Charlie Stross: Publishers "Cutting their own throats"

[Sil_liS]

Originally Posted by stonetools

Publishers actually had to reduce their margins to implement agency pricing .

Didn't we discuss this before? It's not true, they've increased their margins: Amazon was paying 50% from the list price, and now it's keeping 30% (that means that in the transaction the publisher was getting 50%, and now it's getting 70%).

[BeccaPrice]

<a href="http://kriswrites.com/2011/11/16/the-business-rusch-how-traditional-publishers-are-making-money/">This article</a> has another take on it - the big 6 are making more money than ever, and a lot of it is because authors get a much smaller cut of an ebook price than they do a paper book price.

if I've borked the link, the article is at:

http://kriswrites.com/2011/11/16/the...-making-money/

[stonetools]

Originally Posted by Sil_liS

Didn't we discuss this before? It's not true, they've increased their margins: Amazon was paying 50% from the list price, and now it's keeping 30% (that means that in the transaction the publisher was getting 50%, and now it's getting 70%).

We're talking about different margins: Shtskin is talking about profit margins per ebook sold, not the percentage of revenue that the publisher gets from the sale of the ebook.

[JeremyR]

Originally Posted by BeccaPrice

<a href="http://kriswrites.com/2011/11/16/the-business-rusch-how-traditional-publishers-are-making-money/">This article</a> has another take on it - the big 6 are making more money than ever, and a lot of it is because authors get a much smaller cut of an ebook price than they do a paper book price.

if I've borked the link, the article is at:

http://kriswrites.com/2011/11/16/the...-making-money/

Yes, her blog is a much more credible source, IMHO, since she's worked in multiple genres with all sorts of different publishers (and worked a lot as an editor and all sorts of jobs)

Stross mostly writes really bad Cthulhu pastiches (can't even call them Lovecraftian) and seems to be an apologist for his publisher.

[BeccaPrice]

oh, I enjoy the Laundry books, they're light fluff. Iknow he writes other novels, too, but they haven't appealed to me. Can't say why, excacly, just not my kind of SF

[elcreative]

Originally Posted by JeremyR

Yes, her blog is a much more credible source, IMHO, since she's worked in multiple genres with all sorts of different publishers (and worked a lot as an editor and all sorts of jobs)

Stross mostly writes really bad Cthulhu pastiches (can't even call them Lovecraftian) and seems to be an apologist for his publisher.

Actually, the Laundry series is a minor part of his work... amusing fun but definitely not an example of his main canon...

[Sil_liS]

Originally Posted by stonetools

We're talking about different margins: Shtskin is talking about profit margins per ebook sold, not the percentage of revenue that the publisher gets from the sale of the ebook.

When the publisher gets a higher percentage of the revenue, the profit margins increase as well. If they were making a 5% profit before, they are making a 25% profit after Agency pricing.

[Pinecone]

Originally Posted by TechnoCat

DRM isn't the big problem; their pricing is. Take Bunnicula. Right now it's $5.99 with free (Prime) 2nd Day shipping for the paperback. The electronic book, which does not incur printing, shipping to Amazon, shipping to me or unsold stock destruction costs, is also $5.99. That grates on me. If it was $4, I'd buy it. But at the same price? There are other ways and other books.

But ebooks do have storage and delivery costs.

You have to store the files and you have to pay for the bandwidth to deliver. And if you get wrirelessly, someone pays for the wireless time.

[murraypaul]

Originally Posted by Pinecone

But ebooks do have storage and delivery costs.

You have to store the files and you have to pay for the bandwidth to deliver. And if you get wrirelessly, someone pays for the wireless time.

Storage and bandwidth are tiny, tiny costs. Minute fractions of a cent.
And it is your wireless network, so you are paying, the publisher certainly isn't.
[Missed your point. Yes, Amazon do subsidise wireless delivery to their devices]

[Blue Tyson]

I note that the Gollancz SF Gateway books were all 8.66 (and still are elsewhere).

Price now 12.50 in Australia.

So English and French publishers still trying to prop up their main companies with outlandish gouging of Australians.

[leebase]

Originally Posted by Andrew H.

Ever heard of loss leaders?

