Back to: Amazon/Macmillan: other perspectives | Forward to: Information, Freedom, Flame-bait

Amazon surrenders

The New York Times reports that Amazon has conceded to Macmillan:

"We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles," Amazon said. "We want you to know that ultimately, however, we will have to capitulate and accept Macmillan's terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books".
Which is highly interesting: as Bruce Schneier puts it, "in a supply chain, profit — and power — tends to flow to the most constrained member of that chain." In an airport food court, most of Starbucks' or MacDonald's profits flow towards the airport, for real estate in that situation is constrained; in ebook publishing on the Kindle platform, profits flow towards the platform owner (i.e. Amazon).

I'd rate this as a temporary setback for Amazon; in the war to define the internet book distribution chain, Macmillan have merely clawed back some of the territory they've lost over the past five years and bought themselves some time in which to try and get their ebook sales up and running on a profitable basis. In the long run, though, if they don't make it work within a couple of years, expect to see more battles (and possibly a new CEO: there are many firing crimes in publishing, but pissing off a major distribution channel in order to win a concession and failing to exploit it successfully has got to be one of them).

Longer term the publishers badly need to reconsider the entire idea of selling ebooks wholesale or on an agency basis via internediaries. This goes against everything they've ever done before — but the correct model for selling ebooks (profitably and at a fair price) is to establish a direct-to-public retail channel, like Baen's Webscription subsidiary. Oh, and once you're there, you can ditch the annoying DRM.

80 Comments

1:

Sounds like round one went to Macmillon, but I tend to agree with Bruce Schneier publishers need = in no particular order.
A, An effective direct retail pipe
B, To exploit to it's fullest the current advantage - or risk being mown down the next time Amazon or other intermediate learns from the current fight and squeezes.

Beyond that my crystal ball has gone cloudy.

2:

Agree with you about Macmillan and other real publishers having just been bought time in which to re-model their distribution and down-the-line-to-the readers supply chains.

However, sorry, I'm getting monomaniac on this but ....
E-BOOKS AND READERS ARE LESS THAN SHIT - at present at any rate.
Shit can be composted and used to make plants grow. E-readers are no good for even that. As for substitutiong for a REAL (dead-tree) book, forget it.
See previous post in other thread about rading in bed under very fluffy cat, and eystrain, and backlit screens etc ad nauseam as "Private Eye" would say.

The practical, universal e-reader has yet to be built - I would think about 3-5 years away at present rates, for a reasonable price (£25-35) and constructed LIKE A BOOK - folded down the middle, can be BOTH ambient-light AND backlit read, and no thicker than 1/2" = 1cm thick when folded shut. Battery-life to be at least 10 hours, at least 100G storage, and can handle both Maths/Physics texts and artworks.

Meantime, I, and a lot of other people, who have 5000+ dead tree-bits in their houses will stick with print, thank you very much.

3:

I wouldn't go as far as saying that establishing a direct-to-public retail channel goes against everything publisher has done before.

It might be true in the UK and the US, but in Sweden (and as I understand it France, and very possibly other countries) one big book outlet is the mail-order book clubs, which are owned wholly or in part by the publishers.

This route carries its own set of problems, of course, in that the publisher now also acts as its own retailer, and it has led to spats between publishers/book clubs on one hand and booksellers on the other.

For myself, I think publisher-run e-book stores might be a good thing, but you will also need third-party ones acting as aggregate stores, otherwise you get a fractured market (as in, you will have to visit different stores for books by John Scalzi, Charles Stross and Liz Williams), and a fractured market will make it far harder for the "midlist" to get noticed and sold in quantity.

4:

Greg @ 2: I have to disagree, I recently was gifted a Sony PRS-300 ebook reader for Christmas. Initially I wasn't sure if I would get on with it, but as it was a gift I made an effort. As it turns out I would now happily swap every one of the 1000+ dead tree books I own for an ebook version.

The ebook reader has actually made it easier for me to read, and in fact, I find myself reading MORE now than I did before. The text is clear and the ability to increase the font on the fly is a massive boon to me (and my ageing eyes). This weekend I visited my in-laws and instead of taking a handful of hardbacks I took my tiny PRS-300 with my entire "to read" pile on it.

I've even gone so far as to start donating my dead tree books to charity shops and libraries where I've got both a dead tree version and a ebook version.

The one thing that DOES nark me though (in a highly selfish way) is the high cost of ebooks. In my mind it does NOT cost the same to distribute a piece of weightless information as it does a dead tree. Yes I admit that profits need to be made to keep the industry moving and books being written however there are surely distribution savings to be had.

I for one am looking forward to the competition that Apple will bring, and the price wars to come. I'm not saying authors like Charlie should be stiffed with lower fees, far from it. If anything authors should ask for HIGHER fees.

I'm also not suggesting it should simply be a race to the bottom but the efficiencies of the ebook system compared to the dead tree system has to passed onto the consumer at some point.

5:


Maybe I'm missing something, but that fact that this is a result of Macmillan trying to foist the iBooks cost model onto Amazon means that Macmillan are now the most "constrained" part of the distribution chain, no?

With two outlets for e-books (one still gestating, sure), Amazon are exactly right - Macmillan have the monopoly on their books. So Schneier's observation is apt, and bang on the money here. This market is acting exactly have others have.

6:

"This market is acting exactly as others have", that should be.

Apologies for the poor typing.

7:

Yay that your not going to get squeezed further in what you earn Charlie, and I agree the publishers need to start doing their own distribution. That being said while eBooks remain above the cost of a standard paperback people aren't going to want to buy them. Publishers are increasingly looking like their going to go the way of the music industry in not working as a group to make a new format work and instead working on their own and getting eaten by iTunes.

8:

Actually, insofar as I am an author who licenses publication rights to his books to Macmillan, I am the monopolist. You can't get new Charles Stross books from anyone else, after all.

On the other hand, this reductio ad absurdam is meaningless; it's like saying Daisy the Cow has a monopoly on DaisyMilk™ because no other cow ate exactly the same patch of grass in Farmer Brown's paddock, so their milk tastes different. In practice: glug. If Daisy goes to the butcher, another cow will be along in a minute.

No. What we need is a supply chain with fewer links between the author and the reader -- but bear in mind that books, even ebooks, face fixed production costs (editing, copy-editing, proofreading, book design, and DTP).

I have some thoughts on this. Expect another blog essay a few days from now.

9:

"Actually, insofar as I am an author who licenses publication rights to his books to Macmillan, I am the monopolist."

That is certainly true for new things you write, but I doubt many of your contracts for previously written books allow you to take the rights back that you already gave away?

10:

Thorsten, all my book contracts include extensive provisions for me to take the rights back!

This is standard in publishing. And while it's difficult for me to take the rights back ("revert" them) while the publisher is pumping out product on a profit-making basis, why would I want to? If and when sales taper off I'm entitled to get the rights back and re-sell them to another publisher -- or self-publish them.

