Do Amazon and the Publishers want to Kill Digital Sales ?

[darryl]

What was missing from the print book market for a long time was competition between publishers.. The BPH oligopoly had a stranglehold on everything, and the industry operated to their benefit. Both Authors and Consumers were, at least in my opinion, ruthlessly exploited. Where there is no competition the market does not work very well in setting prices. Whilst prices need not be inflated that will often be the result. Rational players will collect extensive data and experiment with price so as to find the optimum price point where overall profit as opposed to per unit profits are maximised. A complacent industry without effective competition may well be satisfied with less than optimal pricing and feel no need to experiment or change the status quo. When Amazon decided that the optimum price for a newly released BPH ebook was about $9.99 this was perceived as a grave threat to the status quo, despite Amazon effectively subsidising the difference and thereby enriching the BPH. And of course, in determining optimum price, the BPH needed to consider not only the effect on EBooks but on PBooks, a consideration that I imagine was not of great concern to Amazon.

But the situation now has produced competition, despite agency pricing. Indie/Self-Published books sell at much lower prices, and efforts are made to optimise those prices. However, I suspect that these lower prices cannot sustain a tradiional publishing business model with all of its associated inefficiencies. Yet traditionally published books must compete with Indies. Under agency publishers essentially attempted to differentiate the market for their books based on alleged better quality because of their gate-keeping. This has not been the catastrophe tat it could have been, because there are a not insignificant number of readers who perceive value in this gatekeeping role and/or the higher prices. However, indications seem to be that the BPH are continuing to lose market share, and will ultimately have to face up to this and drop their prices.

The issue is not agency. It is the huge disparity between supply and demand and its effects on price. Whether an agency or a wholesaling model is used, the lower prices will need to be funded largely by the Publishers and not by Amazon. If the BPH cling to their higher prices I don't think they will collapse tomorrow. But I do expect that they will continue to haemorrhage market share pretty well indefinitely until they do adapt with lower prices or become irrelevant.

[fjtorres]

The BPHs are quite happy to hemorrhage market share so long as they meet their HQ quarterly financial targets.

Most of their "problems" stem from their mandated priorities, where reporting ever-increasing gross revenue trumps unit sales, and where controlling print channels trumps reader or author interests. I don't see them disappearing, either, because they have a treasure trove of copyrights they control and can exploit for the next century. The scenario I see developing is they keep on buying other tradpubs and/merge together so they can keep reporting quarterly "increases" while laying off more and more production staff. That can keep them going for at least another ten years.

In the meantime they will continue to acquire IP from legacy authors and newcomers still willing to submit. They will be seeing less manuscripts but with less bidders (because of the mergers) they won't see a shortage any time soon. Over time, they will be reducing their output and focusing on proven big sellers and they will start producing more in-house content via work-for-hire contracts and in-house staff. (They are already talking about that.)

As their big name tent-pole authors age and "retire", I expect they'll start doing Tom Clancy type contracts, buying out their names and IP so they can keep on producing ghost content under their brands. Think of Patterson's book mill, only run by Penguin or Hachette. Since good writers come up with story ideas by the dozen, far more than they can ever write up themselves, they can buy enough plots and story summaries to keep their IPs running for another generation or two.

Basically, the BPHs can maintain their internal practices indefinitely, just by ditching their riskiest buys and adopting the book mill model of the pulp days. Which means they are under no immediate pressure to change their pricing strategies. In fact, they might be happy to see their new title ebook sales very slowly erode to near zero if they can still meet their quarterly financials along the way. In their ideal world ebooks would be solely for backlist: that was their very first strategy, after all, windowing ebook releases. I suspect they'll return to it, doubling down on a print first model after their Agency Part Deux contracts expire.

They still have plenty of options that don't require lowering prices any time soon.

[whismerhill]

Originally Posted by MGlitch

And just what should the price of an ebook be? Should established and popular authors ebooks be cheaper since they're more likely to sell more? Or should they be priced higher and new authors be priced lower? How would the government ensure that the pricing systems they create would allow for new authors to grow as a viable means to make a living?

I feel like the government argument I throwed in, was badly misunderstood

I was merely suggesting the government puts back the final price of ebooks into the digital etailers hands instead of the current system where the publisher dictates the price nothing more, nothing less.

as for whether the publishers would be able to hire lawiers & crash such a law this is for another debate.

[kennyc]

Originally Posted by whismerhill

I feel like the government argument I throwed in, was badly misunderstood
....

Government? The government should have nothing to do with selling books.

