Sunday, February 7, 2010

And the book industry goes kablooie...or not

So Macmillan is moving from a "retail model"* (with a 50/50 revenue split) to an agency model (with a publisher-70/bookseller-30 split) in its relations with booksellers (and other publishers are quickly following suit), and the entire book-blogging community is flipping out. "This will mean higher ebook prices across the board," bemoans Jane of Dear Author. "But authors will earn less if their books are listed at $14 than if they're listed at $25.99 and discounted to a sawbuck by Amazon!" wail others. And dozens upon dozens of readers insist that "Macmillan just lost themselves a customer!"

*For those of you wondering, I employed quotation marks because since the 1930s, bookselling has been a gruesome marriage of retail and consignment. In a true retail model, retailers own the merchandise they buy from manufacturers and set the sale price at whatever they think the market will bear. If the merchandise doesn't sell, the retailer is stuck with it, and either shifts it to a liquidator or puts it on clearance--often for less than wholesale--because recovering some of their investment is better than nothing. In a consignment model, the providor of goods sets the consumer sale price, and if the item doesn't sell it either sits there unsold forever, or the consignment broker simply returns it to the owner, no harm no foul.

In bookselling, retailers are not stuck with unsold books. Those books are either returned to the publisher for full credit (in which case the publisher can remainder them to recover some of their losses), or stripped and pulped and the covers returned to the publisher for full credit (in which case, the publisher swallows a total loss on them). So for the retailer, bookselling embodies all the benefits of retail and none of the risks, and for the publisher, all the risks of consignment--and more, in the case of mass market paperbacks--and none of the benefits. Sweet deal for bookstores, no?

Like income tax--which was brought in to help compensate for economic stressors that were temporary--this hybrid consignment/retail model was created as an interim measure to help bookstores stay afloat in the Great Depression. And like income tax, we're still stuck with it, long after the initial conditions demanding its creation have passed. Frankly, this is not a situation that could have continued indefinitely. If publishers were to survive in an increasingly tight market, something had to give.

Like most industries undergoing a paradigm shift, there are some who will claim the sky is falling. And maybe it is.

But me? I'm not that worried. Certainly this news would dismay me more if I were a Macmillan author, but as an ebook reader and an ebook author, I'm pretty sanguine about the whole debacle. Here's why.

None of this is going to affect the way I purchase books, or negatively impact the publishers to whom I'm willing to submit my work.

With one glaring exception, I've never paid more than $8 for an ebook, and have never, ever bought an ebook that was priced higher than it's lowest-priced print version, so this move isn't going to affect my options as a reader one bit. To my knowledge, I have never bought a Macmillan ebook--if I have, it was priced under $7. The $9.99 ebook has never been an option for me, nor will it ever be one. So I couldn't care less if Macmillan books sell for $9.99 or $109.99, they weren't getting my money before, and they ain't getting it now unless the price comes down.

The publishers who got my money before will still get my money (a bigger share of it, in fact, if they also embrace the agency model with a 70/30 split), and the publishers who didn't won't unless they lower prices. And despite my strict personal policies on ebook purchases, there are plenty of ebooks available to me (and about 35 of them are sitting on my Sony right now, waiting for me to get to them). This is because no matter how bugfuck, baffled and blind most traditional publishers are about ebooks, there are a few out there (like Baen and HQN) who mostly know what they're doing and are cashing in on that knowledge.

As an ebook author published with a house that understands the market and the consumers who drive it, this shift in the marketplace is a net gain for me. The traditional publishers (like Baen and HQN) who understand their readers, will thrive. Those who don't and continue to refuse to learn, will falter. If, as Jane insists, ebooks from trad-pubs will only go up in price, well, the more $15 ebooks there are out there, the more attractive my own publisher's books will be to readers. I certainly can't see publishers like Samhain suddenly raising cover prices to $15. Just because Macmillan jumps off a bridge doesn't mean publishers with brains will join them.

