a commission for their services. Amazon does not pay a price to the publisher, they remit the money they have collected on their behalf.

[DMcCunney]

Originally Posted by Sil_liS

So is this the reason behind georestrictions? An American publisher isn't allowed to sell a book in Europe, so the retailer, now an agent for the ebook is also restricted. Nice.

Whether the the retailer is a traditional retailer or and agent under the Agency Model is irrelevant. If the publisher doesn't have the right to sell the book in a particular location, the reseller doesn't either.

For instance, we order occasional books from Amazon UK - hardcover editions of British publications of Terry Pratchett, J. K. Rowling, and Tom Holt (who doesn't seem to have a US publisher these days.) We can place the order with Amazon UK and have them ship to us. We cannot order them from Amazon US. They don't have the rights to sell the British editions.

Hachette caused a fuss a couple of years back by pulling ebook titles they published from one of the ebook retailers (Books On Board, I think), because they didn't think the retailer had the technology in place to properly enforce georestriction on their titles. They were concerned about legal action by other publishers who held the rights to those titles in their areas.

If it sounds stupid, well, it arguably is. But the problem is not going away any time soon. If a publisher licenses worldwide ebook rights in the first place, it's one thing. If they don't, it's another. And the vast majority of back catalog has contracts negotiated back before the whole issue arose, and won't have worldwide ebooks rights as part of the package.

It's a symptom of much larger problem, which is that the Internet is making things like national boundaries increasingly irrelevant in many cases.

That is strange, because in the articles about costs, all of the things you mention are counted for the hardcover price, after which it is said that the ebook will have the same costs, so the publishers effectively count everything twice, plus they ignore the paperbacks.

Nope. I never said costs are double counted. There are costs common to all three editions, incurred in acquiring and preparing the book for publication in the first place, which will be allocated across all three editions.

The print editions do not absorb costs like that, with the ebook tagging along for free. The accounting doesn't work that way.

And what happens if the ebook is the only edition? Those costs don't magically go away just because it's an ebook. The ebook will then bear the entire burden, instead of an allocated share of it.

So please quote an article that talked about "acquisition with attendant advance, contract, line edit, copy edit, proofread, cover design and art, markup and typeset and the like" costs being distributed on all the forms of the book. I dare you.

If I find one, I will. How do you think they get applied?

Meanwhile, you seem to be saying you simply don't believe me, because my posts don't agree with what you want to be true.

Like I said earlier, it doesn't matter if you believe me or not. As mentioned, I've been an observer of publishing for decades, and most of the folks I know and hang out with are in publishing. I've learned a bit about the subject, and try to share what I know here. Everything I say is true to the best of my knowledge.

I sympathize with folks who want their ebooks cheaper. I'd like to get things cheaper too. But for reasons I've been trying to explain in this thread and elsewhere, I don't think it's possible for publishers to produce and sell ebooks as cheaply as many folks would like. Authors want to get paid actual money for the rights to issue a book. People in publishing that acquire, line edit, copy edit, proofread, and prepare books for publication as print volumes or ebooks expect to get paid for what they do. And publishers pay rent on office space, have electric, phone, and other bills, and an assortment of other costs that are part of corporate overhead, plus a need to make a certain level of profit to remain a going concern and open for business the next day.

Book prices, paper and ebook, will reflect those factors.

If I'm correct in my notions, you simply won't get ebooks from major trade publishers at the price point you might like, because they can't produce ebooks at that price point and stay in business.

I think I am correct. Time will tell.

Have you actually been in meetings to approve something?

Yes. Too many times.

Think about it: the hours it takes to make a proposal, getting it to meet the expectations of the person directly above only to have a person one step higher have the completely opposite idea. Those hours for all the people involved, plus the overhead costs, plus all the stuff that clutters the network because everything will get mailed, and every person will have a copy of the same document on their computer, and in their email, with everything backed-up for safety; those, if I'm not mistaken, imply costs.

You're quite right. They do imply costs. The question is how great the costs are, and whether removing them will materially affect the price charged to you.

My feeling is that they are a relatively small component of the total cost, and dropping them won't reduce the publisher's costs enough to allow a reduction in the book's price.

(And trying to figure out what those costs actually are and allocate them to a particular book will be an exercise comparable to rabbis splitting hairs over points in Talmud. I've been in occasional meetings where allocation of costs is discussed, and everyone has the same opinion: "It shouldn't hit my budget!" )
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Dennis