Let me emphasize this. I am the copyright owner; Macmillan (or other publisher) is merely a licensee for certain sub-rights. Not all of them -- my translation rights, motion picture rights, video game rights, and a host of others get sold separately (via my agent, who is on my side: she gets a percentage cut of my revenue in return for maximizing it).

11:

Charlie,
I look forward to reading your thoughts on the supply chain model.

How about taking a leaf from the rest of the busiess world where the fixed overhead costs of creating the product (a book) are covered by the first sales.

Once the overheads of creating the book are covered and you hit break even point, everything after this is gravy. Split the "profit" between all interested parties at a pre-agreed percentage.

So say a book costs £20,000 to create, proof read, copy edit, etc etc and sells for £10 per copy it would take 2000 copies to be sold to hit break even point. Once those initial 2000 copies are sold everything after that is profit for the author and publisher. So if you sell 3000 copies that's £10,000 profit to share.

I admit it's a simplistic way of looking at it but it works for other people.

12:

I do love Amazon's whiney monopoly-calling gambit there. Yes, that evil publisher won't let anybody else publish the manuscripts they bought. Horrors.

13:

I have to say, I'm impressed by the amount of power that authors apparently retain. If other media industries worked this way, then we probably wouldn't be fighting over legislative disasters like the Digital Economy Bill.

14:

I can't wait to see how the whole eBook thing settles out this year, and it will happen this year, with all the tech converging on it. Kindle, Sony Reader and particularly iPad pushing things along.
Be interested to hear more of your views as it unravels Mr Stross!

15:

I'd find the high eBook price a lot easier to pay if I knew more of it was going to support the author, to be honest. And I know you could technically self-publish by eBook a lot more easily than on paper, but there's a degree of filtering we normally expect to be put in place by the publishers so that a published book is of at least a minimum standard of quality.

Of course, when booker prize-winning manuscripts are sent to publishers as a test and only one even bothers with the rejection note and the rest go unresponded-to; and simultaneously chick-lit actually exists, let alone makes it into print: well, at that point, you do have to wonder if the publisher's earning their cut...

All of which leads to a question for Charlie with regard to eBooks and distribution models - do you think we could eventually see a different distribution model based on a social-networking-like system with freelance editors and authors producing their own eBooks for commercial distribution through generic channels like some mutated literary version of the reddit software? Or does the whole "wisdom of crowds" paradigm break down badly when it comes to editing?

16:

(editing, copy-editing, proofreading, book design, and DTP).

It's true these things have associated costs, but it's also true they're becoming more and more automatable. It seems to me that a lot of these processes could be much more streamlined given appropriate use of technology, particularly as we move towards the latter 3. Also, inevitably, when you produce copy n+1 of a physical book it has to cost a lot more than when you pump copy n+1 of an ebook, and all these cost considerations notwithstanding, that's got to make a difference somewhere in the price, unless we postulate that publishers are so good at their business that they a priori know how many people are willing to buy the book at what price, and are already maximising the profits, which I would find exceptionally unlikely.

17:

How about taking a leaf from the rest of the busiess world where the fixed overhead costs of creating the product (a book) are covered by the first sales.

Uh, what do you think that publishers are doing? Hardcovers come first at a much higher price and then paperbacks. One of the issues with ebooks is that they come at the same time as hardcovers at a (if Amazon would have it) much reduced price.

18:

Mark@15

Do you take the time and effort to send spammers or other potential loonies playing silly buggers a rejection note, or do you just quietly drop their emails into the bit bucket? Sure I know some people like messing with the heads of the guys sending out 419 scams by actually engaging them in correspondence, but it's a real minority pursuit.

I know publishers have a (quite possibly deserved) reputation for being dilatory with submissions, but I don't think failing to respond to being trolled with an obvious scam really counts as evidence of that.

19:

I don't want to read slush, and I prefer to read novels that are professionally edited, copy-edited and proof-read. I like my novels to be in correctly-spelt grammatical English and to be written by someone with an understanding of plot and character.

Self-publishing doesn't put a filter between me and the author to remove the people that can't write to that standard, and I'm quite happy to pay for the existence of that filter - and I recognise that there is a real cost to that.

The approach I'd like for the e-book industry is this:

The e-book manufacturer allows you to directly install e-books from your PC (for free) if you want. Publishers have a direct-sales option.

The e-book manufacturer supplies a marketplace; they collect a standard percentage of every book purchased through the marketplace (something like 10-15%, but the marketplace can choose). Publishers can pay more for marketing / product placement within the marketplace like any other retail outlet.

Any commercial publisher (ie SFWA pro market or equivalent) can add their books to the marketplace at whatever price they choose. Non-commercial publishers (self-publishers and vanity) can too, but they appear in a different part that the readers have to positively choose to look at; books won't appear in the advertising / marketing parts unless they are pro published or have pro-equivalent sales levels (the rare breakout self-published book). Yes, this is a ghetto. Find a publisher that will take a commercial risk on your book if you want readers to take a chance on it.

Publishers release books for simultaneous e-book/hardback release, with the price to the distributor being approximately the same as the price to the ebook marketplaces - this should result in ebooks being cheaper than physical books, but the publisher getting the same revenue (actually more margin, because the printing costs are included in the wholesale price but not in the e-book price). They can run their own marketplaces if they want - which would give the reader an advantage that they can be certain that a book bought from a generic marketplace will be usable on their next e-book from a different manufacturer, and the publisher an advantage that they can either get more margin, or they can undercut the e-book manufacturers.

Later on, e-books drop in price as the book ages, while the physical book goes from hardback to trade paperback to mass-market paperback, also dropping in price. Eventually, the book becomes backlist, permanently available for something like £3/$5 as an e-book and intermittently reprinted as a paperback for a retail price of about twice that.

Authors get royalties as a percentage of the wholesale price instead of the retail price, so they get about the same for a $15 ebook as a $25 hardback.

I think that could work, since I expect the book to ebook transition to be very slow, and there to be a large physical book market for the foreseeable future - even a lot of people in their twenties prefer paper, where it's mostly older people unfamiliar with technology who prefer physical CDs; the last time I bought a CD was a present for my Dad, but I buy paper books all the time.

20:

Surely the point here is that Amazon's key value proposition is distribution, and e-books aren't hard to distribute? Paper ones need warehousing, trucks, workflow, returns, etc. Heavy content like video needs CDNing. Text is trivial to distribute on the Web. MacMillan could therefore easily have taken their trade elsewhere or set up their own direct-to-reader channel. They could even have used Amazon Web Services tools to do so...

21:

unless we postulate that publishers are so good at their business that they a priori know how many people are willing to buy the book at what price

Well yes, part of the art of publishing is making as good an estimate as possible about how many copies to print in the first place and at what price to sell them. (Especially since it's cheaper per copy to print 10,000 instead of 1,000 - larger print runs attract greater printing discounts.) You base it on sales of previous books by the author, by similar authors, on how much you can afford to spend on marketing and so on. You can't be exact about it, and it's always nice to have to go back and print more when you weren't expecting to, but if you're any good, when you're off you're not likely to be off by much. If/when all books are electronic (or, I suppose, POD), it'll be an easier proposition, but we aren't there yet. Even when we are, publishers will have to make back the fixed costs plus a little profit, and that will involve the same estimates. Merely hoping that one of your many books turns out to be the next Da Vinci Code will swiftly lead to bankruptcy.

