Is Publishing Doomed? JOHN B. THOMPSON with Williams Cole

[Kali Yuga]

Originally Posted by Andrew H.

Amazon offered very low prices on a *tiny* percentage of their e-book sales....

I agree that Amazon's policy did not quite border on predatory pricing; IMO it leans much more towards a "loss leader," which is legal. However, it's pretty clear that their goal was to establish $10 as the default price, and in a year or two would have started berating the publishers into lowering their wholesale prices.

Originally Posted by Andrew H

Which is why no one ever brought an anti-trust action against Amazon.

Actually, legal action against predatory pricing is very rare; in most cases, the alleged offender can't sustain the anti-competitive pricing long enough to permanently cripple the competition.

It is possible that DeBeers engaged in predatory pricing, but I believe most of their anticompetitive practices were on the supply side -- e.g. freezing out diamond merchants who did not toe the line.

Originally Posted by Andrew H

Anti-competitive behavior is bad because it hurts the *consumer.*

Actually, that's not really the intent of the laws in question. The goal is simply to maintain fair competition. The consumer be damned.

Originally Posted by Andrew H

I mean, Baen *gives away* books. Are they engaged in predatory pricing? Or something worse,since there's no pricing at all.

Baen -- and other publishers, working through ebook retailers -- give away free books as a promotional strategy all the time. The theory is that it is more cost-effective than spending on advertising, and will encourage the readers to purchase titles by that author or in that series.

Baen also has no hope of dominating the market to the extent that they'd put other publishers who work in their genre out of business. Looks to me like they are in the clear.

[M0zza]

Kali, Your Mustang reference doesn't really stand up.

The difference between the two mustangs is rather large. ABS, traction control, trip computer, heated and electronic seats etc have been added to cars since then.

But the difference in a book is what exactly? A book is a book is a book. No technological advances. No SatNav to find your way around it. Nothing.

[Sil_liS]

We should get something straight: the "price" of the book, the one that is sometimes printed on the book, is essentially pulled out of the publisher’s ass. I really don't see why it comes as a surprise that they make a very small profit from hardcover sales when they give the books to the big retailers at 50% of the "price". So we have Amazon who can give larger discounts on the "price" since they got the books half-price anyway, and smaller retailers, who got a smaller discount, if any, can't really give discounts.

Then there is the issue with the price for ebooks. It is generally accepted by the people on this forum that the price for paper and printing is around 10% of the "price". So why is it that the publishers refuse to have ebooks come at a smaller price? Why didn’t they want to just set the price of the ebook to 10% lower than the current pbook?

After that we have the costs in relation to moving the books. For this there is no clear answer, since we only have a vague explanation that they are too small to count. And apparently some of the people reading this thread don't think that what the publishers were saying in the 70's counts. How about the year 2000? Is that recent enough to count?
There is an article about the postal rate increase in the US in the year 2000.

No one argues that the Postal Service should not charge publishers every penny it needs to recover costs of delivery. But it shouldn't charge a penny more.

Books, magazines and newspapers serve and important civic and educational function in our society. It is in everyone's interest if they survive.

So if 10 years ago a 15% increase in the delivery cost would have destroyed the publishing business, it must mean that the costs of moving the books were a significant percentage. When did it change?

And then there is another thing that was mentioned: editing (karunaji, post #40). Why does it take so long and costs so much? Don't the authors use spell-check? Do they give the publishers just a really long txt file that isn't divided into chapters and paragraphs? Just how bad are the initial unaided words of the authors that they need 100 hours of work to fix?

[J. Strnad]

For example, the most basic proofreading of a book that is 100K words long normally requires at least 100 hours. Sometimes there are several rounds of editing, then final proofreading, formatting, illustrations, covers, typesetting etc. It costs tens of thousands of dollars to properly publish a book. All done by educated professionals who demand to be well paid because unlike authors they don't get royalties. If it takes 300 hours (low estimate) on proofreading and editing, formatting, typesetting etc., it will cost a publishing house about $15,000

.

As my late mother used to say, "Pish."

I've proofread professional books and I can assure you that it doesn't take anywhere near 100 hours. Any freelance proofreader who required more than two weeks to proof a 100,000-word book, and charged accordingly, would find himself repeating, "Would you like fries with that?" in short order.

If publishers truly edited books these days and worked to develop manuscripts, that$15,000 figure might ring true. But they don't. An author had better have a typeset-ready manuscript before submitting because the editing he gets, if any, will be minimal. He'll deliver an electronic manuscript that can be edited and sent to an artist, and that file will be "typeset" and sent to the printer.

The major publishers have one thing to sell, and that's cachet. As long as they can convincingly paint themselves as the anointed ones who choose only the best for you, the reader, they'll have a function. Once readers discover the little man behind the curtain, they're history.

