Amazon says 'will have to capitulate and accept Macmillan's terms'

[MerLock]

Originally Posted by Pardoz

You're free to email your favourite store and ask why a certain e-book is still selling for hardcover price when the paperback has been out for fifteen years, of course, but the response will be 'Because that's the price we've been told to sell it at, and we're not allowed to change it.'

That's what I'm worried about. That either implies the system doesn't work or the pubishers idea of when to discount ebook prices are a bit off in my opinion.

Again, you won't see this in paper books because of actually stocking and selling a physical item. I haven't checked recently but when ebooks were new, I saw large gaps in ebook pricing compared to their paperback counter parts since a lot of the ebooks were based on the hardcover price.

I hope things have changed or will in the not so distant future.

[Lemurion]

One thing to consider is why publishers want the ability to charge a higher price for books in greater demand. Due to the nature of the industry, the vast majority of a publisher's costs are incurred before they see a single dime in earnings. That means the faster they can earn back those expenses, the more books they can publish and the better their chances of getting that next bestseller.

Publishers make most of their money on hardcover bestsellers. These are the books that pay everyone's salaries and subsidize the midlist. They are the financial foundation of the industry. Currently, e-books are a small part of the market, and don't have a large effect on hardcover sales. However, as e-books become more popular, $10 e-books will start having an effect on hardcover sales. Under Amazon's current system that won't make a big difference to publishers, because publishers are still making their standard cut.

The catch is that as e-books take a larger and larger market share, the Kindle store cannot continue losing money on the largest part of its electronic book sales. At some point they would have to either raise prices or renegotiate with the publishers for lower costs. At that point, publishers would have less money to spend on buying new books. They would have to take fewer chances on new authors and would eventually publish fewer books. Everyone but Amazon would lose.

Authors would lose because there would be fewer slots for their books, publishers would lose because they would make less money, and readers would lose because there would be fewer books for them to buy. Amazon would win because they would make more money and have a larger market share.

Macmillan is willing to make less money now so that they don't end up making MUCH less money later.

It's not a perfect solution, but it's better than the alternative.

Self-published and indie books are always an option, but the problem is that while some are very good - the bad ones are both much more numerous and very very bad (see "Night Travels of the Elven Vampire) - and there is no easy way to winnow the wheat from the chaff.

[JSWolf]

So when is Amazon putting back all the McMillan e/Books?

[bwaldron]

Originally Posted by JSWolf

So when is Amazon putting back all the McMillan e/Books?

Good question. I note that they said

"We want you to know that ultimately, however, we will have to capitulate and accept Macmillan's terms"

And I along with everyone else took it that they had capitulated. Perhaps "ultimately" has not in fact been reached yet?

[JSWolf]

Originally Posted by bwaldron

Good question. I note that they said

"We want you to know that ultimately, however, we will have to capitulate and accept Macmillan's terms"

And I along with everyone else took it that they had capitulated. Perhaps "ultimately" has not in fact been reached yet?

Not yet that I can see.

[MerLock]

Originally Posted by Lemurion

One thing to consider is why publishers want the ability to charge a higher price for books in greater demand. Due to the nature of the industry, the vast majority of a publisher's costs are incurred before they see a single dime in earnings. That means the faster they can earn back those expenses, the more books they can publish and the better their chances of getting that next bestseller.

Publishers make most of their money on hardcover bestsellers. These are the books that pay everyone's salaries and subsidize the midlist. They are the financial foundation of the industry. Currently, e-books are a small part of the market, and don't have a large effect on hardcover sales. However, as e-books become more popular, $10 e-books will start having an effect on hardcover sales. Under Amazon's current system that won't make a big difference to publishers, because publishers are still making their standard cut.

The catch is that as e-books take a larger and larger market share, the Kindle store cannot continue losing money on the largest part of its electronic book sales. At some point they would have to either raise prices or renegotiate with the publishers for lower costs. At that point, publishers would have less money to spend on buying new books. They would have to take fewer chances on new authors and would eventually publish fewer books. Everyone but Amazon would lose.

Authors would lose because there would be fewer slots for their books, publishers would lose because they would make less money, and readers would lose because there would be fewer books for them to buy. Amazon would win because they would make more money and have a larger market share.

