OverDrive sold to private equity firm KKR

[fjtorres]

Originally Posted by murraypaul

Digital scales much better than physical does.

If anything, physical gets more expensive with volume because of warehousing and returns.
That's why tradpub has been reducing initial print runs and supplementing with POD on everything but the big names. The upfront cost is nowhere near as big and overhead and recurring costs are a much bigger part of print than they like to pretend.

Other content businesses welcome digital because of the higher profit margins, even at lower retail (which actually boosts consumption as a bonus) but publishing is special...

[Quoth]

Originally Posted by murraypaul

Once Amazon have the infrastructure in place to sell books, the additional unit cost of selling another one is tiny.
Each extra pBook sold is another one printed, shipped to a distributor, warehoused, shipped to a retail outlet, stocked, and possibly ultimately destroyed if it doesn't sell quickly enough.
Digital scales much better than physical does.

Yes. Books can be remaindered or pulped within three months.
The cost of warehouse and shipping can exceed print. Even print is only down to maybe 50c in 100,000 quantity, that's a $50,000 upfront cost.

The cost of Amazon listing and shipping ebooks via user Internet connection is almost zero compared to total IT / AWS costs.
They DO charge the publisher for Mobile Whispernet delivery, which is tiny compared to physical shipping.

[fjtorres]

Originally Posted by FrustratedReader

I've worked at a senior level in a ISP selling data centre capacity. I know what the profit margin is. It's better than most retailing.

.

Ridiculously so.

https://www.investopedia.com/ask/ans...ail-sector.asp

The most profitable retail sub-sectors by net margin are usually the building supply and distribution retailers. Companies in these sectors often achieve average net margins around 5%, almost double the average for the online retail sub-sector.

Certain markets, such as retail electronics and retail clothing, have to adapt to constant changes in consumer tastes. A company might be very profitable in the first quarter of the year and struggle during the fourth quarter, due to cyclical consumer spending patterns. Best Buy, for example—one of the major electronics retailers in the US, posted a net margin of 2.4% during its fiscal first quarter of 2018 but managed to generate a net margin of 3.5% for the first quarter of the fiscal year 2019.

Supermarkets are leaner than average, in the 1-2% range.

The supermarket business is a low-margin industry, with the average profit margin for supermarkets typically ranging from 1 to 2 percent. However, natural, organic and gourmet food markets enjoy higher averages from 3.5 to 6 percent.

AWS has been reported as 25% profit margin but it is going higher as they boost their database, graphics and AI services. So 10x higher.

Tradpub is also low margin, typically in the 5-7%, even with maybe 25% unit sales coming from digital and audio.

[pwalker8]

Originally Posted by murraypaul

I do work in IT, and also in distribution.
Physically moving things around the country (world) costs money, lots of money.
And the costs scale with the number of items sold.
Once Amazon have the infrastructure in place to sell books, the additional unit cost of selling another one is tiny.
Each extra pBook sold is another one printed, shipped to a distributor, warehoused, shipped to a retail outlet, stocked, and possibly ultimately destroyed if it doesn't sell quickly enough.
Digital scales much better than physical does.

And yet somehow you forget that it's not just the build out that cost, but there is a big monthly expense for all that metal.

Yea, it only cost a couple of cents to jump in the car and drive to the store, but that ignores the actual expense of owning a car - car payments, insurance, maintenance - it's not just the gas to get you from point A to point B. Data centers are the same way. Sure the data storage used for an eBook is trivial, but actual data centers, with electricity, purchased hardware, purchased bandwidth, personal and the like costs a lot of money on an on going basis.

[pwalker8]

Originally Posted by fjtorres

Ridiculously so.

https://www.investopedia.com/ask/ans...ail-sector.asp



Supermarkets are leaner than average, in the 1-2% range.




AWS has been reported as 25% profit margin but it is going higher as they boost their database, graphics and AI services. So 10x higher.

Tradpub is also low margin, typically in the 5-7%, even with maybe 25% unit sales coming from digital and audio.

The big issue with cloud services is that they over promise on cost savings for large companies. As I said before, the company that I use to work for was spending over a million dollars a month on AWS. It makes sense in certain business models, such as internet services and web sites, but not nearly as much for other businesses. In a way, it's a lot like outsourcing. Execs love the idea, but the actual results tend to be less than desired.

[murraypaul]

Originally Posted by pwalker8

And yet somehow you forget that it's not just the build out that cost, but there is a big monthly expense for all that metal.

Yea, it only cost a couple of cents to jump in the car and drive to the store, but that ignores the actual expense of owning a car - car payments, insurance, maintenance - it's not just the gas to get you from point A to point B. Data centers are the same way. Sure the data storage used for an eBook is trivial, but actual data centers, with electricity, purchased hardware, purchased bandwidth, personal and the like costs a lot of money on an on going basis.

I'm not forgetting it, just that it is minimal a) for eBooks, b) for Amazon, compared to the cost it would be for other media, or other companies.
Market share matters. Setting up a brand new eBook business would be very costly, because you would need almost as much infrastructure for a small small market share as for Amazon's huge one. So your cost per book would be much higher. Again, it scales well.
And Amazon already has all the hardware in place for its other operations. If it were to stop selling eBooks right now, but keep all the rest of its businesses going, how much cost would that save? Not much.