[Kali Yuga]

Originally Posted by Sil_liS

I really don't see why it comes as a surprise that they make a very small profit from hardcover sales when they give the books to the big retailers at 50% of the "price".

OK then, time for a quick lesson in retail.

1) Generally speaking, the publishers make more profits off of hardcovers than paperbacks. Again, a paperback might cost $1.50 to manufacture and a hardcover $2.00, even though the hardcover's list price is twice that of the paperback. The publishers often make more money off of hardcovers than paperbacks.

2) It is absolutely normal for the retail price to be significantly higher that of the wholesale price; a 100% markup is actually outstanding these days. Retail markups are how the retailers are actually able to survive.

3) Amazon may get a break on wholesale prices compared to a one-store independent bookstore, but not a better price than Borders, B&N or other large stores. (Too much of a break could easily veer into anti-competitive behavior.) Their main advantages are the efficiencies they can come up with in terms of inventory management, the lack of paying for physical stores and staff, advertising, branding, and better lines of credit.

Originally Posted by Sil_liS

So why is it that the publishers refuse to have ebooks come at a smaller price? Why didn’t they want to just set the price of the ebook to 10% lower than the current pbook?

People don't want a 10% price break. They want a 50% or greater price break, as evidenced by demanding that no ebook be more than $10 -- no matter how long the book has been out. Again, as Thompson pointed out, most people erroneously believe the paper portion constitutes a huge chunk of a book's cost, but that is no longer the case.

And let's face it, some people around here won't be satisfied unless the price on a new ebook is $5.

Plus, ebooks do actually vary in price; generally speaking, the higher the demand, the higher the price. It just fundamentally doesn't make sense to peg ebook prices off of paper. That type of thinking is almost entirely due to transitional issues.

Originally Posted by Sil_liS

After that we have the costs in relation to moving the books.

Most of which is normally the responsibility of the book distributors and retailers (not the publishers). And it's not that big.

For example, Amazon spent $307m on world-wide shipping costs, which was 4% of their net sales. That's for everything they sell, including that $700 50-pound TV where they comped you the shipping costs.

Amazon has spent years squeezing every possible efficiency out of their warehousing and delivery process. So have most other major retailers, especially Walmart, as they realized that if they can control those costs then their net profits will be better and/or they can offer customers lower prices. Borders or B&N may not be in quite the same league as Walmart, but I'd be mildly surprised if all the shipping and warehousing costs were more than 5% of the costs for most big book retailers.


So, just so we're clear on this: You don't seem to know much about publisher's real costs, you don't know yet how retail markups work, you don't know shipping costs. Publishers and retailers pretty much know these things, and attempt to use their knowledge to set the prices -- albeit with very different agendas.

And yet, you believe you know what the right price ought to be for ebooks?

The reality is, you don't. What you know is the price you prefer to pay and the price you're willing to pay. There's nothing wrong with that, but don't be surprised when those are very different numbers than the price someone is actually willing to sell something to you.

[HamsterRage]

Originally Posted by Kali Yuga

The price of books is higher, when adjusted for inflation, than it was in the early 70s.

However, it is exceedingly rare for one specific product to track the CPIX perfectly at a given time. Would you expect the percentage changes in the cost of cars, oil, rice and paper to be identical at all times?

The price of books is way, way higher today. Not just for one particular book, but the whole industry. A normal paperback in 1970 cost about 75 cents, which would translate to $4.29 in 2010 if the price followed inflation. So books are at least double what inflation would indicate, maybe even three times.

That's well out of any range of what you'd normally expect, even for a product that wasn't tracking CPI "perfectly".

As a comparison: Ford Mustang Fastback, 1970, sticker price $2,771 (or $15,000 in 2009 dollars). Ford Mustang V6 2011, $23,000. Assuming the two are roughly equivalent vehicles, we could assert that "Mustangs outpaced the CPIX by 50%."

That's not really a fair comparison. A Mustang is a particular model of car, and changes in it's price aren't indicative of price changes over the whole industry, which is what we're talking about with books. I did check for industry averages, and the average price of a car in 1970 was $3,900 or $22,400 in 2010 dollars. The average price of a car in 2010 is $28,400. So car prices are about 25% higher than inflation would indicate. But if it had followed like books have, the average car in 2010 would have to cost from $50,000 to $70,000.

On top of that, as has already been pointed out, a car in 2010 is not the same thing as a car in 1970. Classic muscle car panache and mystique put aside, a typical driver in 2010 would probably consider a 1970 Mustang to be a dangerous piece of polluting junk. So you're actually getting something for your 25% above inflation.

Books, on the other hand, haven't improved in any way that I can detect over the years.

For myself, I've always figured that people don't bitch too much about the price of paper books because they know that they will eventually be able to get everything at half the cover price in a used book store, or borrowed from friends (or shared with friends).

Those options don't exist with ebooks.