22:

Actually you are close to what I need before I go anywhere near electronic books.

The one thing I want to be sure of is that if a total disaster occurs and I lose the ebook reader I can be sure that I don't lose the books on it.

Of course in the UK we have a different issue, ebooks cost 17.5% more than paper books due to tax rules and I doubt that will change over time.

23:

I suspect that Amazon will begin to mull the idea of becoming a publisher themselves (if they haven't already), and directly wooing content creators.

Of course, they would need to provide the services of a publisher, but I imagine that such expense would be quite worth it for them. All they need to do is offer a better deal than current publishers and they can easily woo away author and musicians who are out of contract.

Such a model would work best for Amazon when distribution becomes entirely digital so they needn't worry about infrastructure for pressing discs or printing dead sheets.

24:
Of course, they would need to provide the services of a publisher, but I imagine that such expense would be quite worth it for them. All they need to do is offer a better deal than current publishers and they can easily woo away author and musicians who are out of contract.

Will they read slush? If they only take on authors who already have a name then they will be parasitical on the existing publishers.

Just ploughing through stacks of slush is an important service to the customer. Indeed it is getting through this process that separates the published author from the rest of us. If you've ever read slush then you'd happily pay someone else to do it. Yet reading slush is the only way we've yet found to identify competent authors from the rest.

25:

"Macmillan has a monopoly over their own titles"

Uh, well, yes. Isn't that obvious? This is what the mathies might suggest is the "trivial case."

Publishers have IP, and they /own/ it, along with the primary copyright holder. Criticizing a publisher for this fact is a bit ridiculous.

26:

I don't think direct to consumer will work out that well for publishers & authors.

Pre-internet access, I had to rely on the "Also by &author" page. It frequently only listed books by the same publisher, meaning I'd miss out on some great material. Sure, for my favorite authors I would track down everything I could, but that was a lot of legwork.

I've purchase lots of ebooks precisely because I was able to find them via the content discovery services of Amazon. Publisher direct, without retail outlets, would make the above pre-internet scenario the reality once again. I don't want to have to browse a half dozen publisher-specific web fronts to find all of the books I'm looking for, and then hope I didn't miss something I don't even know exists because it's on a 7th publisher's system.

Barnes & Noble in the brick & mortar space, and then amazon in the digital space, have been successful exactly because they eliminated these sorts of obstacles for consumers.

Direct may be the most profitable avenue for publishers, but the mass majority of consumers will always prefer the aggregated store fronts for their comprehensive nature & convenience.

27:

On Publishers/Distributors/Licensors, see what Apple did to McGraw Hill for leaking the iPad.
http://gizmodo.com/5458795/mcgraw+hill-still-in-deep-denial-over-ipad-leak

28:

@21: Right, that's part of the art or business of publishing. The point is the constraints with ebooks and physical books are sharply different. With physical books, if the print run runs out, you have to issue another one. That means choosing how many copies to print, and actually spending money on printing, storing and distributing them. With ebooks, a book can generate revenue, in principle, for an indefinite period of time. Sure, you'd expect to see some sort of exponential decay in purchase figures, but with ebooks once you covered the costs, it will always be pure profit onwards, whreas with physical books you have to make another gamble for another print run, etc. That's why IMO is significant about the change.

So given that it's extremely hard to know how many people will be interested in the book in 3 years, given that you don't have to tell them you don't have copies anymore, I think this introduces more uncertainty in costs, although only in one direction.

29:

David @16: When we leave proofreading up to the computers we end up with crap like the hardcover edition of 'Cryptonomicon', which had so many usage errors it made me extremely suspicious that it was spellchecked but never closely read.

30:

David @28: those constraints are not as different as you may think.

The cost component of the dead tree element in a paper book is around 10% of the SRP -- very little. And reprints: my UK publisher usually orders them in multiples of 500 copies, starting from 1000! They have PDF-to-offset presses these days. A thousand paperback books occupy 40 cartons, weigh 300-odd Kg, and fit on a single pallet; a US midlist mass-market print run will easily fit in a shipping container. So let's not exaggerate the logistical savings of switching from paper to ebook, please.

31:

A couple things.

1. It sounds like the pricing controversy in part stems from a misunderstanding by consumers about the costs associate with books. It seems to be a natural human impulse to think that a physical object is more expensive and more valuable than an nontangible one. In peoples' minds an ebook *can't* be anywhere near as costly as a physical book, so if you price them same you're trying to rip them off. This is something publishers, authors, and retailers need to overcome.

2. I think it's a mistake for publishers to try to go it alone and retail ebooks directly. A big part of what companies like Amazon or Apple do is bring products together in one spot, and try to sell them to consumers. People don't want to go to 20 different websites to find the ebooks they want to buy, each with different interfaces. This is a losing proposition for all but the largest publishers. And having seen some of their sites, they aren't exactly user friendly. Try to find good books for 10-14 year olds on Amazon vs. publisher sites. If publishers really do want to be retailers, they need to combine their efforts into a single storefront, managed by someone like Google or Yahoo. Basically a search engine with an ecommerce front end.

32:

Some of my readers over on TeleRead.org actually think Macmillan wants to kill off (or at least slow down adoption of) the e-book format to buy more time for print books.

That is a little too uncomfortably "conspiracy theory"-esque for me, but I still find myself wondering why, if Macmillan is so hot on variable pricing for e-books, they haven't done it already. Goodness knows they've had the opportunity.

If Macmillan really is serious about dropping prices on older books below the $9.99 Kindle price point, I sure hope they do it for other e-book vendors such as Fictionwise, too. Otherwise they're just playing into Amazon being the "low price leader" for e-books and helping them concentrate their market.

33:

AndrewG:

In peoples' minds an ebook *can't* be anywhere near as costly as a physical book, so if you price them same you're trying to rip them off. This is something publishers, authors, and retailers need to overcome.

It's not just in their minds. Baen, as Charlie notes, manages to sell direct to the consumer for $6 per e-book, even brand new hardcover e-books. And they make a profit. And they pay their authors decent royalties on those e-books.

As long as Baen keeps doing that, consumers will always have someone to point to as an example when they say, " Yeah, right paper and ink and shipping only amount to $2 out of the cost of a $26 hardcover. Tell us another one."

34:

Hey, Charlie.

All of the Macmillan companies are still delisted, as of after noon on Monday the 1st.

The war is over. Amazon blinked. So where are all the paper books.

35:

Chris: given the way Amazon and Macmillan's wholesale deal is structured, for all we know Macmillan could already have tried variable pricing -- and had zero effect on the price presented to the customers because the sales channel was trousering the discount.

Not saying this is happening, but: Insufficient. Data.