Oh, the old "Loss Leaders" gambit. When you take the entire New York Times best seller list, and put in on fire sale, every day, all the time....that's not merely a "loss leader like milk".

You are taking aim at the heart of the publisher's profits. Selling for $10 what the publishers have priced at $25/30 and which normal retailers would sell for $20ish.

This pricing disparity was SO GREAT...that you could justify paying $400 for the original kindle just on the cost savings alone.

So...Amazon was using it's ability to sustain losses to attack the very profitability of the publisher's who's books it was selling. As Amazon was also the 800lb gorilla in the paper book selling business, the publishers were hand cuffed.

Along comes Apple and the possibility of a credible alternative to Amazon for the publishers. THEN FINALLY, the publishers were able to bring Amazon to the bargaining table. Amazon had a choice....stop the crazy low pricing....accept time windowing for ebooks....or become an agent seller instead of a retailer of ebooks.

All of those choices basically removed the publisher's highly profitable hard back business from having to compete with THEIR OWN product. Just like publishers never release the paper back version until the hard back has had it's run. Nothing new here.

Amazon chose to go the agency seller route as it was the best of the three options. Amazon certainly couldn't allow Apple to have the best sellers months before it did (the time window solution).

Originally Posted by Andrew H.

And my overall point was responding to the contention that agency pricing helped Amazon and that publishers should go back to the wholesale model to get an edge over Amazon - a point that I don't think makes sense given how Amazon had an even greater edge during the pre-Agency period since they were able to compete on price.

Well...as Amazon had already bought themselves a near monopoly....not much was going to change that. At least, though, there is not a CLEAR and OVERWHELMING price advantage to buy an ebook over a hard back book. And thus, we saw the price of the Kindle device drop like a stone. No longer could it sustain even the $250 price point it had reached by the time of the agency agreement.

Lee

[Nancy Fulda]

One strategic move Amazon has been making that I haven't seen from any of the other major online retailers: They are aggressively courting self-published authors. They just rolled out their Amazon Select program, which offers authors added revenue and better distribution in exchange for keeping the book exclusive to Amazon.

If Amazon manages to shoulder the other players out of the market, I think it will have as much to do with their ability to make authors happy as with their ability to undercut other companies' prices.

[Sil_liS]

Originally Posted by leebase

You are taking aim at the heart of the publisher's profits. Selling for $10 what the publishers have priced at $25/30 and which normal retailers would sell for $20ish.

The publisher's profits weren't suffering because they were payed the same amount. If a book store has a buy 2 get one free offer, that doesn't mean that they pay the publisher for only 2 out of every 3 books that they sell.

[rhadin]

Originally Posted by Nancy Fulda

They just rolled out their Amazon Select program, which offers authors added revenue and better distribution in exchange for keeping the book exclusive to Amazon.

I think there are lots of problems with the new program from an author's perspective but aside from those, here's my question: How can Amazon provide "better distribution" when so many people -- worldwide -- do not have devices that are compatible with Amazon's DRM and Amazon is not making its DRM freely available to competitors? Anyone who already owns an Amazon device is already being distributed to by Amazon.

Also, how does Amazon provide "better distribution" when, if the program succeeds as Amazon wants, your indie book will be 1 of 100,000 indie books -- all supposedly getting better distribution, which, for an author, means higher reader recognition and higher sales?

No one who has rushed to sign up for the program has satisfactorily explained how they see their book suddenly rocketing to stardom as a result of giving Amazon exclusivity.

[leebase]

Originally Posted by Sil_liS

The publisher's profits weren't suffering because they were payed the same amount. If a book store has a buy 2 get one free offer, that doesn't mean that they pay the publisher for only 2 out of every 3 books that they sell.

Amazon paid the normal wholesale rate. HOWEVER, Amazon was training the market that $9.99 was the appropriate price for just release best sellers....when publishers had $25/30 as the price (with discounting down to $20ish).

And after Amazon runs all of the publishers other clients out of business....those that don't have internet billions from other types of sales to wage war with....THEN Amazon could tell the publishers that $9.99 was the new retail price and that the publisher would get $5.

The publishers did not go to war with Amazon, their largest customer, for nothing.

Lee