Hachette complains about eBook prices

[dadioflex]

Edit.

[JSWolf]

if hardback books went away, I would not be sad at all. In fact, that would be a good day. Also the silly trade format (If I have it correct) can also go away. Trade is the new paperback format designed to be taller so the publishers can charge more than a regular mass market paperback.

I don't buy hardcovers or trades as they are just there so publishers can charge more.

[Abecedary]

Originally Posted by JSWolf

if hardback books went away, I would not be sad at all. In fact, that would be a good day. Also the silly trade format (If I have it correct) can also go away. Trade is the new paperback format designed to be taller so the publishers can charge more than a regular mass market paperback.

I don't buy hardcovers or trades as they are just there so publishers can charge more.

Ummm, don't trade paperbacks predate mass-market paperbacks significantly? Oh, and Jon, just because you don't want something, I'd really appreciate it if you wouldn't take it upon yourself to make that decision for EVERYONE. I personally can't stand MMPB, and buy trades when possible. Then again, most of the types of books I read aren't intended to be sold in the supermarket checkout line, so MMPB versions aren't even produced for them.

[rhadin]

Originally Posted by Daithi

I'd be interested to see what the financials really are in regards to a typical new hardback book. Is Amazon really losing money on ebooks they sell at $9.99? How much does a hardback actually make after you deduct the cost of printing, distribution, and the discount from unsold books returned to the publisher? What is the author's percentage?

I can't give you exact figures, each publisher is different. But I ran a publishing company (and I'm still involved in publishing), so I can give you some generalizations.

1. Amazon is losing money on the $9.99 bestsellers. Books are "sold" to retailers with a percentage discount based on the listed retail price. The discount is generally 50 to 55 percent. Even with a 60 percent discount, Amazon would need to pay the publisher $10.38 on a book that has a suggested retail price of $25.95. Probably the breakeven point is a suggested retail price of $19.95, but few new bestsellers in hardcover have such a price point.

Why this question keeps surfacing, I do not understand. The publishers themselves have said that Amazon is taking a loss and none of the analysts have disputed this. Seems to me that that this question should be laid to rest permanently.

2. How much does a hardback make? That depends on a lot of factors, not least of which is the print run -- the larger the print run, the lower the print cost. A Harry Potter book that probably made the publisher $5 or more dollars per book after all costs. Books with small print runs make comparatively less. One unknown in the equation is the number of books remaindered. Remaindered books are generally a loss for a publisher. The profit margin on a hardcover is much greater than that on a paperback. It is like with automobiles. The SUVs are high margin profitmakers whereas the small compacts are very low margin.

3. Author royalty percentages are based on the value of the author. Stephen King and JK Rowling command significantly higher roylaties than John Unknown. However, the range generally begins at 8 to 10 percent. It also matters how the royalties are structured. Some royalties are based on suggested price, some on wholesale price, some on other bases.

[Greg Anos]

Originally Posted by Kali Yuga

....

I might add that I have a sneaking suspicion that at least some of the people who deride an industry for failure to adapt to a disruptive technology would not be too thrilled if it was their industry, livelihood and/or profits that were under threat. This is quite evident, for example, when you examine how negatively programmers and IT workers react to their own jobs getting outsourced to India.

I are one of those IT'ers. Soon I may be selling burgers (at 52). You don't hear me complaining about it on these threads. The world changes, and I must change with it.

Part of the reaction to off-shoring is the loss to the business of detailed, unique, skilled experience, which is corporation specific, that is also being thrown out the door as well, in the name of saving a few bucks. And as people like McKinsey have noted, by the time you implement all the new managerial controls to make the process work, you don't save that much money. But....not my problem any more.

[rhadin]

Originally Posted by JSWolf

if hardback books went away, I would not be sad at all. In fact, that would be a good day.

I don't think it would be a good day at all. I buy 100+ hardcover books every year. Some books and authors are well worth keeping in a permanent collection and the one thing that is certain today is that an ebook is far from permanent.

And contrary to the opinion of most, there are still lots of important books that are not suitable for ebooks unless one is willing to consider PDF as an ebook format (but even then, I would much prefer a print copy).

I have yet to see a 2-year-old ooh and ahh over the ebook version of a Beatrix Potter book like they do over the print version.