Baen, incidentally, will happily sell you an ebook for $15 -- and they do. (Seen their E-ARC program?)

36:

Baen actually has some sensible pricing for ebook. I've bought books from them for years. One of the things I like is where they let you buy a whole month's releases in a bundle, and then get early access to the books. I might only want to read one or two books in the group, but since I get the others included I'll check them out too.

OTOH, you can only get the ebooks from Baen. Even though it's easy to import them to a Kindle, they're missing out on free advertising with Amazon.

37:

The economics for commodities and differentiated products are quite different, and the reductio ad absurdam is, indeed, ridiculous.

You even quoted *milk* in your example, so you can have the textbook definition of a commodity in all its glory:


A commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market. It is fungible, i.e. the same no matter who produces it. Examples are petroleum, notebook paper, milk or copper.

You are quite correct in saying, indirectly, that a differentiated product is a natural monopoly; but what you missed is that a class of differentiated products can be viewed in aggregate and 'commoditized' by a cynical and powerful monopsonist.

And yes, this can and does apply to the creative arts. Recall Sam Goldwyn's cynical remark: "Scriptwriters? They're a dime a dozen", and count the times you hear it repeated, daily, if you go to Hollywood - and the awful truth is that, today, they really are undifferentiated. A whole swathe of creative writing has ceased to be an art, and is now an entirely fungible commodity. It happens elsewhere - 'Romance' authors for the Mills & Boon imprint are interchangeable - why not any author?

Why not every author? Look at print journalism, and observe that the market value of writing broadsheet-standard news and commentary has dropped below the cost of living. A journalist's output is, with a very few exceptions for the famous columnists, a thoroughly replaceable commodity.

I speak, of course, in monetary terms: there are other measures of 'value' but what do they matter if full-time writing goes the same way as painted miniatures and decorative statuary?

Yes, reducing any art to a 'creative product' is a massively destructive act, even measured in financial terms alone. But if a cartel or a single company establish themselves as the only buyer in town - or the only distribution channel for an audience exceeding hundreds - it's highly profitable for them to do that and to hell with the consumers, the producers, and the wider interests of our society.

Note, also, that I use the term 'monopsonist' - a buyer cartel, not a monopoly or cartel who control the sale or production of a product. It's not just about being the dominant seller the reading public: Amazon are well on their way to being the only buyer for an author or a publisher.

A quick look at the record industry will show you how much damage can be done by a monopsony controlling access to the distribution and broadcasting of popular music: if you've ever thought that it all sounds the same, a manufactured exercise in marketing, then you've repeated my unpleasant observation about an art form being commoditized into an exploitative mass-manufacture.

I think that battle's lost, for our generation, and maybe for the next one. But the art of writing novels, and the business of publishing them, hasn't quite been captured by monopsonists and commoditized: Amazon have moved too early.

Which is why there's hope - but not certainty - that the destructive and dystopian future Amazon (and, quite possibly Macmillan) seem to want might never happen. But if Amazon increase their market share again this year, through complacency by publishers, incompetence by Apple and BN.com, and apathy among consumers, we've lost.

Reductio ad Absurdem, indeed.

38:

This all started as disintermediation. Back when I started an ISP in the stone ages (yes, all dial-up) that was how we sold the idea of web-commerce (well at first it was gopher sites). Back then there were multiple layers of distribution, not the three tiers we see today of producers and wholesalers and retailers. Clearly as the need to warehouse physical goods evaporates (which is bound to happen once books become bits), the necessity of wholesalers with their distribution chains likewise disappears.

As Nile above says, allowing one dominant player to become too big is simply too bad for all concerned, but markets which are allowed to be free (as opposed to the canard of "free markets") will self-correct to remove the inefficient dominant player (inefficient because dominance always leads to laziness). Amazon helped create the category by funding the Kindle, Apple will fight back with the Ipad and to follow the McKinsey formula, once there are three strong players fighting each other the market will be in the best kind of equilibrium. Don't believe that? Just play any kind of strategy game with 3 equally matched players and see how long it goes and how difficult it is to achieve lasting dominance.

39:

Charlie,

I've seen this "the cost of paper is about 10% argument before", but I've always found it problematic. Not in the sense that I don't believe that's the cost for the average printed book, more in the sense that it's applying the wrong function. CostOfPrinting(n) monotonically rises, whereas CostOfEbook(n) is for all practical purposes constant. We have, in CS terms, an O(N) versus O(k) function here. This is why I don't see it as comparable.

You can say: given that I need to spend 10000 tokens to publish a book, and I won't bother with less than 1000 print run, and each book takes me about 3 tokens to print, I need to price the book at 13 to break even, 15 to make a decent profit, 20 to cover my back in case it doesn't sell well. The overwhelming component of that cost is the 10000 fixed cost. Very well. Even if we keep adding print runs, it takes a while until the cost of the printing overwhelms the fixed cost, in this case, about 3000 books which is thrice the expected run. Even then, the fixed cost keeps being significant up to 10000 books or so. It's also interesting to note that the profit rate will keep growing asymptotically with a ceiling set on the difference between the marginal cost of production of the unit n+1 (3 tokens) and the price of the book to the public. Modifying the price is beyond the scope, but let's say while it would reduce profits, it would increase volume, though likewise one could never get away with a sale price lower than 3 tokens.

However, in the case of ebooks, we have a constant price of 10000 tokens, practically, forever. After we sell 1000 books at a price of 20 and we've paid our fixed cost and got our commercial profit, we have a product that we can sell at any price while making profit on it. From epsilon tokens to 20 tokens, that whole curve of profit-volume is ours to explore. This is why speaking of the cost of a book doesn't make a lot of sense to me, because a book in this context is something that can be making money for an indefinite period of time, without any further investment. Not sure if I managed to explain my point, and sorry if you don't consider this on-topic, I'm trying to understand the issue myself, and I can't see how a zero marginal cost can make such a little difference as the industry claims, when it's regarded as the profitability threshold in economic analysis, and selling at zero plus epsilon should always be possible.

40:

Why would the Publisher bother with a 'traditional' direct to public web retail channel complete with a heavyweight store front, if they're going full out with an agency model?

Instead the Publisher sets up their own affiliate marketing program like the pr0n guys do, along with a minimalist ebook fulfillment backend.

Anyone waffling about books anywhere on the web signs up for the publisher affiliate program, embedding the appropriate gubbins on their website for the books they're currently talking about. Any punter who wants the book clicks straight through from said website into a shopping cart checkout page for the ebook mentioned, on the publisher's site. You could link it up with something Google checkout-esque so they don't even have to fill out their credit card details separately for different Publisher's or leave the publisher having to store customer details for repeat visits.

If the sales is made, the agency/commission percentage gets credited to the affliate's account and the punter is redirected to their ebook download[1]

...next stop, ebook affliate marketing blog spam dooms us all!

--

[1] Yes having manage DRM on top of this this would make the system a bunch clunkier to use and more difficult implement; I'm pretty sure its a lot simpler to do if you can just deliver a straight file download.