Amazon's insane discounting of insanely priced ebooks from insanely clueless publishers has only subsidized their insanity and cluelessness and allowed it to perpetuate. It helped publishers like Macmillan with their ludicrous $25.99 ebooks to compete effectively in a market filled to brimming with smaller, smarter publishers who actually know what the fuck they're doing. Those smaller, smarter publishers have suffered because Amazon's deep discounting was making the biggies' products more attractive to consumers than they should have been. By discounting those Macmillan ebooks, Amazon was both subsidizing their stupidity, and making it harder for the good guys to get the attention they deserve.

Without Amazon absorbing losses that should have been borne by publishers and their dumb-assed pricing strategies, the products of publishers like Baen, HQN, Loose Id, Samhain, and others will have a better chance to shine, and idiots like Macmillan will either wise up or their ebooks will fail.

This system will benefit the publishers who get it right, and penalize those who willfully continue to get it all wrong.

And me, I'm just sitting back and smiling at the thought of walnut-brained, traditional publishing dinosaurs either evolving or going extinct, while the small, agile mammals of the epublishing age flourish. And I'm thanking my lucky stars I'm with a publisher who has eyes to see and a brain to think with when it comes to the digital market.

I don't have to boycott Macmillan. No one does. Just keep on keeping on, insisting on value before you hand over your money, and it will all come out in the wash.

14 comments:

Eyre said...

I agree that it will all come out in the wash. As far as I know, I've never bought an ebook from Macmillan. I will admit to having paid more than $8.00 for an ebook, but I only pay that much when I can get huge rebates on the purchase (ex. Fictionwise's 100% micropay rebates). I don't feel so guilty about the money because I can more books for my money that way. I would, as you said, be concerned if I were a Macmillan author.

M. A. said...

I've been semi-following Jane's grievances regarding this tragedy, and I admit I really don't see what the big hairy deal is.

I admit I have paid and will likely continue to pay more than $10 for some ebooks. I purchased two Harlequin ebooks priced at $14 each, so apparently Harlequin is no more clued in to the market than MacMillan allegedly is.


Truth is, if I want to read a book, I don't think much about the price beyond if I can afford it and am I willing to pay it. I have no strict rules or price thresholds when it comes to ebooks.

I own a Sony Reader and many of the ebooks at the Sony Store are priced over $12.

I'm buying ebooks for convenience and portability and to keep my home less cluttered.

Do I sometimes think ebooks are overpriced? Definitely. But I've seen epublishers sell overpriced ebooks. $3.00 or more for a short story is overpriced.

I don't see a real "bad guy" in the equation. Publishers are businesses. They require profit to operate. It's simple and it's fair.

It's the individual consumer's responsibility to decide what a fair price is and if the consumer is willing to pay.

If consumers don't pay, it's up to the publishers to establishes prices more favorable to consumers and their own fault if they don't sell books.

kirsten saell said...

Macmillan may think the concept of the ebook isn't worth the proverbial paper they're printed on. They may actually want their ebooks to fail in favor of print, and if they do that's their business. Thing is, as long as Amazon was discounting those books and making them available at artificially low prices, there was no way in hell Macmillan would ever be convinced that they weren't cannibalizing hardcover sales.

Now, when they end up selling fewer $15 ebooks than they did the discounted $10 ones, and are still not selling any more hardbacks, they might actually see what's right in front of their noses: 1) ebook readers are not the same market as hardback readers, and 2) ebook readers will buy more ebooks (and Macmillan will earn more money in the long run) if they're priced right.

I agree with M.A. that many books from epubs are overpriced for what you get--both in word count and editorial. But those epubs aren't enjoying the same success as the Samhains and LIs that inhabit the sweet spot as far as cover price, at least for novel length works, and offer decent quality content.

Those overcharging epubs are selling Hyundais at BMW prices, and not many people are buying. But Amazon's discount was making it so publishers who were not pricing their ebooks competitively could compete as if they were. Rewarding the idiots at the expense of the few who get it right all around. How is that a fair market?

