HarperCollins returns to Full Agency pricing

[HarryT]

Originally Posted by tompe

Then these people have to wait until the paperback is out and the price for ebook will be lower.

Precisely. An ebook price will generally fall drastically once the MMPB is released.

[kennyc]

Originally Posted by Apache

Dinosaur, Pea Brain and Extinct.
Apache

This.

[fjtorres]

Originally Posted by RobertDDL

There are countries -- including Austria and Germany -- where fixed prices for both printed books and ebooks are prescribed by law. Publishers do not have the option of not stting a fixed price, and the law is strictly policed.

http://en.wikipedia.org/wiki/Fixed_book_price_agreement

That is pretty much irrelevant in this context.

America is a different market operating under different laws, different history, and different consumer expectations. (Attempted) price fixing of books has a hundred years-plus history of failure in the US. Every time a publisher tries it alone, they fail. Every time they've colluded (three times, so far) they lose in court. Badly. The first time, circa 1908, their loss gave rise to the First Sale Doctrine. The second time they had to pay millions to Indie bookstores. The third, well, that is recent enough everybody here should remember what collusion cost them.

It is meaningless to take what works in Germany, Austria, or small Scandinavian countries where ebook adoption runs in the low single digits, where the big corporate publishers control most of the market (and politicians) and where consumers are used to fixed book prices and try to project those practices unto a much larger market where ebooks constitute a quarter to a third of the overall market, where the BPHs *combined* only control a third of the market in dollar value (and a lot less in unit sales), and where consumers *expect* launch week discounts. Where the whole "literary culture" argument is laughed at by the reality that the books the BPHs most value are teen vampire romances starring clinically depressed girls or shoot-em ups starring cookie cutter gritty vet tough guys or soft porn for housewives. That is where the money that lines the BPH pockets comes from, tearjerkers and shoot'em ups, not "literate angsty coming of age stories"; mass entertainment.

And mass entertainment is dirt cheap.
$8 buys a month of ad-free movies and TV shows at Netflix, both entertaining and (truly) cultural; tearjerkers, shoot'em ups, plays and documentaries, romance and SF. For those wiling to put up with ads, there are hundreds of hours a week of content for free via OTA TV or thousands for $25 cable or satellite packages, no internet needed. Hundreds of stations pumping out entertainment for all interests.

No shortage of content. No pressing need to buy anything at any price which is why hardcover sales have been steadily declining since before ebooks hit the mainstream, why mass market paperback sales no longer are reported separately, why BPH Market share has dropped from 60% in the last decade to barely a third today (and half that going to the randy penguin). And all that is just in the tradpub sector, without even addressing the shadow industry of indie publishing.

The Manhattan BPHs just aren't all they used to be, all they'd like you to think they are. And they're getting kinda desperate for the next big hit that will save their quarter or for a magic bullet to restore their old time power.

Not going to happen.
The ebook market is too big and too varied; there is too much backlist, too many indies, and too much competition from other forms of mass entertainment, from TV and movies, to video games and sports. And consumers know it; they have the power of the wallet and by and large they use it. The buyers willing to drop $25 on a hardcover are getting harder to find; even true fans know that if they wait a week or two they can get the same book for 30-45% off. $15 ebooks? Yeah, right; common knowledge that you can easily get 2 or 3 ebooks for that, even 5 or 6 for smart shoppers.
And after 50 years of American consumerism, smart shoppers are all over.

Here's a couple of the latest BPH magic bullet moves:
http://www.hollywoodreporter.com/new...-scores-787018

http://www.theguardian.com/books/201...tional-imprint

Both ladies are obviously good writers who know their genre and their audience, but do consider what the genre is and how culturally significant it might be. Any german publisher going to match those deals for those books? Think consumers are going to turn out on launch day by the million to pay $25-30 for each?

It is a whole different world out there.

[kennyc]

Related, from The Atlantic:

What a 1925 Ad for The Great Gatsby Tells Us About Book Prices
JORDAN WEISSMANNAUG 21 2012, 1:42 PM ET
If you were a Princeton undergrad in 1925, and you happened to be reading lacrosse team news from the school newspaper, you might well have stopped and glanced at this ad for the brand new novel from F. Scott Fitzgerald: The Great Gatsby.

If you were to buy said novel, it would cost you $2, or $26.18 adjusted for inflation -- roughly the price of a hardcover today.
....

http://www.theatlantic.com/business/...prices/261390/

[shalym]

Originally Posted by HarryT

Precisely. An ebook price will generally fall drastically once the MMPB is released.