41:

andrew @ 31.

I like your point. The issue with doing it alone is that the cost of entry for the consumer is to high. Look at charging for websites. It's not that I'm not ready to pay for good online content it's just that I have to continuously sign up and gove my credit info that is bothering me. It needs to becomes simpler.

The other important factor and where the kindle fails is that if I need to pay almost full for an ebooks and then $500 for an ebook reader (ok I got the DX) then books gets costly for me.

Apple has a solution to both issues. The iPad interigues me as it integrates well with what I already have. It will carry my music and movies, surf well, e-mail well, play games ok and oh read books. It will do all this with a payment system I'm used to. I have accepted iTunes and it has my credit card etc setup. Payment is a breeze and whereever I buy it it get slowly synchronized across my devices.

So with the iPad I'm willing to pay $499 for it just for the other things it does. So on an iPad paying $15 won't feel so bad. on the kindle I want to pay $9.99 to make up for the fact that I bought a device that I don't really needed.

That said the kindle's screen is really REALLY nice. I think nicer then paper...

It will be an interesting to see what happens.

My prediction is that Apple sells the HW and amazon kindle is the most popular app on it as the books might be slightly cheaper on kindle the iBook.

42:

> establish a direct-to-public retail channel, like Baen's Webscription subsidiary

In case any publishers are reading this, here's what I'd LIKE to have:

I read the first few chapters online. I decide, yes, I want to read the rest. I press ONE BUTTON which charges my credit card and I read the rest of the book. Online. Without losing my place.

Webscription comes closest, but its interface is terrible. I navigate to the book. I click on "sample chapters". I read the chapters. Then, to purchase, I have to *go back* to the book page to purchase. And then login and/or fill in my credit card information. And confirm my purchase. And then go to my account. And click on the book *again* in my purchase list. And *then* when I finally get the book, I have to find my place again.

Bizarrely, it's easier for me to legally purchase a used book online and have it mailed to me (and the publisher and author gets nothing) then it is for me to pay a publisher for an ebook.

Publishers: make it easy for me to give you money.

(A useful if rough heuristic for "easy" is to reduce the number of clicks, keystrokes, and page views I have to go through to give you money and read the book).

43:

There's something we've maybe forgotten in the discussion of pricing, and the cost of actual printing.

The publisher doesn't get the retail price. They have to pay their costs out of the difference between what they get from who they sell to, and what they pay the author.

We don't know what Amazon pays the publisher, and we don't really know what the author gets. Besides, that latter isn't a simple percentage.

But, not entirely wild guesses but rules of thumb, figure on them getting about half the retail price, per book printed, and remember ugly little things such as returns.

That 10% of retail that might be saved by not needing a printer could easily be 20% of the publisher's income per copy sold.

That sort of change in a business's profitability is pretty difficult to arrange, in most cases.

44:

You guys might enjoy Mary Robinette Kowal's parody of Amazon's concession that Charlie posted up top.

45:

Arguing that ebooks should cost almost as much as dead trees because printing accounts for only 10% of the cost of publication is disingenuous, because it ignores the fact that many of the other costs in the dead tree process aren't relevant to ebooks either. Ebooks don't need typesetters or designers -- that will be done better by the reading software -- or warehouses or trucks. Cover art will probably survive in a sense, but only as a (small, cheap, probably recycled) JPEG for the web page.

(Anyone who thinks typesetting, design, layout, etc should be done by the publisher is making exactly the same mistake as all those graphic designers in the 1990s who thought "best viewed on Internet Explorer 4 at 800x600" was a good idea.)

46:

There is still the value-added of Amazon's referral system (if you like X you'll like Y). Publishers could do that within their own titles, but not across other publishers or other media besides books. If publishers really wanted to kill Amazon dead, they would fund a crowd-sourced referral system at a social media site like Library Thing that could operate across all types of media. Combine that with convenient direct-to-retail sales channels and Amazon is just another department store.

47:

Okay, after reading some of your comments, and rereading your posts more clearly with them in mind, I think I understand your position about ebooks, pricing, and distribution thereof.

I'm not sure I agree, but you're convincing.

Thanks for all the information you've put up over all this.

48:

I second recommendation for LibraryThing. For me, LibraryThing is the best innovation that happened to my reading for last few years. Its referrals are so accurate to be scary.

I guess part of it is that Amazon doesn't know all books I bought since I buy some elsewhere, but I purposefully enter all books I enjoyed to LibraryThing to get recommendations.

In summary, if you use Amazon mainly because of referrals, you can get better ones elsewhere.

49:

Ebooks are the future, and should be acceptable for publishers to restrict them from copying (by DRM etc). However, to sell them at the equivalent price of paperbacks, when reader technology is expensive and still far less than perfect doesn't make much sense. At least it seems like poor business practice - looks like Macmillan is profiteering from selling a product that has none of the expense of a paperback to produce. Perhaps if their ebooks were sold cheaply as a promotion, people would be more likely to read them, perhaps buy the hardcopy. This would ultimately result in more sales and the author would gain more readers. So everyone wins.

50:

Charlie @35:

Chris: given the way Amazon and Macmillan's wholesale deal is structured, for all we know Macmillan could already have tried variable pricing -- and had zero effect on the price presented to the customers because the sales channel was trousering the discount.
I don't think so. At least, not with Fictionwise. I don't have URLs handy, but I and others from TeleRead.org talked to Steve Pendergrast in the past and he always said he wanted to offer lower prices on the e-books but his hands were more or less tied by the prices the publishers insisted on—and that it was often next to impossible to get the publishers to come down to paperback price on the e-books even after the printed books were in that price range.
Baen, incidentally, will happily sell you an ebook for $15 -- and they do. (Seen their E-ARC program?)
Yeah, but I wasn't really counting that since it doesn't really have an equivalence in what other publishers are doing. They're not selling the e-book of the finished hardcover book simultaneous to that book as Macmillan is planning to do, they're selling a three-months-in-advance peek at the draft version that may have a number of glitches in it.

51:

Not so much a direct reply as an "AOL with extras" - but anyone who thinks reading slush isn't a valuable service provided by the publishing industry is welcome to take the following challenge:

1) Go to a large fanfiction repository (I suggest www.fanfiction.net as a good example).
2) Pick a fandom you like with over 100 items available for view.
3) List the first 100 stories available.
4) Read those 100 stories. All of them. Note how many are actually readable.

[Before anyone asks, I've actually taken this challenge in two different fandoms - Lord of the Rings and Blake's 7. I do it every so often when I feel masochistic enough, or when I feel I've worked up enough bad karma to need offsetting.]

I believe by the end of the first 20 stories, Gentle Reader, you will be agreeing Sturgeon's Law is accurate. By the end of the first 50, you will probably agree with me that Sturgeon was an optimist. However, this challenge is only a simulation of what reading through a slushpile is like, and not an entirely accurate one at that. Slush readers are very useful people, who sort through the piles and piles of stuff which has been filtered by the very basic filters of "can this person write an address legibly" and "has this person managed the task of putting their manuscript into an envelope".