At this moment in the evolution of books, ebooks are really only wholly acceptable for fiction that has virtually no graphical element and that is considered "read once then toss" material (and yes, there are some exceptions, but exceptions only act to prove the rule).

[rhadin]

Originally Posted by Ralph Sir Edward

Part of the reaction to off-shoring is the loss to the business of detailed, unique, skilled experience, which is corporation specific, that is also being thrown out the door as well, in the name of saving a few bucks. And as people like McKinsey have noted, by the time you implement all the new managerial controls to make the process work, you don't save that much money. But....not my problem any more.

Ralph, I'm with you on this. Much of U.S. editorial work in the past 5 years has been off-shored from the U.S. to India and other countries where editors will work for significantly less. These off-shore editors charge between one-fifth and one-tenth of what a capable, experienced, skilled U.S. editor can charge and the publishers are taking advantage of that to either off-shore the work or depress the local wage. But the result is also a lessening of the quality, which we see when we pick up a book and note all the errors.

This is not to imply that the editors in these other countries are not skilled -- they are skilled; they just are not skilled in the culture of the U.S. I would find it very hard to competently edit a book intended for the Indian market because of my lack of familiarity with the culture.

The biggest problem in all industries is that the focus is on the quarterly dividend for shareholders rather than on what is good for either the company or the country long term. Publishers off-shore my work but then call me wondering why I haven't bought the latest edition of XYZ for my work library. Can't buy what I can't pay for doesn't seem to get through to them.

[Daithi]

Rhadin,
Thanks for the response. It is nice to get a response from someone that is in the publishing industry. You had asked, why this question keeps surfacing and thought it should be laid to rest permanently. Well, at least I can give you the reasons it keeps surfacing in my mind. Bear with me here, it may be that I'm following some faulty premises so my reasoning can be way off. Anyway, the following is why I wonder if Amazon is losing money at $9.99 per ebook.

If I go to Amazon's site, and view the books section (not the Kindle section), I see that in the first 3 pages or so of newly released books that the price for hardbacks is between $13 and $16. Even at my local Barnes & Noble, Borders, Target, and Walmart, I rarely see books at the $26 range that publishers often indicate they receive. Whenever I actually buy a fiction hardback it is almost always between this $13 to $16 price point (usually at Walmart or the grocery store). The only time I've paid in the $26 range is for non-fiction.

I also know that hardback books have costs that are not associated with ebooks. The big three costs not associated with ebooks are distribution costs, printing costs, and remainders costs. If each of these costs were $1.50 per book then we go from a typical $16 price per book down to $11.50, and if you can get another $1.50 in savings from other costs such as storage, fulfillment, invoicing, collection, and sales reps then $9.99 would not be losing money. In fact, it would be delivering huge margins. Plus, ebooks never go out of print.

So that's why I'm sceptical of the claim that Amazon (or the industry) is losing money at $9.99 for an ebook.

[pdurrant]

Counter-example:

Baen Books produces two $25 hardbacks each month. All their hardback releases for the past ten years have also been available for $6 as an ebook, two weeks before the hardback hits the shelves. Indeed, their entire output each month (6 books on average) is available in ebook form for a total of $15.

Baen are profitable, and continue to sell hardbacks, paperbacks and ebooks.

There's no reason why other publishers couldn't do the same, if they stopped wasting money on DRM, and told Amazon and other retailers that insisting on the same cut for ebooks as for paper books was ridiculous.

Originally Posted by GA Russell

Here is a Financial Times article from today in which the French publisher Hachette complains about Amazon's $9.99 price for best sellers. He thinks that if the public becomes accustomed to that price point, all other eBooks would have to be sold for less, and the hardback book may go away.

http://www.ft.com/cms/s/0/0df31226-9...44feabdc0.html

[JSWolf]

Originally Posted by Abecedary

Ummm, don't trade paperbacks predate mass-market paperbacks significantly? Oh, and Jon, just because you don't want something, I'd really appreciate it if you wouldn't take it upon yourself to make that decision for EVERYONE. I personally can't stand MMPB, and buy trades when possible. Then again, most of the types of books I read aren't intended to be sold in the supermarket checkout line, so MMPB versions aren't even produced for them.

I gave MY opinion. I am not talking for you. So please don't say I am.

[JSWolf]

Originally Posted by rhadin

I don't think it would be a good day at all. I buy 100+ hardcover books every year. Some books and authors are well worth keeping in a permanent collection and the one thing that is certain today is that an ebook is far from permanent.

