Ex-CEO of Random House on ebook pricing and the future of publishing

[Penforhire]

Well, you guys have more faith in current publishers than I do. The pointer to Baen is a good one. Despite being a favorite publisher of mine, just because they promote it doesn't mean it'll be worth reading (to me). Publishers have a built-in bias, They want to promote what they sell.

I don't know why you downplay the value of public focus or fan groups. I get more great reading recommendations from users here at Mobile Read than from any publisher. The spam-bots haven't made it into our reading threads... yet.

[emellaich]

I had an article on this at Teleread:
http://www.teleread.org/2009/05/20/s...nd-good-books/

I do think that publishers have an important and valuable role in the process. However, we might be able to change the definition of a publisher in a world where production involves bits and not physical media and physical distribution.

As an analogy I look at blogs that have opened up the 'newspaper' business to the wide unwashed masses. What if we could likewise open up the publishing business?

Finding good books to read -- even with publishers -- is already more difficult for me in an electronic world. Let's say that typewriterhead (to pick a random name from this thread) is good at finding books. He/she develops a network of friends that funnel potentially good books towards him. If I'm looking for a good book, I go to his book blog because I know that his taste is consistent with mine. When I buy a book he recommends I use his affiliate link to purchase it and he gets a few ducats off the top.

Now griffonwing, is more into dubloons that ducats. He wants more $$$ and he is a good editor, not just a good promoter. When he promotes a book he puts his stamp of quality on it by also editing it. The same book/author might be recommended by both griffonwing and typewriterhead. However, the griffonwing recommendation is for a special griffonwing edition that is edited by him. He gets a small cut off the top for sales of his edition. Authors could decide who they let edit their books. They might sign exclusive editing agreements. Editing can be a fee paid by the writer or a percentage of the sales. And of course, Typewriterhead can recommend the Griffonwing version.

Bottom line is that the publishing functions of editing, laying out the digital bits on the page so the page looks nice, and promotion and recommendation are needed and here to stay. The internet potential is the opportunity to micro-source these out of the hands of large publishing houses into individual hands similar to the way that blogs have opened up the editorial game.

[Elfwreck]

Originally Posted by Moejoe

The problem is *all* new authors have to promote themselves, it's just part of the business. Doesn't matter how good they are, or what kind of agent they have, they're going to end up on the treadmill of trying to get their work noticed.

But they don't all have to figure out exactly how to do that... how to arrange book signings (and where it would be useful), which magazines/newspapers/websites to buy ads in, which review magazines or sites they should contact, whether they should talk to TV producers about a bit on a talk show.

Publishers can manage the promotion process. I'm not saying they do, or do so well--but there's some demand for that skill, and publishers are in the spot to fill it.

I didn't mean that writers can ever expect to not do promotion--but many are, and will remain, willing to pay a percentage to have someone else figure out what can be done and the best way to do it.

Authors who want to manage 100% of their own PR, and want to self-publish (digital or physical) and manage 100% of the editing, doc conversion, and sales aspects, don't need publishers. There are very few of those. I'll happily agree that there will be more in the future--but they're never going to be the majority of all authors.

My favorite authors don't write fast enough; I'm very happy they don't cut their writing time in half in order to manage production, distribution & promotion of their books.

[Greg Anos]

Just like old home week...or my first post here.

Here's the problem in a nutshell. Mass production is based on taking a design (in this case an edited book) and amortizing the cost of the design over a long production run. The longer the run the more profitable. Too short of a run, it's a loss. You incur the design cost no matter whether or not you produce the product at all. The cost of production (not design) has to be the major cost of the product, or else somebody else will make it significantly cheaper and undercut you.

This works as long as there are significant costs to produce the product. When the cost approach zero, the whole paradigm fails. And that's what is happening now with digital products.

[junkyardwillie]

Originally Posted by Ralph Sir Edward

Just like old home week...or my first post here.

Here's the problem in a nutshell. Mass production is based on taking a design (in this case an edited book) and amortizing the cost of the design over a long production run. The longer the run the more profitable. Too short of a run, it's a loss. You incur the design cost no matter whether or not you produce the product at all. The cost of production (not design) has to be the major cost of the product, or else somebody else will make it significantly cheaper and undercut you.

This works as long as there are significant costs to produce the product. When the cost approach zero, the whole paradigm fails. And that's what is happening now with digital products.