I will cheerfully continue to pay the publishing industry the premium they charge for this service - anything which saves me from having to try and find decent authors one by one is a Good Thing.

52:

What Meg Thornton @51 said, with the exception that I'm not brave/stupid enough to have done the challenge properly. I've simply spent six months on a fic mailing list with a "no critical comments" policy, which I consider to be morally equivalent.

54:

THANK YOU, Charlie, for getting the price info right. The pricing on ebooks will be determined by which middlemen can be skipped, and which processes can become more efficient. The price of the physical item is very little, even including shipping. But personally, I don't like the fact that an ebook and a book cost about the same - one I can resell if need be, burn for warmth (perish the thought), or stick back on my 100 linear feet trophy collection of caught books.

55:

Re the slushpile.

Comparing wanky fanfiction to new authors trying to publish their work is not fair.

Instead of going to fanfiction try the 'show your work' section of absolutewrite. Rather than being horrifying it will be entertaining.

http://www.absolutewrite.com/forums/index.php

There is a lot of talent out there that doesn't get published, so please don't judge every aspiring author trying to build their craft skill by the standards of the masturbatory fantasies vomited up onto the internet at large.

56:

I think one real concern for published authors is if someone comes up with a rating system for slush pile authors and it takes off.

On one level yes it could be a fairly small audience but it:-

1) provide a means for publishers to identify authors who are good and interesting to readers.
2) provide a free supply recommended of "quality / interesting" books that would be easily accessible.

The real question here is would a Wikipedia style business model work against the Encylopedia Britannica business model on the slush pile. I don't know the answer but my inkling is that some people will try.

57:

Robin @55: you're out of order, and if you keep dissing fanfic writers like that I'm going to ban you.

(I am not a fanfic author or consumer, however I know and respect several of them. At the high end, what do you call a STAR WARS novel by, say, Karen Traviss, but a work of fanfic that's officially authorized by Lucas et al? In general the writing quality follows the same quality distribution curve as regular fiction. The big difference is that fanfic is written under conditions where actual pro publication is controlled by an IP monopoly and hence scarce, so for the most part you get to see the raw slush on the fanfic sites. On the other hand, schizophrenics with hypergraphia don't generally write fanfic, they write about the GANGSTER COMPUTER GOD ON DARK SIDE OF MOON and so on, and send it to Tor to clog up their slushpile, which is invisible to you.)

58:

I feel impelled to note that I would pay good money for a Stross book about a GANGSTER COMPUTER GOD ON THE DARK SIDE OF MOON (but I wouldn't buy it via Amazon).

59:

I've bought ebooks from Baen for $15 - I've even bought Charlie Stross ebooks from Baen for $15.

People keep bringing up the point that after all costs are covered, the marginal cost of selling one more e-copy of a given novel is very low (especially if one doesn't have to pay DRM license fees).

The point I think those people are missing is that most ebooks never reach that point in sales.

David@39 had an example where selling the first 1000 units for 20 tokens each would pay the setup costs, and then prices could drop much lower. In principle, he's right. The problem we face at the moment is that right now many books are struggling to reach 500 units - they never generate enough sales to reach that wonderful place where all one has to worry about is marginal cost.

I have no problem with what Macmillan is doing - especially if it means I can eventually buy e-versions of Tor paperbacks at paperback prices. (It's not $15 for the ebook of a current $25 hardcover that I object to - it's $15-20 for the ebook of a current (or backlist) $8 paperback that annoys me.)

60:

I've been a BAEN webscription user for years, so I'll put in my .02

Reasonable price (covered). No DRM (covered). Available in a wide variety of e-formats.

I have over 75 ebooks on my ancient HP-IPAQ PDA and I would have more if more authors were available from Baen (my plug). Some of my favorite authors still are dead tree only publishers, maybe it is time for them to get with the e-program, eh?

And #59, you may be right. Many, many authors may never EVER get exposure unless they spend the kilobucks required for a vanity press release.... but think, how much does it really cost to 'publish' in the ebook format? (forgoing marketing costs of finding some publisher willing to even OPEN the manuscript to read and comment)

Your sunk costs are gone anyway (the PC, word processing software, communications, etc.), so once the book is in a format (WORD, WORDPERFECT, ACROBAT, whatever), the ongoing publishing cost to the author is basically nil. Having an e-publisher like Baen's webscriptions *might* get a little known author a wider audience than vanity press obscurity.

And one more plug for Baen's website.... the 'free' books. Once a title has been released for a number of years, how much incremental revenue does it bring in? (Unless you are one of top authors, even then, I'd bet the answer is.... none.) So why not give away an old title to the free library as a teaser? I have picked up a few new authors to read that way, ones I would not normally have purchased due to obscurity (and being cheap, not wanting to risk my $6 on another throw away!)

I have no problem with McMillan OR Amazon is doing. That is business. But if you commit hari-kari over marketing issues, the blood fallout is just going to drive your customers away.

61:

Speaking as a Baen webscription customer myself, I hear where you're coming from.

Baen is about 33% owned by Tom Doherty, CEO of Tor.

Tom (and the folks at Tor) are acutely aware of what Baen are doing with ebooks, and I believe I can say that they understand and approve of it.

Unfortunately Tor nearly went bust some years ago: a distributor went Chapter 11 under them right before they (the distributor) were due to deliver a multi-million dollar bank transfer, and right after Tor had paid their monthly bills to everyone. Tom hammered out a deal with St Martin's to buy the company but maintain it as an independent business unit, and everything worked okay. But in the fullness of time St Martin was bought by Macmillan and Holtzbrinck, and the effect of being owned by a multinational corporation has been to deprive them of some autonomy.

Tor were on the verge of joining Webscription about 3 years ago. In fact they did join -- and for a weekend, my Merchant Princes books were sold via webscription. My understanding -- which is hearsay and should NOT be considered admissible evidence -- is that when someone at board level in the parent group heard about the way webscription worked they nearly blew a gasket. Group policy was that ebook rights were to be handled centrally, experimentation was discouraged (as in: firing offense, even for CEOs of nominally independent subsidiaries), and the brakes were applied.

The reason for this idiocy is simple: sheer blind terror. Put yourself in their shoes -- you're the executive of a corporation turning over $2-4Bn a year. Are you going to gamble that income stream on a not-fully-understood new technology that threatens to cannibalize your existing market? It's easy for you or me to say "hell, yes" ... but you and I don't have their fiduciary duty to the shareholders.

As for the free library and so on, I hope to have something to announce in the next few weeks, but it's going to have to remain a surprise for now. Meanwhile, you might want to keep an eye on this web page.

62:

The big difference is that fanfic is written under conditions where actual pro publication is controlled by an IP monopoly and hence scarce, so for the most part you get to see the raw slush on the fanfic sites. On the other hand, schizophrenics with hypergraphia don't generally write fanfic, they write about the GANGSTER COMPUTER GOD ON DARK SIDE OF MOON and so on, and send it to Tor to clog up their slushpile, which is invisible to you.)

