N.Y. Times Article: Steal This Book (for $9.99)

[BillSmithBooks]

I would be happy to sell my ebooks for $14.99 if anyone wants to pay that...I merely ask for a buck or two.

I publish in HTML, use it anywhere, back it up, no DRM because I don't feel like treating my customers like criminals. And frankly, as a customer, that's what I would want.

Course I sell direct instead of going through Amazon.

BillSmithBooks.com, OutlawGalaxy.com

[JSWolf]

“The concept that because a book is an e-book it should automatically be priced significantly lower than a paper book is one we don’t agree with,” said Carolyn Reidy, chief executive of Simon & Schuster. “What a consumer is buying is the content, not necessarily the format.”

Because of DRM, we are buying the format and if we were just buying the content, then all formats would be the exact same price for one. Once we have the DRMed copy of the eBook, we are stuck with it in that format. So why the BS saying we are bying content and not the format?

[wallcraft]

In A Few Quick Tips for Kindle Authors and Publishers Stephen Windwalker pointed out that Amazon is happy with a "profit" of about $1.25 per ebook. So at $9.99 the "sustainable" list price (even if Amazon stops subsidizing sales) for new releases is $17.49 assuming 50% goes to the publisher.

If you are an independent author using Amazon's DTP you get 35% of list price, which can be $24.99 and Amazon will still sell it for $9.99.

Amazon's subsidizing of ebooks sales is distorting the market. It means that the optimal list price for a new release is the highest that Amazon will sell for $9.99. Which is somewhere between $25 and $30 for major titles. This helps Amazon by pricing all other ebook retailers out of the game. They don't have the profits from the Kindle to help subsidize ebooks.

[Xenophon]

Originally Posted by kamm

Ummm since when "iTunes moment" has achieved anything especially as long as format goes?

FYI iTunes was never been anything more intended than a quasi-monopoly distrib platform for Apple, nobody else.

Also iTunes did not drop DRM until very recently and still charges extra, even if you already own the track -a typical cheap, Apple-like money-grabbing trick.


OT: I often wonder how on Earth Apple mananged to brainwash so many people to think they have invented so many thing when, in fact, they did not jack&^%$... it's beyond me.

The most revolutionary change in format came with mp3, this German Fraunhofer Institute-developed format.
Easy-to-download/share music, for free, arrived with Napster.
Mobile music (aka MP3) players arrived after Diamond Multimedia successfully defeated the (il)legal attack of the RIAA-mob in 1999, clearing the path for the flood of mobile music players (ironically Diamond's winning argument used the precedent of Sony Corp of America vs Universal Studios 1984 - Sony, the RIAA member... )

Anyway, my point is that iTunes or Apple had nothing to do with formats (other than screwing up everything by introducing its own crap) and even less with dropping DRM (plenty of other stores offered DRM-free music for years now, sometimes even for free.)

Ah, yes. Everyone knows that Apple supports DRM, and only dropped it due to competition from online music stores that were DRM free. Clearly Apple was desperate to hold on to the DRM to protect their "monopoly" at the iTunes store.

As usual, what "everyone knows" just ain't so. And even a modest investigation into the history of Apple, iTunes and DRM will make that completely clear.

Apple wanted to open the iTunes store DRM-free. But the big studios wouldn't go for it. So the DRM-imposed restrictions that the iTunes store began with were the least restrictive terms that the studios would accept! If you poke around you can find lots of contemporaneous articles and interviews that mention this. You'll find interviews with both Jobs and studio heads saying so flat out. (Statements like "Only Steve Jobs had the clout with the studios to get a deal this good for consumers" stick in my mind from that era.)

Towards the end of the DRM-only period, you can find Steve Job's open letter on the subject of DRM. Read it -- you'll find you agree with most of what he has to say. The only problem was that only one of the 3 big studios was willing to let Apple sell DRM-free -- and even they insisted on a higher price in exchange.

More recently, we've had a number of years during which the big studios have let other stores sell DRM-free... while continuing to contractually require DRM at the iTunes store. This was a deliberate attempt to promote other online stores at the expense of the iTunes store. The studios were attempting to put a dent in Apple's dominance in that market. They failed (mostly).

So, when you wrote

Also iTunes did not drop DRM until very recently and still charges extra, even if you already own the track -a typical cheap, Apple-like money-grabbing trick.

you've missed the mark. Apple pushed for getting rid of DRM from the very beginning of the iTunes store. Further, the charge for upgrading your existing library is not Apple-motivated -- it's another thing that the studios insisted on. You've missed the mark completely.

