Publisher Delays E-Book Because of Concerns About Pricing
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There’s an interesting article in yesterday’s Wall Street Journal called “Publisher Delays E-Book Amid Debate on Pricing.” Upon first read, or for those not immersed in the issues surrounding the retailing of eBooks on Amazon, it sounds like no big deal. The article starts with:
Sadly the article doesn’t go deep. Publishers are generally setting the retail prices for the eBooks at the same level (or sometmes roughly 10% lower) than the print version of the same book. Yet Amazon persistently retails them for $9.99 (against hardcover prices in the $25-$30 range). By all accounts Amazon pays the publisher based on the established retail price and then takes the loss itself. (I just checked the top ten fiction bestsellers on Amazon from the last New York Timesbestseller list and indeed all are priced at $9.99 in eBook format, with the exception of the one title noted by the WSJas not available as an eBook.) The scuttlebut I hear surrounding this is that Amazon wants to achieve two goals: 1. By sticking to this loss-making practice, to create a perception amongst eBook buyers that they should not have to pay more than $9.99 for an eBook, and to thereby, over time, force publishers to drop their retail prices for eBooks. and 2. To establish Amazon.com as THE place to buy eBooks and read them on Amazon’s Kindle (in a format completely incompatible with othr eBook readers). This is considered as Amazon’s attempt to emulate the near-monopoly Apple has achieved with iTunes. Publishers are increasingly annoyed because while there are some cost savings involved in eBook production versus print production, they still have the same overhead, including acquisitions, editorial, marketing, sales and production (if not printing). Furthermore, in these days, where eBooks still account for a small percentage of overall book sales (”only 1% to 2% of total book sales, as measured by dollars” according to the WSJ article), publishers maintain essentially the same overhead because the bulk of thir sales are through tradtional bricks-and-mortar channels. eBooks are not adding much to the bottom line. On top of this Amazon apparently demands a higher discount from retail prices on eBooks than it does on printed books. Much more investigation to be done on this topic, but in the meantime I can only observe that, like Google, Amazon is now only interested in “doing good” when that means doing good for Amazon.com. July 15 update: An article in today’s New York Timeslooks at how some other publishers are reacting to this same challenge. Consultant Mike Shatzkin, who I’ve known for years and whose insights I respect is quoted as saying: “People who read e-books don’t buy physical books, and people who buy physical books don’t buy e-books.” That doesn’t make any sense to me…I wonder what is data source is for that claim? What about cookbooks full of color pictures, coffee-table books, kids books…none are well-suited to the Kindle or other eBook reader…so do eBook buyers never buy those books in print? |
Wow - thank goodness that anti-spam question was easy. Okay, so here is MY take on this.
eBooks are absolutely no different than a digital game, digital movie, digital song or digital software application. When something becomes digital, what changes is the distribution model. It is not about the device sale. In some cases, like the cell phone, they give the device away and make it up on the services.
It is also not about what effort it takes to create the content.
Music by Trent Reznor (Nine Inch Nails) are the same price as Music by London Philharmonic Orchestra’s even though Trent produces everything himself on a Mac at low cost - contrast that with the production cost to record and pay for all the players!
A children’s book with fantastically complex and beautiful illustrations ceratinly took more time and effort than the person taking notes while getting the inside scoop from Ruth Madoff on how that Ponzi scam actually worked - but i can bet you that at the bookstore, the Madoff book will sell for far more than the children’s book.
I think that will change.
Thad,
You’re right with the point you make. Even somebody who reads only ebooks for straight text (like me) would buy an illustrated book. That is aside from the point Motoko and I were discussing, but your distinction is accurate.
Michael Cader on Publishers Lunch today talked about the publishers’ general frustration with Amazon’s deep discounting of ebooks. It was news to me (in your post) that Amazon is pushing for deeper discounts on ebooks than on print books; I think they want “lower prices”, but that could also occur by a reduction in publishers’ retail prices. I don’t think any of those things are motivating Dominique Raccah; I take her at her word that she doesn’t want to devalue the $27 hardcover she’s going to be selling. I don’t agree with her, but I don’t think, in this case, that there is any secondary agenda.
Mike
Thad — I think the WSJ numbers are wrong — in every case I’ve looked at, as well as in overall market figures, it appears that e-books represent between 1/10th of one percent and a half-percent of revneue at publishers. This is in part due to the discounting of e-books compared to their paper counterparts (based on the increasingly standard pricing, $9.99-ish, the unit volume of e-books is probably two to three times more of the sales, as a percentage of units sold). In any case, it’s true that we’re only at the very beginning of the transition between these media, which will never result in the end of paper books, only a radically different mix.
Amazon’s reports indicate that Kindle buyers are also paper book buyers, suggesting that they frequently buy both versions to read in different settings.
[...] to drop in on….. By Mitch Ratcliffe, on July 20th, 2009 Thad McIlroy has an interesting discussion of The Wall Street Journal’s article about the Sourcebooks decision to withhold an e-book [...]
I think the Journal’s reported “one to two percent” of book sales now being accounted for by electronic publishing is well above the real number. I’ve looked at a lot of publishers reports and the aggregate industry figures, and it appears that the correct range of e-book revenue as a percentage of total publishing revenue is between 1/10th of one percent and a half percent. As a share of units sold, e-books account for two to three times the revenue figures, because e-books are sold at a deep discount to paper editions.
Amazon’s numbers suggest that Kindle users frequently buy both the paper and e-book version of a title in order to read in different settings. Frequently does not mean the majority, but the statements by Jeff Bezos last fall and in January were unequivocal, Kindle sales have not cannibalized paper sales and the Kindle buyer buys more books than the ordinary Amazon book customer. There’s no evidence that Kindle readers don’t read paper books or vice versa and, the categorical statement that no Kindle buyer also buys paper books is clearly incorrect. I buy both, choosing formats for different kinds of uses.
Michael,
I agree with you that “When something becomes digital, what changes is the distribution model.” This is the part that music, film, book, newspaper, etc. companies find it most difficult to grasp. But is IS THE KEY issue. However, the “effort it takes to create the content” must have an impact on pricing, or the content will no longer be created. I’m not sure what you mean by “I think that will change.”
Mitch,
Thanks for illuminating the sales numbers on eBooks. I was only thinking of IDPF numbers (www.idpf.org/), and not thinking about how this was impacting net publisher sales. I’d also forgotten Bezos’ comments from last year, although I’m still pondering his claim that when books are available at Amazon in both print and eBook format, the eBook garners a 35% greater sales volume, despite the fact that only a fraction of Amazon’s customers own Kindles. Hmm…..