Even if this were always true, (and I have seen cases where it didn't happen) I've seen too many cases where even 1 or 2 days after the official release of a hardcover I could get it for 10-25% off of the cover price, which will sometimes cause the hardcover to cost less than the ebook. If I wait a month after release date, then the chance of the price being cut by 25% goes up substantially.

What possible excuse can there be for treating ebooks differently from paper books in this regard? Why should publishers be able to dictate to a retailer what price an ebook is sold at, when they are not allowed to dictate what price a paper book is sold at?

Shari

[SteveEisenberg]

Originally Posted by kennyc

This.

Unlike with other big publishers, HarperCollins financials are separately reported:

http://www.digitalbookworld.com/2014...-by-divergent/

So, if we are all still here in a couple years, we will be able to put this to a test.

Apache and kennyc: I suppose you aren't really thinking that HarperCollins is literally going extinct in the foreseeable future. Or are you?

If not, what is your prediction?

My contrary prediction is that they will remain in business, with year-to-year profit changes continuing to be driven by whether they have mega-hits rather than some long term trend.

It's possible that, in three years, you'll be saying they are dying, and I'll be saying they just didn't have a hit that year. I realize nothing can really be proven here, but we still could try to ask what it would take to show either that the alleged Manhattan mafia has successfully withstood the digital transition, or that they are, indeed, pea brains.

Originally Posted by fjtorres

Where the whole "literary culture" argument is laughed at by the reality that the books the BPHs most value are teen vampire romances starring clinically depressed girls or shoot-em ups starring cookie cutter gritty vet tough guys or soft porn for housewives. That is where the money that lines the BPH pockets comes from, tearjerkers and shoot'em ups, not "literate angsty coming of age stories"; mass entertainment.

If I was finding a shortage of BPH books worth reading, I might agree with you that pornography and vampire-themed narrative fiction was a problem, or get heebie-jeebees over the rise of Scholastic. But since I'm not finding a shortage of what interests me -- and not finding that indie or university press books interest me more -- the fact that BPH's publish lots of books I wouldn't care for is harmless.

And, according to this, the vampire craze is dying a natural death:

http://www.nytimes.com/2015/04/12/bu...tion.html?_r=0

[kennyc]

Originally Posted by SteveEisenberg

....

And, according to this, the vampire craze is dying a natural death:

http://www.nytimes.com/2015/04/12/bu...tion.html?_r=0

"....It's possible that, in three years, you'll be saying they are dying, and I'll be saying they just didn't have a hit that year. I realize nothing can really be proven here, but we still could try to ask what it would take to show either that the alleged Manhattan mafia [vampire] has successfully withstood the digital transition, or that they are, indeed, pea brains."

[HarryT]

Kenny,

What are you actually saying here? Do you expect HarperCollins to go out of business as a result of using agency pricing?

[DiapDealer]

I think it makes perfect sense to attempt to use a medium that is dying, aching, straining to become your primary money-maker in order to (attempt to) artificially prop up the medium that CAN'T be your cash-crop on its own anymore (even though you really, really, really want it to), by keeping the price on the medium that WANTS to work hard for you artificially high.

[pwalker8]

Originally Posted by SteveEisenberg

...

And, according to this, the vampire craze is dying a natural death:

http://www.nytimes.com/2015/04/12/bu...tion.html?_r=0

Yep, these things go in cycles. Based on why my niece and nephew want to read/listen to, it sounds like dis-utopias such as the Hunger Games series, is the new craze.

Since I started reading SF&F back in the mid 70's, I've seen Conan knock offs, Tolkien knock offs, generic sword and sorcery, the first wave of urban fantasy, dragon books, werewolf books, vampire books, vampire/werewolf books, realms of fay, and a number of cycles come and go. I'm sure new cycles will come about as well. Anytime an author comes out with a successful motif, then other authors will jump on the band wagon. The same sort of thing happens in most genres.

[fjtorres]

The only argument I've heard that comes close to making any sense for the Manhattan BPHs maintaining high book prices is to maintain the illusion that their books are Premium products.
Which is a valid strategy for low volume, niche products. If your total sales only appeal to a small portion of the total market anyway (say 6-7%) then jacking up prices by a third and sacrificing a quarter of your unit sales (to, say 5%) will result in higher profits. It worked beautifully for Apple with the Macintosh. It made a cash cow out of a marketplace also ran by heading up-market and charging higher prices on hardware and service packs. The same strategy works for plenty of other manufacturer's in cars and stereo equipment, cameras, and clothing.