Please understand -- I'm not claiming that Apple's longstanding opposition to DRM is rooted in "good-guy-ness." Rather, they've opposed DRM because they believe that problems caused by DRM and associated restrictions get in the way of making money. They've opposed DRM because it's bad business. And that's a position you can trust: after all, Apple is in business to make money, so opposing bad business practices that get in the way of making money is entirely consistent with their purpose.

As for inventing things, they mostly don't claim to have done so. But your "introducing their own crap" line w.r.t. music is also off the mark. AAC is not "their own crap" -- it's an ISO-standard encoding. It's part of the MP4 standard suite. The only "their own crap" involved is the DRM -- and that was forced on them by the studios. Oh yeah -- the Apple Lossless format is theirs too. It exists because license terms for MLP (what you find on DVD-Audio and some Blu-Ray discs) were too expensive. But note that the various lossless encodings are more-or-less interchangeable in terms of degree of compression. And, of course, any compression that is truly lossless provides exactly the same results when doing a round trip through compression/decompression.

I realize that "big bad Apple" is an article of faith in certain online communities. But in this case the "history" your post assumes is just plain incorrect.

Xenophon

[Xenophon]

Publishers and authors say it is much more complicated than the cost of paper and shipping. The lower e-book price “is not sustainable,” said Mr. Baldacci, whose novels regularly rise to the top of hardcover best seller lists. If readers insist on cut-rate electronic books, he said, “unfortunately there won’t be anyone selling it anymore because you just can’t make any money.”

Perhaps these folks should be asking Baen how they're making money selling books at a max of $6 US, with discounts well below that point. And doing it while paying authors excellent royalties (royalty on an e-Sale is about equal to trade-paperback, which is modestly less than hardcover but waaaaay better than mass-market paperback). And they make that money with no significant hit to their paper sales (yet -- we'll see what happens as eBooks become more popular). Baen also has no reason to fear the changeover to eBooks, because their profit margin on eBooks is significantly better overall than for dead-tree-format ("overall" means wrapping up all dead-tree sales of a book in all formats and comparing that against all e-sales of the same book).

The problem for Baldacci is that he's dealing with publishers who haven't figured out a business model that works in eBooks. Not that the lower e-book price "is not sustainable."

On the other hand, Amazon probably doesn't like Baen's business model much either. After all, the way that Baen's able to succeed with low prices is by cutting the distributors entirely out of the value chain (and mostly cutting out the retailer too). They aren't quite selling directly -- Webscriptions is a separate business -- but Ingram and Amazon and B&N and friends aren't in the picture. And here's the important part: Ingram and Amazon and B&N and the like aren't getting any markup on those e-Sales either.

Xenophon

[kazbates]

Originally Posted by lilac_jive

I'm perfectly happy buying ebooks for $11.99 that are new hardcover releases. If they want to charge more than that, I won't buy it. It's that simple. I almost never bought hardcovers before because of the price. Publishers can make more money off me now, or less later, but take the risk I'll just get it at the library. It's that simple.

I bought hardcover before owning my readers, but usually at a wholesale club where the price was close to half off the retail price (and that was at the same time as the release in bookstores). If they can sell it at that price, why shouldn't electonic sellers be allowed to do the same? I am perfectly willing to buy books as long as I'm paying a fair market price.

[sirbruce]

Originally Posted by HarryT

10% of "wholesale" price is a pretty standard royalty rate. I speak from experience.

It's 10% - 15% for hardbacks, 6% - 10% for paperbacks (mass market less than trade). Ebooks can sometimes be as high as 25%. Also, it's not uncommon for some editions to have a sliding scale based on sales; i.e. 10% for the first 10K hardbacks, 12.5% for the next 10K hardbacks, 15% thereafter. Don't expect to be getting 15% unless you're Stephen King or JK Rowling or Dan Brown, in which case the percentage probably doesn't matter (you'll never exceed your advance).

[sirbruce]

Originally Posted by rixte

The problem with the publisher's argument is yes, I do believe there's a similar amount of work that goes into an ebook as a book, between editing, typesetting, cover design, etc, etc. However, those prices are covered by a *paperback* that goes through a decent run - not a hardback.

I don't see your point. As long as every ebook sale takes away a paperback or hardback sale, the ebooks have to cover their share of the TOTAL cost of production.

[JSWolf]

I do know part of how Baen are doing it. They are not having any middle men in the works. No Fictionwise, no BooksOnBoard, no Amazon, no Sony, no Mobipocket. So all that expense is not having to be laid out. So they can charge less and still make a good profit because of this.

[Greg Anos]

Originally Posted by JSWolf

I do know part of how Baen are doing it. They are not having any middle men in the works. No Fictionwise, no BooksOnBoard, no Amazon, no Sony, no Mobipocket. So all that expense is not having to be laid out. So they can charge less and still make a good profit because of this.