[whismerhill]

Originally Posted by Manabi

Well that's the problem. The BPHs, using agency pricing, are demanding that they set the prices even if the market won't buy them. Sales go down? Blame it on piracy, never on prices being too high. So definitely don't buy it if it's too high, but don't expect the prices to be adjusted as they would in a sane market.

exactly !
that's why I thought that "maybe" the governments should do something about it, and put back the price in the retailer's hands. (note the *maybe*. a lot would have to be discussed. And in any case it doesn't belong to us to decide such matters ...)

Originally Posted by kennyc

Government? The government should have nothing to do with selling books.

your argument doesn't add much. did you at least read a couple page back to understand what we're talking about ?

[Manabi]

Originally Posted by fjtorres

It may already be too late for DRM-free to help.

I concur, I think it'd help them even less than it helped the record companies. The market moved faster on eBooks than it did digital music, and the BPHs handled the change even worse than the record companies did. Which is kind of impressive in a train wreck sort of way.

Originally Posted by whismerhill

exactly !
that's why I thought that "maybe" the governments should do something about it, and put back the price in the retailer's hands. (note the *maybe*. a lot would have to be discussed. And in any case it doesn't belong to us to decide such matters ...)

Unfortunately for consumers, agency pricing by itself isn't illegal so the government can't do anything. The reason the government stepped in with Apple and the BPHs was because they colluded together to fix prices. It was basically a conspiracy not only to force agency pricing on the entire market, but to force set prices on the entire market. If they had simply waited till their contracts expired and refused to accept anything but agency pricing in the new ones, without working together to do so, it would have been perfectly legal. And that's what they did.

I really don't think it's working out for them, but at least they didn't do it illegally this time around.

[darryl]

Who sets the prices is simply not the problem. Prices were heavily discounted previously because Amazon saw it as being in their interest, apparently even to the point of making nothing on the sale of BPH Ebooks. Those days are gone and most unlikely to return. Whether agency or wholesale, lower prices will need to come from the Publishers without Amazon subsidising them. Legislation forcing the end of agency would achieve nothing.

I couldn't agree more with kennyc. Governments have no place in this market. A nightmare scenario that raises it ugly head a little higher once the precedent of government intervention is set is the implementation of a European type fixed price regime. This is of course the logical outcome of the arguments of misnamed lobby groups like "Authors United". Once books become accepted as special snowflakes because of their "cultural" importance then of course culture must be protected by leaving its guardianship in the hands of the BPH rather than evil Amazon! Why? Because!

[MGlitch]

The thing is that while the BPH's might not be adjusting as quickly as you'd like, they'll need to adjust at some point if the masses view their prices as too high. Or they'll go out of business, unless they can increase print sales to reclaim the lost profits of ebooks.

I've seen claims here that publishers should treat the editors, artists, and authors better. Including better royalties, and better overall pay. Yet I've also seen a fairly strong claim that ebook prices are, currently, too high.

These seem to me to be mutually exclusive if you accept that the profit margins on ebooks versus pbooks is, relatively, narrow, and consider that most BPH's release print and digital versions of their books. I'm not saying ebook sales should prop up pbooks, nor the other way around. Though big name authors do prop up new authors, and thus -book- sales prop up -book- sales.

I'd also point out that in the course of my lifetime mass market prices have risen maybe 4 dollars or so. At least from the earliest prices of books I can recall compared with the typical prices today. This is for the US market, I'm not sure how prices have fluctuated in other countries. But at that growth rate it's not even doubled in a number of decades. I think it can be argued that this price increase is roughly keeping up with inflation. And while I'm using mass markets, the cheapest of print books, ebook prices tend to fall to around the mass market price once the print book is released in that edition.

I think BPH's shoudl take the route of treating their staff and authors better. As well as accepting more new authors and releasing them only in digital. It may not get them as many sales as a print release would, but if the digital sales are significant they can consider doing a print run. This saves them some money, and puts them in a position to react quickly should the new author prove to be popular.

[Tattncat]

Originally Posted by cvkemp

I have and I do buy ebooks that are more expensive than paper ebooks. Why, because they are easier to store. I was one of these that had books stacked everywhere. I got my first e-ink reader and discovered how easy it was to store my books. So I managed to get the books that I wanted to keep in ebook format and I have sold or given away almost all of my paper books. Yes there are some paper books I still have because they are old books that were given to me by parents, grandparents and friends. They have special notes in them. I also buy and give some books to friends and family. But I only get ebooks for myself if at all possible.

Ditto! I don't buy paper at all.

[rkomar]

There has to be some government involvement, at least in enforcing copyrights, anti-competition laws, library rights, combating piracy,... So, it's not realistic to want the government out of the business.

[MGlitch]

Originally Posted by rkomar

There has to be some government involvement, at least in enforcing copyrights, anti-competition laws, library rights, combating piracy,... So, it's not realistic to want the government out of the business.