Only one small problem with that: publishers aren't manufacturers. They don't actually create the product they market. They have to buy it first. (Well, technically they license the copyright in most cases but given the terms of the contracts, they are effectively purchases.)

And that is where the rubber meets the road.
The dirty little secret of Manhattan publishing is they are not getting as many good manuscripts as they used to get. Torstar said it openly just before they flipped Harlequin to the Murdochs. Reports from the RWA conventions confirm it. The sucess of indie publishing confirms it. The recent reports of seven figure advances for already-successful indie authors confirms it; those are all books that the BPHs never got to even bid on.
In the old days, those books might have come to them on a six-figure contract. More likely, mid five figures. Nowadays six figures get politely declined, five get laughed off.

Higher manuscript acquisition costs are already impacting the BPHs. And that is not going away. Just as the flood of quality backlist and indie titles isn't going away; it can only grow bigger because ebooks don't go out of print. And that is also impacting the BPHs on the other side of the supply chain. The monster hits they're not getting? That isn't a slump--that is the new normal. Look at the total sales numbers for bestsellers now and the numbers from a decade ago. They're lower. And they are lower for the same reason network TV ratings are lower now than in the days before cable and movie rentals and Netflix and HBO and Hulu. People are spreading their attention, and dollars, around instead on dumping it on the fad title of the day.
Higher manuscript acquisition costs means less manuscripts going out the door. Which means less tickets in the "blockster book" lottery, which when combined with the lower peak unit sales for the lottery winners means they have to raise prices (further reducing unit sales) to maintain their dollar sales numbers.

So, no; HC isn't going bankrupt any time soon.
But their importance to the market is going to slowly fade away as they trade unit sales for gross margins and their net goes down.

Expect the BPHs to publish less and less new titles and rely more on more on backlist until the beancounters pull the plug on the pbook side and the companies become IP management operations rather than distributors of new content.

The trends are there.
Sixty percent has become thirty and is headed for 25 real soon.
They'll probably stabilize at about 15% in a decade or so which means still more consolidation, more layoffs, more personnel forced into freelancing for Indies. And more high quality Indies...

Agency does mean higher prices because without the higher prices their overlords will get angry and they really don't want to see them angry.

[kennyc]

Originally Posted by fjtorres

.... HC isn't going bankrupt any time soon.
But their importance to the market is going to slowly fade away as they trade unit sales for gross margins and their net goes down.

Expect the BPHs to publish less and less new titles and rely more on more on backlist until the beancounters pull the plug on the pbook side and the companies become IP management operations rather than distributors of new content.

The trends are there.
Sixty percent has become thirty and is headed for 25 real soon.
They'll probably stabilize at about 15% in a decade or so which means still more consolidation, more layoffs, more personnel forced into freelancing for Indies.

Agency does mean higher prices because without the higher prices their overlords will get angry and they really don't want to see them angry.

Yep...

[pwalker8]

Originally Posted by SteveEisenberg

Reading this, it sounds like the biggest music industry problem is that they lost control of pricing:

http://www.digitalmusicnews.com/perm...ry-99-problems

However, I guess that's not what you mean.

Also, you don't want to allow concentration of your retail channel by one dominant retailer, whether it be Apple or Amazon.

However, I guess that's not what you mean.

One lesson is that you shouldn't cater to a youth market, since younger people have, on average and with many exceptions, fewer qualms about piracy.

However, I guess that's not what you mean.

Question: How many more years of publishers remaining profitable, while readers have lots of low-prices indie options, will it take to realize that maybe those English-major publishing executives aren't totally incompetent, or harmful to literature?

P.S. This isn't to say that I judge publishers by their profitability. I judge them by whether I like to read what they publish.

Yep, people want to throw music, movies and books together for some reason, when really all three have very different business models and dynamics.

Ever since the advent of radio, music has been available for free to those who don't want to buy. Most musicians earn their money from either live concerts or royalties. It's just a relative handful who make a significant percentage of their money from the various stores. Pretty much every musician of note got his or her start playing live concerts.

Movies are a totally different market and a totally different business model. The digital video (VHS tapes, DVD, blu-ray and digital download) have opened a whole new range of markets for movie makers. Now, there is a whole market for movies that never hit the theaters but rather go directly to DVD/digital download.