Macmillan is willing to make less money now so that they don't end up making MUCH less money later.

It's not a perfect solution, but it's better than the alternative.

Self-published and indie books are always an option, but the problem is that while some are very good - the bad ones are both much more numerous and very very bad (see "Night Travels of the Elven Vampire) - and there is no easy way to winnow the wheat from the chaff.

I'm not sure about the cost percentages for a publisher, but are they considering the fact that as ebook demand rises, the shift towards ebooks will save the company money in terms of distrbution and production? I think we are just asking that those savings be passed on to us.

Older titles will most likely continue to sell as ebooks because they take no shelf space and can remain in the digital store for all eternity. That's another source of continued revenue.

I think the publishers are perhaps too narrow sighted to consider changing/adapting their business model towards digital media and instead, is trying to force ebooks to fit into their current system. They see the money they are getting decreasing with ebooks but don't consider how ebooks can save them money and perhaps even make them more.

[Lemurion]

Originally Posted by MerLock

I'm not sure what the perecentages of a publishers cost are, but are they considering the fact that as ebook demand rises, the shift towards ebooks will save the company money in terms of distrbution and production? I think we are just asking that those savings be passed on to us.

Older titles will most likely continue to sell as ebooks because they take no shelf space and can remain in the digital store for all eternity. That's another source of continued revenue.

Production costs are a relatively small portion of the publisher's outlay, and distribution costs are borne by the distributor not the publisher. So publishers don't see a large portion of the savings by going e.

People often tout the reduced marginal costs of ebooks as a reason for lower prices. Yes, once the initial outlay has been paid off the marginal cost becomes very low (mostly just royalties and DRM licensing fees if applicable).

The problem is that you need to pay off those initial costs first, before the low marginal cost can save you - and most ebooks don't sell enough copies to do that. You can't amortize your setup costs over ten thousand copies if you only sell five hundred, and that's the situation ebooks are in now.

[kennyc]

Originally Posted by bwaldron

Good question. I note that they said

"We want you to know that ultimately, however, we will have to capitulate and accept Macmillan's terms"

And I along with everyone else took it that they had capitulated. Perhaps "ultimately" has not in fact been reached yet?

I hope not.

[Krystian Galaj]

Originally Posted by bwaldron

Good question. I note that they said

"We want you to know that ultimately, however, we will have to capitulate and accept Macmillan's terms"

And I along with everyone else took it that they had capitulated. Perhaps "ultimately" has not in fact been reached yet?

Who exactly said that? As far as I know, this was just one of the posts on Kindle forums. It was signed "Kindle Team", but there's no information if this mysterious "Kindle Team" has any influence on company's decisions. Maybe it's just Amazon sounding out reactions.

[zerospinboson]

Originally Posted by Lemurion

Production costs are a relatively small portion of the publisher's outlay, and distribution costs are borne by the distributor not the publisher. So publishers don't see a large portion of the savings by going e.

People often tout the reduced marginal costs of ebooks as a reason for lower prices. Yes, once the initial outlay has been paid off the marginal cost becomes very low (mostly just royalties and DRM licensing fees if applicable).

The problem is that you need to pay off those initial costs first, before the low marginal cost can save you - and most ebooks don't sell enough copies to do that. You can't amortize your setup costs over ten thousand copies if you only sell five hundred, and that's the situation ebooks are in now.

I'm not really sure I agree, here. As I understand it, in the paper world, retailers get about 50% of the price. If hardcovers cost 25$, that leaves roughly 13$. Roughly 2$ are spent on every hardcover printed, with a chance that only part of all hcs will sell, and then I understand that the pbacks are also paid for with the money made through hc sales. All of these costs are up-front, and fairly substantial. This means that in a digital world, you need a substantially lower lump sum payment up-front. This would seem to add up to quite a bit, if you consider that this only matters for the riskiest books, and definitely make a dent in publishers' balance sheets. (Which are touted as the reason why they need to increase the prices on all other titles. Unless they're lying, of course. )
Say the money saved here amounts to another 1-1.5$ off the average production price, (assuming no paper printed at all) then this adds up to 3-5$ saved. That's nearly 40% of their operating cost, so long as you assume no print runs at all!
Basically, if my silly maths hold water, I would suggest 'they' just try selling ebooks to ereader-owners first for titles they deem risky, and later decide whether to actually print the books and reach the larger market.
Anyway, WRT incorporating ebooks into the new book production chain: the money spent to create a mobi file from a word document should be trivial, yet will likely still result in less formatting issues than most re-digitized books suffer from.