M. A. said...

Those overcharging epubs are selling Hyundais at BMW prices, and not many people are buying. But Amazon's discount was making it so publishers who were not pricing their ebooks competitively could compete as if they were. Rewarding the idiots at the expense of the few who get it right all around. How is that a fair market?

Again, it's really individual consumer responsibility to create price thresholds.

Macmillan and other like-minded publishers (print or electronic) may very well believe their pricing system is fair. If they can sell ebooks successfully at this price, why shouldn't they?

Now, with that said...I'm no economist, but it does seem to me that if Publishers A, B, and C all sell ebooks priced between $5 - $10 while publisher D sells ebooks for $15 - $20, it's a safe bet cost-conscious readers will gravitate away from publisher D unless D demonstrates superior quality leading consumers to judge them worth the extra cost.

It's like saying Armani is "unfair" because Armani clothing and accessories cost more than, say, knockoff brand separates sold at Wal-Mart.

Would anyone confront Armani and say, "What a greedy clueless businessman you are! Don't you know I can buy a blazer, shirt, and slacks at Wal-mart for a fifth of what you charge for a keyring?"

What strikes me as very telling is the enormous fuss being made about this situation. What the fuss demonstrates in my perspective is that, for whatever reason, some readers and self-proclaimed reader advocates DO view the traditional publishers' products as valuable and desireable. If not, why complain so much?

As you've already pointed out, numerous epubs offer an exceptional variety of ebooks at lower costs. Why not give business to them?

Answer: readers/reader advocates view the print publishers as "better." It's dificult to gage for certain what's "better" but obviously they want these books just as easily available and affordable as epub books.

That the business practices utilized to produce these books probably incur expenses epubs don't have to worry about doesn't matter in their opinion.

Everyone's entitled to an opinion, but the publishers still have to turn a profit to produce the desired items.

Carly Carson said...

This spat bt. Amazon and Mac. is just business. Amazon wants to make their Kindle attractive to consumers by offering cheap bestsellers. The publishers need the best sellers at reasonable prices to keep afloat. And why shouldn't they want to keep afloat? I personally know many people who use their Kindle for books they otherwise would have purchased in hardcover. I myself just paid $18 for a hardcover teen book for my dd (though I hated to do it) because she had to read it NOW. But it's a valid pricing model to have something at full price immediately, and discounted (say at a sale, or in paperback) later on. You pay more if you can't wait. Supply and demand. I agree that all publishers have to adapt to the ebook world one way or another, but that doesn't mean they must let Amazon roll over them.

Eyre said...

Are people assuming that the publishers make less money on the discounted ebooks than they would on hardback sales? I really don't know much about this topic, but it would seem to me that production and distribution must take a huge chunk out of hardback profits while production and distribution for ebooks would be much cheaper. When taking that into consideration, a publisher could actually make more profit from a $9.99 ebook than a $20.00 hardback. Thus, I don't think that discounting the ebooks would hurt profits. In the end though, they can set the price for their products. That's their right; however, it's my right as the consumer to decide if I'll pay that price.

M. A. said...

Hi Eyre.

My guess is that, although epublishing in general is cheaper than the print process, there may be expenses in the print industry related to epublishing we're not taking into consideration.

It's easy to look at the known facts and make a judgment that print publishers can afford to match epub prices and provide the same level of convenience in terms of quick release, etc.

I personally don't know enough about it to form a judgment. But it's not my place to chastise Macmillan and say, "You should only charge $5 for an ebook because that's what Somebody Else charges."

You're right. At the end of the day, the consumer decides to purchase or not and it is consumer habits that will influence Macmillan pricing decisions.

Again, I don't understand why Macmillan is being made the "baddie" in the equation. I just finished reading what I consider a LOUSY ebook from Harlequin for which I paid $13.

Dear Author regularly reviews Harlequin books and I have never read the Ja(y)nes complain of their prices.

I'm dubious, at best, about their motives in bad-mouthing Macmillan.

LVLM said...

What the fuss demonstrates in my perspective is that, for whatever reason, some readers and self-proclaimed reader advocates DO view the traditional publishers' products as valuable and desireable. If not, why complain so much?