[murraypaul]

Originally Posted by Sil_liS

It is generally accepted by the people on this forum that the price for paper and printing is around 10% of the "price".

Nope.
Several people have claimed several things, but I don't think any of them are generally accepted.

[Sil_liS]

Kali, are you a publisher or a retailer? You are saying that you know more about the cost of books than me. You don't quote anybody on the values. You just know.

Originally Posted by Kali Yuga

OK then, time for a quick lesson in retail.

I don't think that I need one, but fine.

Originally Posted by Kali Yuga

1) Generally speaking, the publishers make more profits off of hardcovers than paperbacks. Again, a paperback might cost $1.50 to manufacture and a hardcover $2.00, even though the hardcover's list price is twice that of the paperback. The publishers often make more money off of hardcovers than paperbacks.

There are three sentences. I didn't argue with the one in the middle, and the other two are almost the same thing, except the first time you say "generally", and he second time you say "often". And please give a quote, because in this article, the statement is "Moreover, in the current print model, publishers can recoup many of their costs, and start to make higher profits, on paperback editions."

Originally Posted by Kali Yuga

2) It is absolutely normal for the retail price to be significantly higher that of the wholesale price; a 100% markup is actually outstanding these days. Retail markups are how the retailers are actually able to survive.

I'm not sure that you actually read what I wrote. I don't have a problem with the fact that there is a retail price, I have a problem with the fact that the publishers say (in the article that I quoted before) that *because* they give a 50% discount, they are barely making any profit. If it isn’t profitable, then don't do it.

Originally Posted by Kali Yuga

3) Amazon may get a break on wholesale prices compared to a one-store independent bookstore, but not a better price than Borders, B&N or other large stores. (Too much of a break could easily veer into anti-competitive behavior.) Their main advantages are the efficiencies they can come up with in terms of inventory management, the lack of paying for physical stores and staff, advertising, branding, and better lines of credit.

I gave Amazon as an example; I did say big retailers in what you quoted. Did you even read that?
And all the advantages that you mention are only for pbooks. Ebooks would make everyone if not equal, at least level some of the differences.

Originally Posted by Kali Yuga

People don't want a 10% price break. They want a 50% or greater price break, as evidenced by demanding that no ebook be more than $10 -- no matter how long the book has been out. Again, as Thompson pointed out, most people erroneously believe the paper portion constitutes a huge chunk of a book's cost, but that is no longer the case.

First of all don't call it a price break. If it is missing from the costs, then it shouldn't be in the price. And you keep forgetting that we still need a reader for an ebook. Since we are paying for displaying the ebook, then why should we pay for the price of the corresponding printed paper?

And most people buy paperbacks. They are going to want to pay 10% less than the price of the paperback. I know that you are saying that when there is only the hardcover, then the price should be comparable to that, but the problem is that after the paperback is out, the price won't come down.
And Thompson didn't talk with readers. I like to see facts, and the fact is that Thompson is selling a 5 year old hardcover at 3 times the price of the paperback. According to your logic, the hardcover must be in high demand.

Originally Posted by Kali Yuga

Most of which is normally the responsibility of the book distributors and retailers (not the publishers). And it's not that big.

How big is it on the publisher side? You know, not only sending the book to the retailer, but also getting back the ones that weren't sold.

Originally Posted by Kali Yuga

So, just so we're clear on this: You don't seem to know much about publisher's real costs, you don't know yet how retail markups work, you don't know shipping costs. Publishers and retailers pretty much know these things, and attempt to use their knowledge to set the prices -- albeit with very different agendas.

I know what I read about the publishers real costs. The only reason why they aren't saying more is because it would actually show how much money they are making. I have bought things in bulk a few times so I know the concept. And shipping costs are attached to some purchases on the buyer side as well.

Originally Posted by Kali Yuga

And yet, you believe you know what the right price ought to be for ebooks?

Yes, less than the pbook.

[Sil_liS]

Originally Posted by murraypaul

Nope.
Several people have claimed several things, but I don't think any of them are generally accepted.

Actually they claimed that that there are other things beside the price of paper and printing that should make the ebooks cheaper, including the lower risk factor. You know, no returns, no storage, no transport.

[karunaji]

Originally Posted by J. Strnad

.

As my late mother used to say, "Pish."

I've proofread professional books and I can assure you that it doesn't take anywhere near 100 hours. Any freelance proofreader who required more than two weeks to proof a 100,000-word book, and charged accordingly, would find himself repeating, "Would you like fries with that?" in short order.

Proofreading 1000 w/hour is a standard industry average for business texts assuming they are written by professional copy-writers or translators. In fact, it is very hard to put a strict number because each text is different. Maybe fiction is easier because there is less interest in fact checking. On the other hand, fiction requires more polished style and that's even harder because there are no objective measures.

