Stars fall in Amazon protest about ebook prices

[C.I.Bond]

The problem is that the e-books are being sucked up into a model that is designed for shipping paper products. This model incurs a lot of overhead because it is working with physical materials and that means lots of labor and retail/storage space so naturally the cost is spread out over all the products. Manufactures don’t decide what each product should cost based on how much is costs to make them they decide what the cost based on what they can get for them. When was the last time you saw an older person sell their home for a little more than they paid for in 1935 because that was fare? They will point out that they incur additional costs with the formatting and venders that they didn’t have before those crazy-newfangled e-books. Publishers see e-books as a threat because they undercut the price of their money makers, the hardcover.

The reality is that e-books have very little overhead associated because they are just data. As a weenie author (Indie) I have experience first hand with this sort of thing. Basic copy editing will probably cost between $600-$2,000… cover art also depends on who you get but you can have something decent for about $500. Keep in mind that I don’t pay any of these people’s social security or medical insurance. I can do the conversion but I don’t have a lawyer on retainer or anything like that and since I work from home I don’t pay for an office. So my costs are minimal.

The real costs of an e-book in a professional publishing environment can only be determined if we have a company that only puts out an e-book version and maybe offers a print-on-demand option. Then all of the old crap won’t be in the system to confuse the issue.

[GreenMonkey]

Originally Posted by Worldwalker

If I were to buy a DRM-locked ebook, I couldn't read it on whichever reading device I wanted. I couldn't let my mother-in-law read it. I couldn't sell it to a used bookstore when I didn't want it anymore. I couldn't give it to the church sale or the charity book table or the library.

Yes, if I broke the DRM, I could do some of those things, though still far from all. But we're talking the legal and cabal-intended uses of the book, not what one could do otherwise. The only thing you listed that might be an advantage is sending it to some random location ... but I have more books than I have time to read loaded on my ebook reader already, so I feel no need to buy any additional ones at random times. If I buy a pbook that sucks, at the very least I can give it to some relative who might like it, and earn a few brownie points that might some day turn into them giving me a better book. With an ebook, I can't even do that.

That's my main issue. All companies - not just book companies - are moving to this model. Thanks, in my mind, to the DMCA law which prevents DRM circumvention (even for fair-use or backwards-engineering reasons...stuff that was legit before the DMCA). Without that we'd have a ton of legal, easy-to-use devices and programs that would circumvent the DRM.

All of the companies are trying to move to this "you only own a license to the product" scenario, and away from ownership. Video games with their DRM'd, one-owner digital downloads - movies and TV via iTunes and the like - etc.

With these kinds of restrictions on the product, it's not ownership. It's a lease. Which is why I find myself buying used hardcovers instead. At least you still OWN a hardcover. It's yours to use (or sell) as you would like.

It's about controlling the secondary market, and preventing real ownership, more than anything.

And the Agency 5 pricing scheme? It smacks of price-fixing to me. Companies are not supposed to make non-competition or price-setting agreements. Anti-monopoly and anti-price-fixing laws are supposed to prevent this kind of cross-company solidarity of pricing.

[Worldwalker]

Not really, C.I.

There are companies like Baen and O'Reilly (the examples I use the most) who sell DRM-free ebooks for quite reasonable prices, and sell enough of them to make a very significant profit. There are also publishers here on MR, indies who do small or POD print runs as well as ebooks, who are willing and able to sell their ebooks below the prices of their printed books. I buy books from them.

Publishers don't try to pay the costs of HCs from the sale price of MM paperbacks; why should they pay them from the sale price of ebooks?

[Worldwalker]

Originally Posted by GreenMonkey

It's a lease.

It's a lease, and if you have a Kindle, Amazon can decide they want to de-sell you that book any time they want to. Probably the same for other books, too ... anything that talks to the company store.

Ah, I like my ebooks that arrive by email from companies whose stores never touch my reader.

[MikeFromHC]

Originally Posted by jhempel24

Wrong...and wrong....We don't want to pay next to nothing, we want fair pricing...not a price higher than a HC which some ebooks do.

HC cost more to produce, it's better binding, better paper, a separate dust jacket, want me to go on? Please.

Are you saying that this difference accounts for the 3x price difference?
If so, why can they give much larger discounts?

Note that JSWolf says "The perceived value of a hardcover is greater so the price is higher."

What is the percentage of printing, binding, paper, and transportation found in a book?