Answer: readers/reader advocates view the print publishers as "better." It's dificult to gage for certain what's "better" but obviously they want these books just as easily available and affordable as epub books.

I don't think that necessarily true. It's just a fact that well known, popular authors are pubbed through big, traditional publishers and have far more recognition and popularity to readers.

The ebook reader is still currently a small percentage of the total reading population. And even within the ebook reader population, only a small percentage of those know about all these smaller epubs. I'm pretty sure many Kindle owners don't have a clue about all these little epubs and only buy mainstream, NY pubbed authors' books.

So the desirability to have a popular, well know author's books in ebook is just a desire to read the same thing everyone else is reading in different format. Not necessarily as opposed to perceived cheaper quality epubbed books.

Yes, I'm sure there are lots of reader who are "designer" oriented in that they will always think a NY pubbed book is going to be far better in quality, but I think many long time ebook readers are well aware that crappy books come from any pub and that there are many, superb gems within the epubbed only group.

I personally don't perceive authors from NY pubs to be any better than epub authors, however, their ebooks are inaccessible to me in a non DRM format and at higher prices. So yeah, I'm going to bitch about NY pubbed authors' books that I can't read because of high cost and DRM.

M. A. said...


I don't think that necessarily true. It's just a fact that well known, popular authors are pubbed through big, traditional publishers and have far more recognition and popularity to readers.


Popularity and recognition is a tremendous selling point. It is an element of what can constitute value to a consumer.

The ebook reader is still currently a small percentage of the total reading population.


Which is something print publishers have to consider. Print publishers already have an established market in print books. They can't just throw that business away.

Epublishers often offer print versions of novel length works. The print versions cost more -- as much as 200% more -- than ebooks. Considering more people read print than ebooks some might argue that is "unfair."

However, people in the epublishing business understand the extra cost is related to the expense of POD services to produce the print book/s.


I personally don't perceive authors from NY pubs to be any better than epub authors, however, their ebooks are inaccessible to me in a non DRM format and at higher prices. So yeah, I'm going to bitch about NY pubbed authors' books that I can't read because of high cost and DRM


Only it's not NY pubs making ebooks inaccessible to you. You are declining to purchase their ebooks because the merchandise doesn't meet your specific criteria in terms of price and format.

As a consumer, you have every right to make that decision.

I do believe that, at some point, the situation will level off, especially as ebooks continue to gain ground. I don't think ebook technology has reached the level where it is affordable and desireable to the general public.

karen said...
This comment has been removed by the author.
kirstensaell said...

Macmillan and other like-minded publishers (print or electronic) may very well believe their pricing system is fair. If they can sell ebooks successfully at this price, why shouldn't they?

I agree. But I hardly consider it a fair market when a retailer takes some manufacturer's high-priced offerings (the Armani suit) and swallows huge losses in order to discount them so they can compete with mid-priced merchandise.

Not only is "Armani" still cashing in big on the Armani-sized wholesale prices the retailer pays, but their product is now moving a lot faster than it would have because more people can afford it.

And the mid-priced manufacturer suffers because his product is now competing with manufacturers that are effectively being subsidized. The mid-priced manufacturer isn't getting the same subsidy. They're just getting the shaft, no matter how you look at it.

Answer: readers/reader advocates view the print publishers as "better." It's dificult to gage for certain what's "better" but obviously they want these books just as easily available and affordable as epub books.

Well, no one's going to convince me it costs more to produce and ebook than a print book--ppb, warehousing, shipping and returns are ongoing costs while most ebook production costs are finite, and many are shared between the two formats. I think the most attractive price for any ebook is going to be 10-30% lower than the least costly print version of the same title. Expecting publishers to be able to do this and still turn a profit doesn't seem unreasonable.

But I'd disagree with any assertion that ebooks should be cheaper because they CAN be. I mean, I could invent and patent a cheap process to make a hugely useful product out of 10 cents worth of recycled plastic, and if the public was willing to pay $100 for it, more power to me--wahoo!