[bwaldron]

Originally Posted by Krystian Galaj

Who exactly said that? As far as I know, this was just one of the posts on Kindle forums. It was signed "Kindle Team", but there's no information if this mysterious "Kindle Team" has any influence on company's decisions. Maybe it's just Amazon sounding out reactions.

Well, it's the only official word we have from the company, AFAIK.

[asjogren]

Originally Posted by zerospinboson

Basically, if my silly maths hold water, I would suggest 'they' just try selling ebooks to ereader-owners first for titles they deem risky, and later decide whether to actually print the books and reach the larger market.

A very compelling idea! And it ought to be cheap.

However, the CEOs are determined to force fit an archaic publishing model on a new world. And we know what the end result will be. Too bad their shareholders don't.

[Lemurion]

Originally Posted by zerospinboson

I'm not really sure I agree, here. As I understand it, in the paper world, retailers get about 50% of the price. If hardcovers cost 25$, that leaves roughly 13$. Roughly 2$ are spent on every hardcover printed, with a chance that only part of all hcs will sell, and then I understand that the pbacks are also paid for with the money made through hc sales. All of these costs are up-front, and fairly substantial. This means that in a digital world, you need a substantially lower lump sum payment up-front. This would seem to add up to quite a bit, if you consider that this only matters for the riskiest books, and definitely make a dent in publishers' balance sheets. (Which are touted as the reason why they need to increase the prices on all other titles. Unless they're lying, of course. )
Say the money saved here amounts to another 1-1.5$ off the average production price, (assuming no paper printed at all) then this adds up to 3-5$ saved. That's nearly 40% of their operating cost, so long as you assume no print runs at all!
Basically, if my silly maths hold water, I would suggest 'they' just try selling ebooks to ereader-owners first for titles they deem risky, and later decide whether to actually print the books and reach the larger market.
Anyway, WRT incorporating ebooks into the new book production chain: the money spent to create a mobi file from a word document should be trivial, yet will likely still result in less formatting issues than most re-digitized books suffer from.

One thing I think you may be missing is that bestselling hardcovers don't just subsidize the paperback editions of the same titles, but also both paperback and hardcover editions of other titles.

I also don't think that ebook only versions to "test the waters" would lead to prices that are that much lower. In fact I think the reverse. Even if I accepted the idea that ebook sales are a "gimme" with no added cost to that of a paper edition and thus do not have to cover their share of the sunk costs from before the two editions fork, that would only apply if there was a paper edition. Without firm plans for a paper edition, the ebook would have to bear all those costs such as the author's advance, the cost of cover art, editing and everything else involved in acquisition.

Also, it's not quite as simple in a corporate environment to run a word doc through mobigen in order to create an ebook. There are multiple runs involved for different formats, and both DRM and software licensing costs to be covered (as well as the salaries of the people doing the conversion). These are all added costs that have to be covered somewhere.

[asjogren]

"Also, it's not quite as simple in a corporate environment to run a word doc through mobigen in order to create an ebook. There are multiple runs involved for different formats, and both DRM and software licensing costs to be covered (as well as the salaries of the people doing the conversion). These are all added costs that have to be covered somewhere."

Then if SmashWords.com gets a stable of top notch authors, these neanderthal-likes are doomed just as their namesakes.

EVOLVE OR DIE

[MerLock]

I wonder how the gaming industry does it. Some companies have teams of developers working on games for well over a year. They have cost associated with advertising the games as well as cover art for the boxes and hire testers for their games, yet the price of games haven't changed that much for the past 10 - 15 yrs.

I think the difficulty for publishers is that they are maintaining/producing both a paper and digital version of books. Otherwise, I can imagine that they could change their business model so that they can sell ebooks for less.