[thinkpad]

Originally Posted by tapar

My conspiracy theory is that book publishers would prefer it ebooks failed and were never heard from again. The longer they can stave off ebook adoption the better for them. They won't need to find ways to address piracy, they won't have to give up the margins on the hardcovers...basically from a publishers viewpoint....I can't think of many reasons to be happy about ebooks. They won't have to worry about authors hiring their own editors and cutting them out of the loop entirely.

Theory, I see it as a fact
E-books are just all a big headache for the big publishers.

[thinkpad]

Interesting Blog-post:
https://americaneditor.wordpress.com...-the-agency-5/

April 2011 will be the moment in ebook history that historians will be able to point to as the turning point. If the iBookstore succeeds in eliminating Amazon’s dominance of ebook sales and in selling a lot of Agency 5 ebooks, then agency pricing may have a longer life. But if Apple fails to topple Amazon and if the iBookstore sales of Agency 5 books aren’t spectacular, agency pricing will die.

[nashira]

....You know, for the prices they often sell regular books in Australia, even the hijacked prices look cheap.I'm used to the whole books for an ounce of proverbial (or not) gold thing and it sucks. It's always sucked, it's just now in a different form and to more people.

And to be perfectly frank, I don't buy books from major publisher - in part because I cannot legally buy from whole handfuls oof them, or because they have drm or the price is attempting to reach australian paper book prices and it just makes me want to go hide on smashwords or gutenburg.

Smashwords, by the way, does get my money and even if the books aren't mainstream, I've still read some good ones. I'd happily pay 10-12 dollars for more mainstream books if they would let me and didn't come with a zillion strings attached, because it's better than the 20-50 dollars I'd have to pay for the privilege of buying it in paper. And no, I'm not talking about hardcovers souly. I don't buy a lot of those, I don't need them. But I do buy more ebooks from the 0-12 range than I'd by in 10-12+.

I'm not sure that messing with the reviews system (even if Amazon doesn't mind) actually helps that much, however. Though I do not see a better way (not buying them, as I do, aside) to voice your annoyance.

[brecklundin]

I basically think the Price-Fix 5 are actually better called the Price-Fix 6. I believe they did the back room deal with each other to all say it was Apple who came to them with the same agreement. And by agreeing to the terms then it forced the cartel...errrr....publishers to honor the terms of their "independent" decisions to make the deal with Apple in terms of nobody pays a lower price than Apple. That part of the agreement is what makes no sense and is suspicious.

I think this time Jobs' true malevolence will come out...he colluded with the Price-Fix 5 to form the Price-Fix 6 with Apple as the excuse for it all. But it's so transparent it's not funny because WHY would every publisher agree to the same agreement with Apple in the face of their biggest reseller, Amazon. The is a blatant flaunting of existing anti-trust, consumer protection or collusion.

No matter how big a supporter of Apple and Jobs, he was without a doubt the puppet master here because this was the ONLY way he could break into the ebook market. He might even expect the deal to fail and is using it as a way to impede companies like Amazon, B&H as well as other resellers. It's not the first time Apple used this sort of tactic, only last time, they used the Justice Department to do their dirty work against Microsoft. And that was so obviously an attempt to bog down their competitor in legal issues that it would either give in or lose, worst case it was an attempt to make the competition look bad.

It's always wheels-within-wheels...this has nothing to do with the profits for the publishers at all, even if they think it does because the drank they Jobs Kool-Aid...he could care less about them. I think Jobs sold them on the illusion that by signing the agreement with Apple, even though it was the same with all of them, it gives the publishers involved and "out". It's a veil made of rice paper...

I could be wrong, and likely am, but based on how it all has shaken out, this sure sounds plausible to me.

[TallMomof2]

I have purchased very little since the Agency price fixing went into affect. It aggravates me to receive coupons from B&N, Borders, and Books a Million for print books only! Can't use them on ebooks because of the price fixing.

Is it fair to give one star reviews because of this? It's as fair as the price fixing by the top publishers.

[Kali Yuga]

Ahh, so much to respond to...

Originally Posted by JSWolf

It's not a matter of hacking and slashing. I get email from Borders that gives me 25-40% off. I cannot apply this to eBooks. Why? Because the Agency 5 say I cannot.

Yes, I agreed with your assertion that retailers can't discount, and can't use pricing as an advantage. However, the publishers can and do discount.

Originally Posted by JSWolf

No, This is way wrong. A lot of people who read eBooks are doing so because they don't buy hardcovers....