Ebooks should be cheaper because readers' rights to that content are restricted. The same way that Apple realizes DRM (even though it costs to add it on) devalues iTunes songs in the eyes of consumers, and therefore offer the cheaper to produce DRM-free versions at a higher price, publishers need to realize most readers won't pay more than print for an ebook they can't wring as much value out of as they can a print book.

Market forces should decide. Subsidies, whether they stem from governments or from retailers, are bad news for letting market forces decide anything. What Amazon was doing was tilting the playing field so some products were not competing on their own merits. Consumers might like this, but when you think about it, sheesh, unfair much?

Amazon wants to make their Kindle attractive to consumers by offering cheap bestsellers. The publishers need the best sellers at reasonable prices to keep afloat. And why shouldn't they want to keep afloat?

The problem with this argument is that Macmillan was making a killing on those discounted bestsellers--in many cases more than they'll make within the new system. Macmillan used to earn as much as $16 on an ebook that Amazon turned around and sold for $9.99. While a small epublisher who listed their book at $9.99 earned less than $5--because Amazon's discount for small press books is higher than 50%, and Amazon wasn't subsidizing their reasonably priced books. It was a "rich get richer and poor get poorer" system.

For Macmillan, the new system will mean higher prices for consumers (which will certainly mean fewer copies sold), AND less money per copy on many titles. They could end up taking a huge hit in their wallet with this. But it will allow for more fair competition for consumer dollars than before.

kirstensaell said...

Forgive the lack of quotes on the first, fifth, and tenth paragraphs of my way-too-long comment, lol. I'm asleep at the switch and google hates me.

M. A. said...

For Macmillan, the new system will mean higher prices for consumers (which will certainly mean fewer copies sold), AND less money per copy on many titles. They could end up taking a huge hit in their wallet with this. But it will allow for more fair competition for consumer dollars than before.

Agreed. This is how it should be. If Macmillan believes it can sell virtual books at prices comparable to physical books, let them succeed or fail based upon their own efforts and the "dollar votes" of readers.

The more I discuss this issue the less qualified I feel I am to contribute any worthy concepts to the issue. I am a lifelong reader and bibliophile.

I am delighted with ebook technology for many reasons, but I do appreciate ebooks contain limitations physical books do not and that some enthusiasts feel they should sell at rock-bottom low prices due to these limitations.

On the other hands, ebooks offer conveniences print books don't. Doesn't that increase their value?


I'm undecided on the issue as to how much cheaper it is to produce ebooks than print books. I agree there are abundant overhead costs related to print publishing.

That said, there are costs related to epublishing. It's nice to think that epublishing doesn't create additional cost for print publishers, but I'm sure there are variations in set up and procedure. To a company set up to do print publishing, this may mean additional overhead.

LVLM said...

This is all kind of a moot point for me. I'm all for letting publishers do what they want and see how the market falls into place.

I'm with you Kirsten about Amazon because for me, $9.99 is still too high a price for me for an ebook.

I didn't like that Amazon gets the customer accustomed to $9.99 price point for ebooks because people will expect that to be the price even if it's not a correlation to HC prices.

Meh, I just don't read any mainstream authors at the moment because I do only want to read on my reader.

I wonder how Bold Strokes books is doing as far as ebook sales?

They are a print publisher of lesbian romance/ erotica. Their books cost between $10-$16 usually in PB. Although you can get them cheaper on Amazon.

They also charge the same amount for their ebook version, which are also slapped with DRM.

I looked to see and there are no Kindle versions of any BSB. But they do sell ebook versions through stores like Fictionwise and ARe.

During this last sale at ARe/OmniLit, I got a bunch of Bold Strokes books for 1/2 price in ebook. That is the only way I will buy their ebook books. If I'm going to pay full price with all that DRM, no, not going to happen.

What's really sad, is that I would buy a lot more BSB if their ebooks were cheaper than their PB. I don't like reading PBs at this point, I prefer my reader. So I just don't buy BSB at all usually. Only the rare instance when I know someone else will enjoy reading it and I can share it.