The publishing industry is providing a public service by acting as a sink for this stuff. Like the BBC's Have Your Say forum, it's absorbing at least some of the bogons.

63:

I'm sorry.

64:

It's okay, really. (But you might want to note that I don't like snobbery, even when it's directed at groups who are routinely portrayed as somewhat dubious. Especially when it's directed at out-groups.)

65:

Dave @59: (talking about most e-books never reaching point in sales where costs are covered)

The thing that irritates a lot of consumers is how publishers seem to be insisting on piling on the same proportion of those costs onto e-book prices as they do onto p-books. Since it's already known e-books sell a lot fewer copies than p-books, and they'd be printing the p-book anyway, why should e-books have to carry an equal share of the load?

Rightly or wrongly, I think a lot of people consider the e-book version as an "extra". Let the setup costs be carried by the print book, since they'd need to do all that stuff to publish the print book anyway.

Robin @55, Charlie @57: I should point out that saying people write either fanfic on the net or non-fanficky stuff to try to publish is a false dichotomy. (Maybe you didn't mean it to come off like that, but it sort of did.)

There's a lot of unpublished original stuff on the 'net that the creators wrote because they wanted to without any thought of getting paid, or else it was not the sort of stuff there's a pro market for (some of the more outre paraphilia fetishes, for instance—yes, that kind of fiction is often "masturbatory" but people who are into those fetishes seem to enjoy it).

Some of this stuff is poor, but a surprising amount of it is great—especially if it's written in shared-world settings with a gatekeeper who has a good enough grasp of what makes a good story to act as an editor.

And speaking of gatekeepers, in past discussions of the Internet slushpile problem, one of the ways around it that has been proposed is having "trusted reviewers"—friends, bloggers, columnists, etc. who read slush as a hobby picking out and recommending the "good" stuff.

In the interest of doing my part to introduce people to the "good" stuff, I've decided to write a series of columns for TeleRead reviewing some Internet and indy-pub fiction I have found to be worth reading. Here's my first one. There will be more.

66:

Chris Meadows@65:

Treating the e-book as an overrun has been basically what the publishers have been doing for years. Since there are setup costs for e-books (conversion and proofing costs, notably, plus storage, security and distribution) and becuase the market has been very small this has actually resulted in relatively higher prices than one might like based on projections of small/slow sales.

Once the market/projected sales become large enough to bring that per-copy price down they start to cannibalize the dead-tree versions they're selling against. So you can't consider them to be just overruns any more; they have to shoulder some of the initial cost. And HC print-runs, except for best-sellers, aren't that large, and they frequently have sell-through/returns problems (whence the remainders market, and debacles like the effect of the Gingrich/Forschten returns on Baen a few years ago), so it doesn't necessarily take a big impact in terms of total numbers to render the HC market unworkable (absent much higher prices).

So that model of letting "the setup costs be carried by the print book" won't work in even the medium run, unless you delay e-book production until after the costs have all been covered -- which is what was meant by "deep windowing" and which most e-book consumers don't want.

67:

James @66: I would question whether e-books actually do cannibalize hardcover sales. If I prefer reading books on my convenient, portable tablet, am I going to run out and buy a hardcover just because I can't do that?

I didn't buy most hardcovers (at least, new) even before e-books came out. Neither did anyone in my family; we regarded them as generally a waste of money.

Most people with any sense will wait or check it out from the library, or go download it off the 'net. In the case of the first option, the publisher has delayed a sale; in the latter two the publisher has probably lost it (depending on whether after reading it through the library the person decides he wants to own a copy (or reading it via peer-to-peer thinks the author and publisher deserve to get paid) when they finally decide to sell it to him in the format he wants). In none of these cases have they sold a new hardcover.

68:

The only way the publishers will beat Amazon is to opt out of Amazon's model. In other words, the publishers must play with new business models. And, raising your prices 50% does change anything but the number of ebooks sold.

69:

Chris@67:

I think you've got the cannibalization problem backwards. Of course its not going to cannibalize sales from you, since you don't buy HCs in the first place. But the market which does buy HCs includes a block of people who buy HCs because they can get it now -- and read/reread it over a longer term than a library checkout will let them. (I know: I'm one of them.) And a subset of those people, if they have a decent e-book reader, will buy an e-book instead (faster delivery and better portability which might push them in that direction, plus sunk costs in the reader), especially if it is cheaper.

Your perspective suggests that there may be more early sales of novels when an e-book option is present. It doesn't necessarily mean that total sales will be higher; and if the revenue from the net new e-book sales doesn't match what has been lost in the revenue from the lost HC sales, then you have cannibalization. The lower the initial e-book price the more copies have to be sold to avoid that; and growing that market isn't all that easy.

In the end, once everything has settled out, the flow to the publisher would probably be greater with a pure e-book market than with the current dead-tree market, but that would mainly be because low-price e-books for titles which have been out for some time will replace second-hand sales, since there won't be any second-hand sales.

70:

I've noticed that lots of LPs (the survival of which gives me hope for paper books, even in a 99% digital world) these days come with a voucher for a free download of the content. Perhaps offering free ebook downloads with hardcovers could reduce the cannibalisation of sales?

(btw - is the selection of Stross fiction offered on the page linked above not sparser than it used to be? I'm sure I've read several of those stories - A Boy and His God, Ship of Fools - via links on that page)

71:

I like the idea of giving away multiple formats, especially since some people sometimes end up getting illicit versions of books they already own in order to format shift. I'd also like to see backlist eBooks being temporarily set free or incredibly discounted to drive sales (and presales) of new books. And a pony.

But assuming it's true that hardback sales aren't just about the physical format but also about getting more money from the people who will pay more to get the book as soon as possible, if you sell an eBook at the same price for all time you're basically refusing to take the extra money that some people would willingly pay. That might be a smart move if you would lose money from people who won't just wait till it reaches a lower price and then buy but will never buy out of spite/pride/principle/forgetfulness when they would have bought at first release at a lower price. If it's not, however, would driving people who would pay more for the eBook to get it asap to buy a hardback that they might not want just to get the eBook be necessary? Might it even be resented?

72:

CS Clark @71: "some people sometimes end up getting illicit versions of books they already own in order to format shift."

Yep. These days my standard book-buying procedure (outside of the rare cases where a legitimate e-book is available) usually goes like this:

1. Buy the paperback (or the hardback if it's an author I particularly like and a HB is available).

2. Stick the book on my bookshelf unread.

3. Download a pirate e-book of it.

4. Read the e-book on my iPhone.

73:

Ross Smith @72: I am sure that my publishers would like me to condemn that behaviour, but in all conscience I can't do so (not without flagging myself as a hypocrite :).

CS Clark: What we're getting confused over is the fact that, hitherto, books came with built-in DRM; it's bloody hard to copy a hardback (and if you photocopy it, it's not terribly convenient to read a collection of loose-leaf photocopies). So there are a chunk of customers who buy hardbacks because it's the only format available and they want the book NOW, dammit ... and a bunch who want to buy and lovingly preserve the cultural artefact that is the pristine first-edition hardcover.