Like I said, they do not want to pay hardcover prices. However, they still want to pay a low price for a high-demand good. And it's pretty clear they no longer want to wait to pay a lower price.

Originally Posted by JSWolf

I was OK paying $9.99 for an eBook that was out in hardcover that I wanted there and then. I am not OK paying $12.99-$19.99 for an eBook.

Then you can wait 6 months until the price drops.

There is absolutely nothing immoral about charging more when demand is high, especially for a non-essential good.

I'm not saying you have to like it, but the reality is that "I want this book the instant it comes out at $10 instead of $15!" basically has zero moral force.

Originally Posted by JSWolf

But with an eBook, you are not allowed (supposedly) to remove the DRM....

You're missing my point.

A paper book has, as a part of its physical characteristics, a set of built-in restrictions. E.g. you can't duplicate it an unlimited number of times for personal use, you can't sell your copy and simultaneously keep it for yourself, and so forth. Paper winds up like a "built-in DRM" that restricts your actions -- it's just a different set of restrictions..

In addition, the idea that "ebooks have a lower value" willfully ignores the fact that ebooks give you other cost-saving or added-value aspects. Yes, you lose X Y and Z, but you gain A B and C. I.e. if you're going to demand that ebooks cost less, you ought to figure in the "zero cost for delivery" to your calculations. (And yes, believe it or not, shipping and handling are usually very profitable for retailers.)

And don't forget, to the publisher asking $15 for a new ebook, when the cover price on the hardcover is $25, is a huge price cut. When you buy the hardcover at a steep discount, the retailer is subsidizing your purchase.

Originally Posted by JSWolf

But the $3 profit they would be making from the eBook priced at $10 is $3 more then they would be making when the eBook is priced at $12.99-$19.99 and I'm not buying it.

Again, you are missing the point.

Any price higher than "$0.00" involves a loss of sales. If they're going to drop the price by $3, that needs to be made up by significantly higher sales. I will definitely agree there will be instances where lowering the price will increase sales volume enough to increase a title's profits.

However, there are also numerous instances when the purchase is merely delayed instead of lost. In other instances, the price the buyer is willing to pay is so low that discounting is totally counter-productive. If you believe all brand-new ebooks should only ever cost $5, perhaps you are not a customer worth having.

Originally Posted by JSWolf

Look at BAEN. They sell eBooks reasonably and give away a lot for free and yet they MAKE A PROFIT WITH EBOOKS. How is that done?

• Free books are done as a promo, and Baen probably believes (with good reason) that it's cheaper than spending ad dollars.
• Many of their books are in series, so give away one free, and if the customer likes it they may buy 3+ other books.
• They largely cut out the middle-man, which most publishers can't do.
• I assume they pay authors lower royalties per copy (lower cover price = lower royalties).
• I assume they pay authors much smaller advances.

By the way, numerous other publishers also issue ebooks for free as promos, check out Amazon's "Top 100 Free" -- http://www.amazon.com/gp/bestsellers/digital-text

Originally Posted by JSWolf

Give your answers, it looks like you work for the Agency 5 and agree with their tactics.

"No, I am not in any way shape or form working in the book industry" and "not necessarily."

I'm actually on the fence about agency pricing. However, the reality is that the ONLY reason, IMO, that anyone objects to it is because some people are insanely sensitive to certain forms of pricing. If agency pricing resulted in a flat $10-per-title price, and retailer pricing resulted in $15 for a new ebook, I wonder how these conversations would go. Hmmm....

But in general I support the ability of a company to survive and actually turn a reasonable profit. I also recognize that book publishers are saints compared to the music and movie industries, which are notorious for abusing their financial obligations to many artists. As such I do not resent book publishers (of ANY size) for having the "temerity" to try and run a business.

[Kali Yuga]

Originally Posted by jhempel24

HC cost more to produce, it's better binding, better paper, a separate dust jacket, want me to go on? Please.

I hate to break this to you, but hardcovers barely cost any more to produce than paperbacks.

It is well understood that hardcovers are high margin items. If the hardcover price is $25 and the same book in paperback is priced at $15, do you really believe it costs the publisher $10 more to make the hardcover? Try $1 or $2.

That's why many publishers don't want ebooks to eviscerate hardcover sales -- because a $10 ebook has a much smaller margin, thus produces less profit, than a $25 hardcover.

It's window dressing on the price dynamics of demand.