Quite correct. What the large publishers fail to realize is that they could "cut out the middleman" themselves if they choose to. But that requires a total marketing shift, with the possibility of a revenue drop in the changeover, which is unacceptable to them. To do it, they'd have to direct market themselves, through their p-books and other internet avenues. It could be done for the cost of one of their ridiculous advances to a no-brain celebrity. Shucks, Baen could market better than they do, but they don't need to because all their competitors are so clueless....

[sirbruce]

The math just doesn't hold up. Okay, so hardcover used to be $26 list. Amazon used to buy them at $13 each, sell them at $17 each. $4 profit for Amazon; full profit for publishers.

Now the claim is Amazon is buying them $13 in ebook form and selling them at $10. I don't believe they're paying $13 per ebook. Maybe from some publishers. But I know the costs. Ebooks can easily be $3 cheaper to make than the equivalent paperback, let alone hardback. Mass market paperbacks are $8 - $10 list. How much is Amazon buying those for? $6? No reason ebooks should cost more than mass market paperback.

Okay, so publisher margins will get squeezed if people buy ebooks rather than hardbacks. But they'll still turn a profit. Perhaps ebook prices will need to come up a couple of bucks, but it's hardly the end of the world.

[MV64]

I don't understand the publisher's argument. Yes, it cuts into their profits, but people are still buying hardback books. Like someone else mentioned, hardbacks are aimed at recouping the cost of production. This wouldn't change. Offering an e-book for the price of a paperback would still be bringing in money (would actually increase profits slightly, as paperback books will still sell).

It actually puts them in a better situation in the best case, in the worst it keeps them abuot where they are now.

[sassanik]

I don't buy that publishing ebooks is as expensive as hardbacks or even paperbacks. But I can see how a big publishing house that has been around a while will have trouble with the conversion. They probably can and/or need to cut some jobs out that are obsolete with the production of ebooks. I imagine that many of them don't see how its possible to do that.

It will require a change in thinking on their part and I imagine that many of them are reluctant to do so. As a result they are losing out to smaller publishing houses that specialize in ebooks.

I don't even know if these publishers are even on their radars, but they should be. If you look at fictionwise and bob's top authors, not all of them are from the big publishing houses, it seems that authors from the smaller ebook speciality publishers are coming up more and more frequently.

If they do not change they will shoot themselves in the foot the way Apple did so many years ago when they demanded hardware and software control of their products, and Microsoft was willing to liscence their software out.

If the big publishers think they can charge such high prices and don't realize that there are lean mean little publishing houses out there perfectly willing to chip away at their profits, they will loose out big time.

Amy

[BillSmithBooks]

Originally Posted by Ralph Sir Edward

Quite correct. What the large publishers fail to realize is that they could "cut out the middleman" themselves if they choose to. But that requires a total marketing shift, with the possibility of a revenue drop in the changeover, which is unacceptable to them. To do it, they'd have to direct market themselves, through their p-books and other internet avenues. It could be done for the cost of one of their ridiculous advances to a no-brain celebrity. Shucks, Baen could market better than they do, but they don't need to because all their competitors are so clueless....

Publishers have most of their eggs in the "retailing" basket. If they sold direct, they'd risk tremendous backlash from distributors and brick-and-mortar retailers, perhaps even to the point where the retailers return EVERYTHING by a given publisher and perhaps even demand refunds.

They're not willing to risk poisoning the well for the business they have left in order to sell direct to customers.

Not yet, anyway.

Smaller publishing houses are more prone to taking risks and so are willing to experiment with this model. I suspect we will see some "e and direct sale only" houses emerge to become significant players (akin to small, independent movie studios as compared to the majors in Hollywood).

Their books won't be found in every bookstore...they'll merely have to content themselves with being instant available to the entire English speaking world via the internet.

[Leep]

Amazon's subsidizing of ebooks sales is distorting the market. It means that the optimal list price for a new release is the highest that Amazon will sell for $9.99. Which is somewhere between $25 and $30 for major titles. This helps Amazon by pricing all other ebook retailers out of the game. They don't have the profits from the Kindle to help subsidize ebooks.

While Amazon adjusted their price to $9.99 for "First Family", they have not followed up with that policy for new books from other popular authors. i.e. Lee Child's prerelease for "Gone Tomorrow" is $14.85, and Michael Connelly's new books range from $11.99 for "Brass Verdict" to $15.39 for the pre-release price of "The Scarecrow".

As a Kindle owner, I personally feel it's a bit of the bait and switch syndrome, feared when I purchased the Kindle, but hoped not to see. It seems short-sighted, particularly during the present economic climate. As a purchaser, I won't buy at these prices.

cheers