And contrary to the opinion of most, there are still lots of important books that are not suitable for ebooks unless one is willing to consider PDF as an ebook format (but even then, I would much prefer a print copy).

I have yet to see a 2-year-old ooh and ahh over the ebook version of a Beatrix Potter book like they do over the print version.

At this moment in the evolution of books, ebooks are really only wholly acceptable for fiction that has virtually no graphical element and that is considered "read once then toss" material (and yes, there are some exceptions, but exceptions only act to prove the rule).

The reason to get rid of hardcover and other overly expensive editions (IMHO) is that eBook prices are based upon them. eBooks don't have different bindings and the price to produce an eBook has nothing to do with the price of the pBook. And until the publishers learn this, we can do without the expensive eBook price raising editions.

[ficbot]

Daithi makes some interesting calculations. I just feel like the readers keep telling publishers that it makes no sense to not get a break on the ebook prices due to the lack of physical materials needed to manufacture, ship, store etc. them and the publishers keep saying 'but here's what you don't understand.' Wouldn't it make more sense for the publishers to instead focus their energies on how to reduce the costs to a level that the customer can comfortably pay, and then they can sell and the customers can buy and everyone will be happy? It reminds me of the times when the Canadian dollar has gotten at par with the American dollar and Canadian book buyers have complained about our higher list prices. Rather than work to lower the list prices so they matched, the Canadian publishers instead printed editorials in the newspapers about why the prices were higher and why we should be patriotic and pay them. And the customers responded by buying the books across the border in America, or on-line. Why pay a higher price if you don't have to? Why would they think people would willingly do that?

As for industries, all industries change with the times. I read a historical fiction novel recently where the professions of the characters included one guy who was the town water carrier. He would go to the well and pick up water and carry it around to people. We sure don't have that job anymore! Those people would all be unemployed. Or how about the town washer-woman? Or the town blacksmith? Or the people who used to manufacture the oil lamps, hand-crank washing machines, corsets and other items we don't use now?

Or to use a more recent example, I have a knowledge-based job (teaching) and urbanization has changed MY career. People in my area who have kids cannot afford to live in the city, so the public school board is crumbling. One's choices as a teacher now are either a) move to the burbs and work there or b) acquire a specialization in an in-demand area where there are still jobs in the city. I chose option B and got the French certification. Such teachers are always in demand because not just anyone can get this qualification (i.e. you have to have good enough French and not everyone has that capability) and because you are not allowed to teach this subject without the qualification. I have still been able to find a job in the city. But that was because I accepted the reality that for just plain old regular teachers, there were no jobs and these were my choices if I didn't want to starve.

[JSWolf]

One other reason for lower eBook prices is also due to the restrictions placed on them vs. placed on pBooks.

[zerospinboson]

Originally Posted by Daithi

So that's why I'm sceptical of the claim that Amazon (or the industry) is losing money at $9.99 for an ebook.

Consider amazon might be forced to pay '% of list price' to the publishers, rather than sell price.

[Xenophon]

Originally Posted by pdurrant

Counter-example:

Baen Books produces two $25 hardbacks each month. All their hardback releases for the past ten years have also been available for $6 as an ebook, two weeks before the hardback hits the shelves. Indeed, their entire output each month (6 books on average) is available in ebook form for a total of $15.

Baen are profitable, and continue to sell hardbacks, paperbacks and ebooks.

There's no reason why other publishers couldn't do the same, if they stopped wasting money on DRM, and told Amazon and other retailers that insisting on the same cut for ebooks as for paper books was ridiculous.

It's important to note that Baen does this, in part, by cutting out one-and-a-bit levels in the distribution chain. Their eBooks skip the "distributor" step entirely (that would be Ingrams, etc. in the paper book world), thus skipping their cut of the selling price as well. In addition, the cut taken by Webscriptions (which is a separate business from Baen Books, although it's occasionally hard to tell that from the outside) is rather lower than that taken by Amazon, for example. Finally, Webscriptions takes on a larger portion of the preparation of eBooks than do other eBook retailers (thus reducing costs for Baen). So most of the improved pricing at Webscription comes from disintermediation, rather than from getting rid of paper and its associated costs.

Xenophon
(All of the above written from memory, so apply an appropriate amount of salt.)