[Kali Yuga]

Originally Posted by thrawn_aj

Well then. If it's all about supply and demand, just think of the ratings backlash as "demand" fighting back ....

That is one way to interpret it. A better explanation though is that some consumers don't want to pay more because demand is high. And, they believe this is the most effective protest.

Originally Posted by thrawn_aj

In any case, the supply & demand argument rather defeats your own point - it is the ONE argument that the Agency model goes against. Amazon (as a retailer) has far more knowledge of the market....

I agree that Amazon has access to a great deal of sales data that they will never surrender to the publishers.

However, publishers have received inventory and sales data for years -- often purchasing that data from retailers and distributors. They have their own sales data, which undoubtedly demonstrates that sales are high at certain times (e.g. when the book first comes out, when Oprah features it, etc).

Originally Posted by thrawn_aj

Price-fixing is merely a conglomerate (whether it's OPEC or the Agency 5) going against the whole supply & demand mechanism....

So is Apple setting the price of a single song download at $1. Same with Saturn telling its dealers that "this is the price you will charge, period, and no haggling." Tell me, did you vehemently protest those arrangements?

[LakeLoon]

Since the term "price-fixing" is being thrown around, we should be careful about how we're using it. The "Agency 5" agreements may indeed restrain a certain amount of competition, but not in a way that is normally termed "price-fixing."

We normally think of anticompetitive agreements, such as price-fixing, in two ways: "horizontal" and "vertical." A horizontal restraint is one between direct competitors: for example, between different publishing houses. If two publishers said "we're both going to charge $20 for every new release," that would be a naked horizontal price-fix and almost certainly illegal per se.

A "vertical" agreement involves different steps of the production or distribution chain. For example, if manufacturer A makes widgets, and sells them to retailer B, and they agree that B will resell those widgets for $20, that is a vertical restraint. These types of agreements are sometimes illegal, but not automatically. The circumstances of the agreement must be examined carefully, and various factors considered, pro and con.

An "agency" agreement is a type of vertical arrangement that is often considered legal. An agent acts on behalf of someone else; it does not have independent authority. The publishers hiring Amazon as an agent is a little like hiring a guy off the street and telling him "go sell these books to whoever you can for $20." If the guy sold the books at a discount, he'd be violating the terms of his agency agreement.

There appears to be no evidence (of which I'm aware) that the prices of ebooks are uniform across publishers--in fact, the opposite is true: we have more variety now. Nor do I know of any direct agreements between Amazon and another retailer (e.g., Amazon and B&N agreeing with each other on retail prices). So, we do not appear to have a case of "horizontal" price-fixing here. Rather, we have a vertical restraint in the resale market. Amazon, by switching from an independent reseller to an agent, no longer has the ability to compete with other resellers by cutting prices through reducing its own margins.

However, it's important to note that no other retailer sells Kindle-format ebooks anyway. There is no direct competition to Amazon, only indirect competition from paper books and ebooks in incompatible formats. And the publishers have a legal monopoly, via the copyright laws, on their content, so they have more leeway regarding how their works are ultimately sold.

Now, with all of that said, I find the "Agency 5" agreements unfortunate, because so far they have led to price increases in some cases. I prefer Amazon's having the ability to cut prices by reducing its margins; I like lower prices. Accordingly, I think it's appropriate for regulators to go through the (detailed, fact-dependent) analysis of whether these restraints unreasonably harm competition. But calling them "price-fixing" is not really accurate, unless there's something going on we don't know about.

[jhempel24]

Originally Posted by Kali Yuga

I hate to break this to you, but hardcovers barely cost any more to produce than paperbacks.

It is well understood that hardcovers are high margin items. If the hardcover price is $25 and the same book in paperback is priced at $15, do you really believe it costs the publisher $10 more to make the hardcover? Try $1 or $2.

That's why many publishers don't want ebooks to eviscerate hardcover sales -- because a $10 ebook has a much smaller margin, thus produces less profit, than a $25 hardcover.

It's window dressing on the price dynamics of demand.

Where do you get $10-$15 for a paperback?? I see $7.99 on the MMPB that I buy. I don't buy a $10 paperback, nor do I buy Trade Paper.

As to your other comment that people don't buy HC's because they don't want to pay the prices....it's been my experience that people don't buy HC's because they are bigger/heavier, and harder to tote around than a paperback which can fit in a purse for women (or men if you have one ) and of course the eBook which can be read on the computer/on a phone/eReader etc.