Agree, one thing on the costs approaching zero is are they really. I think the main problem is that they are not separating the costs of creating paper books from ebooks. You might not have the manufacturing costs but you still have all the other costs in between (promotions, salaries, advertising, book signings, etc). I would guess and I don't know the publishing industry inside out but I would guess that the actual printing of the books onto paper is one of the smallest costs per book (there are big outlays of cash for building factories but do these publishing companies still own their factories or is this all outsourced to third parties? If its not then they should start thinking of spinning-off their manufacturing divisions to optimize their cost structures). The main problem will be getting these executives to take smaller pay based on lower revenues in eBooks, that is the push back. The manufacturing aspects can be solved relatively easily by outsourcing production to China or somewhere else to get rid of that risk. They aren't creating prescription drugs so they don't have huge quality control issues and even pharmaceuticals outsource a lot of their production.

[Alisa]

Originally Posted by junkyardwillie

Also publishers have a chance to produce a better product than what is available illegally in most cases (poor OCR'd docs, PDFs, etc.) so if books are available at a reasonable price (around the $10 mark is what I think) people are more likely to buy an eBook than to download it illegally because its not worth the time and effort to find a good illegal download version. There's a big opportunity here for them that they need to capitalize on. The music industry had it much rougher because the illegal music downloads were of the same quality and were actually better because they didn't have DRM, books on the other hand are not as popular therefore do not have the same infrastructure as MP3s did in their bootlegged form.

Even though the music industry had to compete with the same quality in illegal downloads, they still moved to a DRM-free model. While the current ebook community is into scanning and OCR-ing books, I think as ebooks get more popular, folks will tend more to just remove the DRM and post. There aren't many DRM schemes left that aren't broken: tpz, lrx. Any others? DRM is a losing battle for the publishers just like it was for the music industry. I think they can make a profitable market here but DRM is not the way to do it. If people think they're being cheated, they're less likely to care about cheating you back. For now, publishers can offer a cleaner copy but I don't think that advantage will last. So it is, as you say, a time of great opportunity. If they get people in the habit of buying their ebooks and develop an ebook publishing culture we want to support, where author and customer get a fair shake, they could keep people buying despite the ability to get stuff for free.

The other advantage purchased ebooks offer is safety. After all, aside from the ethical question of the illegal download, you can end up getting stuff on your computer you don't want. If they keep the price low enough, then the risk seems less worthwhile. If they charge $50 for their next new release by a big author, they can expect to see it cracked and on the interwebs in minutes and they'll lose a lot of the customers that would have bought it for $10. Beyond that, ebook stores could get creative like offering you access to other sorts of merchandise, events, etc., or monthly services as the music vendors are starting to do.

[sirbruce]

Originally Posted by Ralph Sir Edward

Just like old home week...or my first post here.

Here's the problem in a nutshell. Mass production is based on taking a design (in this case an edited book) and amortizing the cost of the design over a long production run. The longer the run the more profitable. Too short of a run, it's a loss. You incur the design cost no matter whether or not you produce the product at all. The cost of production (not design) has to be the major cost of the product, or else somebody else will make it significantly cheaper and undercut you.

This works as long as there are significant costs to produce the product. When the cost approach zero, the whole paradigm fails. And that's what is happening now with digital products.

I'm afraid this view of business is limited to commodites. It does not apply to books, because it's not possible to make the books "significantly cheaper". The cost of physical production of each book is not large. The skilled labor involved (editing, etc.) cannot be undercut by cheap foreign workers, so it remains relatively fixed. The cost of an ebook is far from zero. The *marginal* cost of an ebook is almost zero, much less than a physical book, but you still have to pay for the up-front overhead.

What makes matters worse is that books traditionally have a tiered pricing structure: more expensive hardbacks come out first, with cheaper paperback and other editions later. This allows one to recoup costs with higher margins on the hardbacks. Making money only via paperback editions can be done, but it's more difficult unless the demand for hardbacks is very low.

With ebooks, people expect paperback prices for new hardback releases. And that's a problem. I personally would be happy if new ebooks came out at $10 - $13 along with the $25 hardback, then reducing to $5 - $8 when the paperback comes out. And I think this sort of structure allows for more profits all parties: publishers, retailer, and author.

[mklynds]

Originally Posted by sirbruce

With ebooks, people expect paperback prices for new hardback releases. And that's a problem. I personally would be happy if new ebooks came out at $10 - $13 along with the $25 hardback, then reducing to $5 - $8 when the paperback comes out. And I think this sort of structure allows for more profits all parties: publishers, retailer, and author.