You've already got the car and are making hand over fist with high end limo service. You make a bit more doing uber eats on the side.

[fjtorres]

Originally Posted by murraypaul

Market share matters. Setting up a brand new eBook business would be very costly, because you would need almost as much infrastructure for a small small market share as for Amazon's huge one. So your cost per book would be much higher. Again, it scales well.

.

And...we're back where we started: OVERDRIVE has the digital infrastructure for both rentals and sales. They weren't maximizing the return on those capabilities so the investment guys figured they could buy it (at a premium to what Rakuten paid) and do better. They already put up the ante so what remains are the incrementals, which are minimal.
They have a higher ceiling than any startup because they are already a going concern making fifty to a hundred million a year net.

That is one very useful starting point.

[murraypaul]

Besides, isn't this all irrelevant?
Under Agency, it doesn't matter to the publishers what the costs of supplying eBooks, because that comes out of the retailer's 30%. The publishers get 70% of cover regardless.
How does that compare to what they get from a pBook after the retailer's cut and the cost of printing and distribution?

[fjtorres]

Originally Posted by murraypaul

Besides, isn't this all irrelevant?
Under Agency, it doesn't matter to the publishers what the costs of supplying eBooks, because that comes out of the retailer's 30%. The publishers get 70% of cover regardless.
How does that compare to what they get from a pBook after the retailer's cut and the cost of printing and distribution?

They get 75% of the 70% or 52.5% of retail. On a $13 ebook that is $6.85.
The author gets 25% or $2.91.
On print they get 35-45% of list (authors get from 8-15%) which is typically around double the ebook retail.

So on a $24 pbook they get about $9 gross, the author gets $3, and the rest is split between the distributor (Ingram only, since B&T quit) and the retailer. Amazon rarely uses Ingram as a distributor and picks up the books at the publisher warehouse so they eat the shipping but get the max 45% discount.

Of their gross, publishers have to pay printing, shipping to their warehouses, warehousing, shipping on returns, and pulping costs. Plus overhead, but that applies to ebooks, too.

Before Agency, ebooks sold at the same price as print so publishers got $9 instead of $6.84 and authors got $3 instead instead of $2.90.

Of course, some pbooks have higher lists and others lower. But the ratios are mostly contant.

With one exception: deep discount deals, like Costco gets.

On those, they get 50% but instead of paying the author 15% of list, they pay out around 5% of the 50%. So on a $24 book selling for $15 at Costco, Costco makes $3, the publisher $11.40 and the $0.60%.

It's a weird business.

[Uncle Robin]

Originally Posted by pwalker8

It's pretty obvious that most of you guys aren't in IT. Servers and data centers cost money. Lots of money. The company I use to work for was spend in excess of $1 M a month on AWS costs, and that was without using it for production.

AWS comes from the infrastructure that Amazon uses. Amazon does not run it's operation on the same machines that it sells to other companies as part of AWS. Yes, I have done work in the AWS infrastructural.

I didn't say Amazon ran its own operations on AWS. I said that it made so much money from AWS that the profitability of its other ventures was largely irrelevant. That is a matter of public record

[fjtorres]

Originally Posted by Uncle Robin

I didn't say Amazon ran its own operations on AWS. I said that it made so much money from AWS that the profitability of its other ventures was largely irrelevant. That is a matter of public record

They probably tap AWS for some added capacity come holidays and Prime Day but their business is stable enough to run on its own data centers for everything else.

The main connection is that tbe first AWS customers were using excess Amazon capacity and tbe first AWS data centers used tech developed For Amazon inhouse use. Both things have changed.

By now (probably since they starting publicly separating AWS income) the two operations have strongly diverged. AWS still does basic infrastructure cloud business but they've evolved way past that. Aws is moving into IP territory for businesses Amazon doesn't play in and software they don't use, and even designing its own CPUs and GPUs and AI chips.

Daddy Bezos' baby is growing up fast.

[Fbone]

Originally Posted by fjtorres

Try looking for ebooks in the apps section of Play. Much much bigger and more brazen in tbe appbook section. The copyrighted content is usually encrypted and wrapped in a viewer so ft slips by the fingerprint and watermark filters.

Can you provide an example what these look like? I couldn't find any. Thanks

Edit: If it isn't appropriate to post publicly, please PM.

[fjtorres]

Originally Posted by Fbone

Can you provide an example what these look like? I couldn't find any. Thanks

Edit: If it isn't appropriate to post publicly, please PM.

They look like an ebook but are android apps.

Most of the ones I found were in non-english languages.
From my phones.
There were hundreds.
But now Play app listings are showing up as georestricted in the browser so they might not show up in the US. The ones I saw were in arabic, korean, chinese (no surprise there) and spanish and offered up anything from 1 book to dozens at too good to be true prices.
Google search won't display any of the articles about it from years back so they may have cleaned up recently or swept it under the rug.

It was after the time of the Digital Reader articles on pirate epubs on Play. Apparently the scammers moved from epub to appbooks.