If publishers truly edited books these days and worked to develop manuscripts, that$15,000 figure might ring true. But they don't.

I don't really know but most self-published books are kind of rough in terms of language. Behind each successful author there is a good editor.

There is a food for thought. Most journalist articles have some boo-boos. Factual, stylistic, inconsistencies, even typos etc. It reflects the nature of that industry (time, money constraints). Will public accept the same level of quality from e-books?

An author had better have a typeset-ready manuscript before submitting

It is an impossible task for most authors. More detail below.

The major publishers have one thing to sell, and that's cachet. As long as they can convincingly paint themselves as the anointed ones who choose only the best for you, the reader, they'll have a function. Once readers discover the little man behind the curtain, they're history.

I agree that big publishing houses have nothing substantial to add. The cost savings they can provide are minimal and the corporate need for ever increasing profits is damaging. Not comparable with car production which consists of thousands of parts that all require big investments in R&D, engineering, materials etc.

Why does it take so long and costs so much? Don't the authors use spell-check? Do they give the publishers just a really long txt file that isn't divided into chapters and paragraphs? Just how bad are the initial unaided words of the authors that they need 100 hours of work to fix?

Certainly the author's first draft should be very well written otherwise even the best editor won't be able to do anything to improve it. However, typos and submitted format are easy to fix and are irrelevant. Editing is delving into most minute details, it is like final polishing, very subjective and yet it is worth it every penny. If the story has even one rugged edge or word, it throws off reader's imagination. It costs $1 to fix this word and $10,000 to know which word to fix

[Barcey]

It strikes me as an article/book written for the publishing industry, researched exclusively within the publishing industry and telling them exactly what they want to hear. A good market strategy for the author but not much good for the industry.

I've observed a lot of incestuous thinking within the publishing industry blogs and websites. Nobody can possibly understand the complications unless you're from the industry. Unless that changes they're doomed.

[Sil_liS]

Originally Posted by karunaji

Certainly the author's first draft should be very well written otherwise even the best editor won't be able to do anything to improve it. However, typos and submitted format are easy to fix and are irrelevant. Editing is delving into most minute details, it is like final polishing, very subjective and yet it is worth it every penny. If the story has even one rugged edge or word, it throws off reader's imagination. It costs $1 to fix this word and $10,000 to know which word to fix

What I see in Europe for paperbacks in English, is that the prices depend more on the store than on the publisher. So all the variation in the value of a book and the work that was put in it is lost by the time it reaches the buyer. I read fiction and there isn't a difference in price between a book that is placed in a universe where the language is modern English, and a book where the language is a little different from modern English. I would assume that the latter would require more work.

[leebase]

Originally Posted by Andrew H.

There is no "free tit," nor was someone else "paying for" the "suckle." I'm not buying my books on welfare.

Amazon was subsidizing the ebooks they sold. That's the ENTIRE controversy. The publishers put a stop to Amazon selling books below cost.

People are angry because they LIKED Amazon subsidizing their reading habits. They could care less about book sellers having to compete against Amazon's ability to lose money. They won't look forward to what the future would hold with Amazon as a true monopoly.

They liked to suckle at Amazon's tit, and that IS indeed the controversy.

Lee

[wigm]

The day the publishers start paying a little more time proofing/editing/formatting e-books that's the day I'll feel comfortable paying hardback prices.
To me the value of a book is in the experience of the story. If that is ruined by half a dozen typos in the wrong places (just happened to me) then the book is not worth the used pbook price.

[Andrew H.]

Originally Posted by leebase

Amazon was subsidizing the ebooks they sold. That's the ENTIRE controversy. The publishers put a stop to Amazon selling books below cost.

People are angry because they LIKED Amazon subsidizing their reading habits. They could care less about book sellers having to compete against Amazon's ability to lose money. They won't look forward to what the future would hold with Amazon as a true monopoly.

There.Is.Nothing.Wrong.With.Amazon's.Pricing.

Amazon is not subsidizing anyone. A subsidy is a direct monetary contribution. Amazon is discounting books, in some cases below its cost.

You're right in your second point. People don't care about other booksellers. Nor should they; if those booksellers can't compete with Amazon, they should go out of business. We are only talking about discounts on a very small number of books.

Your theory, apparently, is that Amazon's low prices would drive all other e-booksellers out of business and then would raise prices. With one exception (Standard oil in the 1890's), this doesn't happen in the real world for lots of reasons, including low barriers to entry for competitors and the fact that books also compete with other forms of entertainment. This same claim is raised about Walmart (that after they have outcompeted local businesses they will raise prices), but it doesn't happen there, either.

They liked to suckle at Amazon's tit, and that IS indeed the controversy.

Lee

If you insist on using that language, I'll point out that I would much rather suckle at Amazon's tit than at the part of the publisher's anatomy you seem intent on suckling. Horses for courses.