Very good post Sirbruce, very good points all. I never really thought about it but I have always thought that for an ebook I would only want to pay $5 give or take. You have however made me rethink my positioning on that. I am not a writer but am lucky to have a full time writer as a friend and have some knowledge of how much work goes into a book other than the writers putting down the words. I now realize that my desire for $5 ebooks was just that, a desire. I too agree that a tiered structure that coincides with the hardback/paperback release would be acceptable to me, the customer, and beneficial to the industry and therefore the writers. Consider me on the bandwagon. If I really want a book when it just came out I do buy it in hardcover and pay the extra. Why shouldn't I do the same for ebooks. That being said if they threw in some extra content or art work to go with the higher "hardebook" price that would make swallowing that pill a little easier.

/end ramble
Mike

[Phogg]

Originally Posted by garygibsonsf

Lost in the doomsdayer debate about publishers’ future is that their unique role as intermediaries has always been about discovering and promoting talent and content—rather than printing and distributing.

This is a function performed far better by a forum of readers than by a paid hack.

Just as with music, and News stories - story writers now have to compete with people who write because the wish to, and who will write for free.

[sirbruce]

And I think it's okay to want a $5 ebook price if you're willing to wait for the paperback to come out, or a big sale. But I think it's unrealistic to expect publishers to cut their own throats by replacing hardback sales with low-priced ebook sales.

[Alisa]

Originally Posted by sirbruce

I'm afraid this view of business is limited to commodites. It does not apply to books, because it's not possible to make the books "significantly cheaper".

Books are also not fungible in the way most commodities are. If I really want the newest Margaret Atwood book, it can't be replaced by the latest Stephen King. Making a book cheaper has limited effect. The product is still the content and that is unique or at least fairly specific.

[toomanybooks]

Originally Posted by Alisa

For now, publishers can offer a cleaner copy but I don't think that advantage will last. So it is, as you say, a time of great opportunity. If they get people in the habit of buying their ebooks and develop an ebook publishing culture we want to support, where author and customer get a fair shake, they could keep people buying despite the ability to get stuff for free.

I disagree about publishers offering cleaner copies. I have found that books that have been handcrafted by enthusiasts often are better formatted and have less errors than professionally produced e-books. This is a major reason why I am against current ebook pricing. I think that they are charging premium pricing for shoddy product.

[Alisa]

Originally Posted by toomanybooks

I disagree about publishers offering cleaner copies. I have found that books that have been handcrafted by enthusiasts often are better formatted and have less errors than professionally produced e-books. This is a major reason why I am against current ebook pricing. I think that they are charging premium pricing for shoddy product.

I do agree that there are lovingly crafted copies of many books out there. The trick is finding them in the torrents. Your time is worth something so if you are offered a copy guaranteed to be well made or your money back, that has a value. How much of a value depends on how you personally view the cost of the time you might spend looking and how important quality is to you. The enthusiasts offering ebooks also have their own way of valuing their time which is influenced by their enthusiasm for a given book. The labor of love and the labor for bread often demand different wages. Beyond all that, I do think when ebooks become more popular the crafting aspect will be less of an influence. I think we'll see the ebook process go from digitized author copy to editor copy and from there to ebook and print at the same time. This gets rid of poorly OCRed publisher copies. If people turn to stripping DRM and sharing vs. OCRing and sharing then the quality will be pretty good. If the publishers eventually institute a good error reporting method then the ebook copy will likely be at least as good as the enthusiast bootleg. Even if they're close, many will take the copy that pays the author over the one that doesn't if the price is fair. I doubt they will read multiple copies to see which is the best. If they routinely find good quality and a good price on a legal copy through a given outlet, I believe many will go that route.

[rixte]

Originally Posted by Phogg

This is a function performed far better by a forum of readers than by a paid hack.

Just as with music, and News stories - story writers now have to compete with people who write because the wish to, and who will write for free.

I think most people want to be able to afford to eat.

I can be a bit of a book snob at times (but I've also been a fanfic reader, so it balances out!), but with a few rare exceptions, most people who write because they wish to and for free are awful at it. This isn't counting people who give away promotional copies, of course.

My disclaimer - I did an internship in publishing when I was in college. I opted not to pursue publishing as a field - and that's because you couldn't pay me enough to sit down and keep reading those slush pile manuscripts. Cutting out publishers reduces my whole future reading world to that nightmare!

[mbovenka]

Originally Posted by Alisa

They extract the high margin from people who want it badly enough that they will pay a premium price.

True, and even with those there's premium and premium... Take Baen and their ARCs (Advance Reader Copies). Unabashedly aimed at the above crowd, but at $15,=, they are still only as expensive as the paperback will be over here in the Netherlands (10 - 11 Euros).

So, to me, they aren't all that expensive, even though they are more than twice their normal ebook price...