These are policies which are applied in much more broad terms, which also applies to other trade goods and services. Not quiet what's being suggested here, nor what I suspect most folks have in mind when they say they want government to stay out.

[rkomar]

Originally Posted by MGlitch

These are policies which are applied in much more broad terms, which also applies to other trade goods and services. Not quiet what's being suggested here, nor what I suspect most folks have in mind when they say they want government to stay out.

Sure, but if they're already involved supporting copyrights for the "public good", then it's not much of a stretch saying they have a place getting involved in other ways, if it's also for the "public good".

Saying that, I'm not of the opinion that the "public good" has anything to do with copyrights anymore. So, whose side they would take in future involvement isn't clear.

[fjtorres]

Originally Posted by rkomar

Sure, but if they're already involved supporting copyrights for the "public good", then it's not much of a stretch saying they have a place getting involved in other ways, if it's also for the "public good".

Saying that, I'm not of the opinion that the "public good" has anything to do with copyrights anymore. So, whose side they would take in future involvement isn't clear.

When government gets involved in (non-legal) business matters it is always on behalf of producers or campaign contributors. Consumers are never the intended beneficiaries and they always end up footing the bill directly or indirectly.

"We're from the government. We're here to help."

Never true in the business world.
No matter how bad the dispute, unless existing laws are being broken you do not want to see government get involved.

In ebooks, the proof lies in *who* is calling for government "protection" and *why*.
It isn't readers, it isn't authors, it isn't retailers.

[kennyc]

Originally Posted by fjtorres

When government gets involved in (non-legal) business matters it is always on behalf of producers or campaign contributors. Consumers are never the intended beneficiaries and they always end up footing the bill directly or indirectly.

"We're from the government. We're here to help."

Never true in the business world.
No matter how bad the dispute, unless existing laws are being broken you fo not want to see politicians involved.

This!

[fjtorres]

Originally Posted by MGlitch

I've seen claims here that publishers should treat the editors, artists, and authors better. Including better royalties, and better overall pay. Yet I've also seen a fairly strong claim that ebook prices are, currently, too high.

These seem to me to be mutually exclusive if you accept that the profit margins on ebooks versus pbooks is, relatively, narrow, and consider that most BPH's release print and digital versions of their books. I'm not saying ebook sales should prop up pbooks, nor the other way around. Though big name authors do prop up new authors, and thus -book- sales prop up -book- sales.

Sorry, but neither is quite true.

BPH margins are not thin. Their net runs in the double digits (which most businesses would kill for) despite vast inefficiencies and waste.

Check the chart here:

http://the-digital-reader.com/2014/0...ustry-numbers/

Or this one, for the big picture:

http://publishers.org/news/us-publis...n-revenue-2014

One BPH, for example, houses their datacenter in the Flatiron building in the middle of Manhattan, an iconic and very very expen$ive building to rent space in. They use it as a wiring closet.
The smallest of the BPHs has something like 19 VPs, all making big salaries.
And of course, they all occupy glass towers in Manhattan and London, not Michigan (Amazon Publishing) or North Carolina (Baen) or elsewhere, like many other smaller publishers. Lots of other examples of inefficiency abound. Just moving to a different NYC address, say the Bronx or Queens, would probably let them double creative staff salaries. Not that they ever would.

And no, big name authors do not subsidize midlisters or newcomers, rather the opposite. The big name authors receive enormous upfront lump sum payment for their titles that far exceed any nominal royalties the book could ever earn them. Which isn't to say the publisher loses money; it's just that the revenue split isn't as one-sided as for "lesser" authors. Likewise, they don't lose money on midlister titles that don't "earn out". The advances are so small and royalties so low and, above all, they do so little to promote them the titles make money off pre-release sales alone. When a midlister is dropped for low projected sales it isn't because they are costing the publisher money--the only titles they actually lose money on are politician campaign books where they pay tens of millions to buy political influence. Midlisters are dropped because they are filling a slot in the schudules but aren't generating enough net cash to meet the publisher's ambitions.

There is a reason why midlisters who got their titles reverted, back when that was still possible, all went on to make way more money off the same titles as Indies.

Publishing ala BPH is very profitable despite their best efforts to make it unprofitable. (On paper. Lots of Hollywood accounting going on.)

Even in "bad times" they are still raking it in, and not just off the predatory author contracts, unpaid interns, and constant downsizings. They could afford to lower prices or treat employees and suppliers better or both. They just choose not to.

Mostly because they don't have to.
Again, they have no shortage of dreamers who are willing to put up with those terms just for the perceived prestige of a contract or a title.