Books are similar to music in some respects, but very different in others. Many people have long been use to getting books for free from the library or cheap via used book stores. On the other hand, until fairly recently, libraries have been the primary market for many authors and publishers. It's really only fairly recently (the last 40 years or so) that the book industry exploded. For example, the best selling book from 1929, "All Quiet on the Western Front" sold 2.5 million copies in the first year and a half. "How Green was my Valley" held the record for sales in the US for a number of years with 250,000 copies sold in the United States. "Harry Potter and the Half Blood Prince" sold 9 million copies in the first day.

The biggest difference that ebooks have made to the publishing industry is the ability to keep books in print. The other big change is audiobooks. Before audiobooks were a very small niche market. That market has really been taking off over the last several years. Some authors report seeing a very significant portion of their income from audiobook sales.

Frankly, I suspect that the biggest lesson that the publishers are learning is the value of diversification, both in markets as well as products.

[pwalker8]

Originally Posted by fjtorres

The only argument I've heard that comes close to making any sense for the Manhattan BPHs maintaining high book prices is to maintain the illusion that their books are Premium products.
Which is a valid strategy for low volume, niche products. If your total sales only appeal to a small portion of the total market anyway (say 6-7%) then jacking up prices by a third and sacrificing a quarter of your unit sales (to, say 5%) will result in higher profits. It worked beautifully for Apple with the Macintosh. It made a cash cow out of a marketplace also ran by heading up-market and charging higher prices on hardware and service packs. The same strategy works for plenty of other manufacturer's in cars and stereo equipment, cameras, and clothing.

Only one small problem with that: publishers aren't manufacturers. They don't actually create the product they market. They have to buy it first. (Well, technically they license the copyright in most cases but given the terms of the contracts, they are effectively purchases.)

And that is where the rubber meets the road.
The dirty little secret of Manhattan publishing is they are not getting as many good manuscripts as they used to get. Torstar said it openly just before they flipped Harlequin to the Murdochs. Reports from the RWA conventions confirm it. The sucess of indie publishing confirms it. The recent reports of seven figure advances for already-successful indie authors confirms it; those are all books that the BPHs never got to even bid on.
In the old days, those books might have come to them on a six-figure contract. More likely, mid five figures. Nowadays six figures get politely declined, five get laughed off.

Higher manuscript acquisition costs are already impacting the BPHs. And that is not going away. Just as the flood of quality backlist and indie titles isn't going away; it can only grow bigger because ebooks don't go out of print. And that is also impacting the BPHs on the other side of the supply chain. The monster hits they're not getting? That isn't a slump--that is the new normal. Look at the total sales numbers for bestsellers now and the numbers from a decade ago. They're lower. And they are lower for the same reason network TV ratings are lower now than in the days before cable and movie rentals and Netflix and HBO and Hulu. People are spreading their attention, and dollars, around instead on dumping it on the fad title of the day.
Higher manuscript acquisition costs means less manuscripts going out the door. Which means less tickets in the "blockster book" lottery, which when combined with the lower peak unit sales for the lottery winners means they have to raise prices (further reducing unit sales) to maintain their dollar sales numbers.

So, no; HC isn't going bankrupt any time soon.
But their importance to the market is going to slowly fade away as they trade unit sales for gross margins and their net goes down.

Expect the BPHs to publish less and less new titles and rely more on more on backlist until the beancounters pull the plug on the pbook side and the companies become IP management operations rather than distributors of new content.

The trends are there.
Sixty percent has become thirty and is headed for 25 real soon.
They'll probably stabilize at about 15% in a decade or so which means still more consolidation, more layoffs, more personnel forced into freelancing for Indies. And more high quality Indies...

Agency does mean higher prices because without the higher prices their overlords will get angry and they really don't want to see them angry.

I don't think you quite understand the concept of advances. Advances are just that, an advance on the projected sales. A publisher who over estimates the advance on a regular basis tends to go out of business. I don't find it terribly surprising that an author who has established that people will buy their books are able to command higher advances. I think that this is something that is true from both authors who started via the normal publishing route as well as those who start via the indie route. I will note that for a true indie author, i.e. one who isn't using a publisher, the idea of an advance does not apply since there is no one to pay the advance. It's only indies who decide to move over to the publisher world who get advances.

[murg]

Originally Posted by SteveEisenberg

Sending customers to the used market increases the price of the used books, making it possible to charge more for new.

Used book prices are generally fixed at half the cover price (providing there is a cover price). This allows the used book shop to pay a quarter of the cover price for the book.