These two groups do not march to the same band.

74:

fmackay @70: yes, there's less fiction on the fiction page. However, you'll find most of the stories in the collection "Toast" (which is downloadable, from that very page). The others will show up as links on the page eventually, when I get round to proofing them properly and reformatting the (circa-1993-95) HTML.

75:
So there are a chunk of customers who buy hardbacks because it's the only format available and they want the book NOW, dammit ... and a bunch who want to buy and lovingly preserve the cultural artefact that is the pristine first-edition hardcover.

And a number of us who buy hardcover because we're shocked by how little authors (or at least genre authors) make.

Really, it's all of those reasons, in differing quantities at different times. The Malazan books, for example, I've been getting in hardcover because a 1200 page paperback... doesn't work. Your books, I tend to buy in hardcover more out of support. I got Iorich because I wanted it sooner.

And despite all that, I still find myself hesitating to spend $10 on an ebook. I really, truly do not understand that -- obviously, somewhere, I think that the price:value ratio is wrong, but I have no idea why. (Unless maybe it's because I can't loan it to anyone, which I do with a lot of the hardcovers I buy? That is, I read them, and a lot of times pass them on -- permanently or otherwise -- to someone else.)

76:

@75 kithrup...agreed. I have a handful of authors (our esteemed host among them) that I generally buy in hardcover immediately as they come out, simply because I know the royalty payment is larger on a hardcover. Cory Doctorow is in the same list, and I haven't read any of my hardback copies of his books in years...I read on my phone (G1) or Kindle, since all of Cory's stuff is available under Creative Commons. With these authors, I usually also have at least one other copy (paperback, once that's out) that I consider my "evangelizing" copy...the copy I put in people's hands and say "you'll like this author". I lose some of those...I think I've had to buy "Accelerando" at least 3 times! *grin* But not getting it back means Charlie's got a new fan, so win-win!

There is a somewhat larger set of authors for which ebooks _do_ cannibalize hardcover sales in my case. If I want to read the book NOW, and it's out via ebook, and it's cheaper or the same price (absolute cost to me), then I do prefer ebooks for fiction nowadays.

And there are a few authors/series that I consider collectibles, but those are getting rarer and rarer for me.

77:

The one thing that people seem to miss when speaking of the Baen webscriptions, at least for Baen books, is that everything they make from them goes straight to them.

Take a 6.99 paperback. Send it to Ingram, and you will see 50% of that come back to the publisher, of which .56 is the author's share. Baen will make 2.94 from that sale.

Take a 6.00 ebook. It's not being delivered to Ingram. They could afford to sell the book for 3.00 and receive the same money as they would for the dead tree version.

The -reason- the dead tree version is still prevalent is because they sell -more- of them per title by a large margin than they do of the ebooks, and Baen's model is considered modestly successful.

This may change with time. But at the moment, Baen can afford to sell their ebook services as they do because they are their own retailer, and the cost of retail placement is not an issue.

This is not true of Amazon, and it is not true of the large publishers who haven't pursued a similar model. If the large publishers did attempt to pursue a similar model, they couldn't do it without cutting into the sales of their retailers, and their retailers -- necessary in the current environment -- would have a fit; why should a retailer put effort behind something that the publisher can sell in a cost-effective/profitable way for a much lower price?

It's also the reason that publishers don't generally have their own stores in the US.

78:

Michelle Sagara: If the large publishers did attempt to pursue a similar model, they couldn't do it without cutting into the sales of their retailers, and their retailers -- necessary in the current environment -- would have a fit; why should a retailer put effort behind something that the publisher can sell in a cost-effective/profitable way for a much lower price?

Very true. It also suggests to me that if the long-predicted collapse of the mass-market paperback comes about and coincides with the rise of the ebook market, we're going to see more wars between publishers and book chains (and not just Amazon -- think Borders and Barnes & Noble).

79:

I’m a Tor author…and a Baen author and a Daw author and a Harlequin/Luna author. And right now I am thanking my own foresight for not having my eggs in one basket, and the Scheduling Gods for not having a new Tor release out.

But people who do are getting hosed. WORSE, the folks with paperbacks, whether new releases or not, because to get that free shipping, people often add a PB to the HOT! NEW! HC they are buying.

I hear a lot of calls for authors to do something else and somehow magically produce and publish, or at least sell, their own books. I do not, however, see a lot of calls for that from writers.

Anyone wonder why that is? I can tell you, because I may be one of the few people commenting that actually HAS some small business experience. Having had, and failed, in a small business, there are a thousand things you must do that are invisible to the customer to keep a small business going.

Here is why authors don’t go into the self (e- or real-book) publishing business.

In order to HAVE a small business you MUST have the following:

Clearance from where you live to run a small business on your premises. If you do not have this, buy or rent space from which to operate same. ($ to $$$) If the authorities find out you are operating a small business from your home (and they will) without this clearance, Very Bad Things can happen. Like fines ($$$$$)

Small business insurance. ($$ to $$$$) If you do not have this and someone injuries himself or you have a flood or a fire, your homeowners will NOT cover you ($$$$$$$$$$$$$$$).

Business licenses. Sometimes three, from city, county and state. ($)

Business tax number.

The ability to process credit card payments ($$. Yes, Virginia, they charge you). You can use PayPal, but that comes with its own set of fees and problems.

Someone to separate your business accounting from your personal accounting. And someone to handle the business tax reporting. If this is you, this is time you won’t be using to write.

A website ($ to $$$$). If you are setting up and maintaining, this is time you won’t be using to write.

Someone to handle orders ($ to $$) After all you don’t want to ship product until you find out if the credit card/PayPal account is good. If this is you….yada.

Someone to think of good ways to promote your books. If this is you….

The sure and certain knowledge that 4 out of 5 small businesses fail in the first 4 years.

A day job, because at the end of 4 years, chances are you will need it.

To sum up, here, to run a small business selling my own books, whether in e- or paper format, I would have to take the odds of 80% failure and the loss of at least 50% of my writing time.

For the record, when our small (scrapbooking, brick and mortar) business failed, our end result was a loss of over $200k.

Start a book business myself? That’s the sound of hysterical laughter you hear. Thanks, I think I’ll stab myself in the eye with a fork a few times instead.

For heaven’s sake go buy books from the folks coming out this week elsewhere!


80:

Let me just second what Mercedes Lackey said with this observation: I come from a long line of folks who were either self-employed or ran businesses. I know the difference quite well, thanks. And I, too, would rather stab myself in the eye with a fork repeatedly than set myself up as a publisher, with all that the job entails.

Old joke: what's the easiest way to make a small fortune in publishing?

Answer: start with a large fortune. Then go into publishing.

Specials

About this Entry

This page contains a single entry by Charlie Stross published on February 1, 2010 8:46 AM.

Amazon/Macmillan: other perspectives was the previous entry in this blog.

Information, Freedom, Flame-bait is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.

Search this blog

Propaganda