Amazon/Hachette Business Interruption
amazon.com
amazon.com
Also, why would Amazon care so much about how others market their content, to the point of trying to interfere? If your content is not worth $15, then nobody will buy it. If you suck at marketing, nobody will know to buy your (possibly great content). Why does Amazon get its hands dirty instead of simply giving you analytics-backed suggestions? Oh, that's right, because controlling the publishers is more profitable for them, and using their market position as leverage against publishers is a great way to do so.
They make $3 on every sale, so obviously it is in their interest to set the price to maximize revenue.
Your whole bit about "everyone doing it" and "race to the bottom" is an instance of the zero-sum fallacy.
All of the evidence points to the fact that people have more than sufficient entertainment options and have set their budgets at a fixed point.
It wasn't piracy that killed music. It was the fact that the prime purchasers of music had a fixed entertainment budget and switched to buying video games aka. zero-sum market.
Me probably. And all the folk I know with reading habits like mine who have not bothered getting an ebook reader yet, despite having problems seeing the floor for books sometimes.
edit - I think Amazon are complete and utter [redacted] over DRM, the 1984 debacle, their general attitude, etc. That said, I think they are probably right that everyone would make more money if the price dropped on ebooks. They are going about it in a very [redacted] way, of course. And even if they are right, their tactics seem pretty [redacted]. But that's Amazon being Amazon. Just because they are behaving like [redacted] doesn't mean that their economics isn't accurate.
Isn't the fact that we're still discussing a single screw up that was immediately rectified from 5 years ago evidence that Amazon is actually going about this DRM business in a pretty sensible way? Also, Amazons complete lack of interest in "fixing" the very easy DRM removal process seems to provide further evidence to the same end.
Sure, it'd be better if there was no DRM, but there's the perfect world and then there's the world we actually live in.
So maybe we should complain about publishers rather than amazon at this point?
I wanted to say that it's like iTunes and the switch to non-DRM, but I think the dynamic is different with Amazon as there isn't any meaningful competition on the e-reader device market as there was (and is) on the MP3 player market, where DRM was a major pain and thus a driver for DRM-free.
Short of Amazon pressuring publishers to drop DRM (which could well happen, but there's not a lot of business upside to it, although do downside either), I guess it will take a viable competitor to the Kindle that Amazon can't or won't provide an app for for DRM to get pressured out by end user market force.
I've never "bought" an e-book with DRM. (With DRM it isn't really a purchase, but rather a lease of indeterminate term.) I don't find it a struggle.
Either you can say the word or you can't. Luckily our language has ways of working around saying certain words, so you don't have to put in [redacted].
Another issue is that some recreational products are rivalrous of time; you can't read a book and play a computer game simultaneously, or combine one of those with doing the ironing or cooking dinner. You can watch a video or listen to music while you're doing something else. Oh, and some products are use-once, while others are use-many-times (and in some cases this varies from individual to individual: do you re-read books, or read them once and discard?).
TL:DR; There's a zero-sum game in the picture but nailing it down is a whole lot more complicated than it looks at first sight.
The error in your logic is that the size of the market for a given book actually depends on the price of that book. There's millions of books out there. Why would I pay $1000 for one when I can get so many others for $5? By lowering the price of books, Amazon increases the market size of each one.
There's also some behavioral economics involved, as I would assume people are far more likely to make a $5 impulse purchase (and look at that, Amazon has "one click send to Kindle!") than a $15 one.
Because market data suggests that most people won't switch. They will buy book from "the new, hip writer X" or they won't buy at all.
Someone who intends to buy something by Malcolm Gladwell is unlikely to buy something from somebody else just because it's a little cheaper.
Amazon wants to maximize sales volume whereas the distributors and authors want to maximize profit. The two are often correlated, but not always.
Which is why publishers don't care whether or not stores like Amazon discount their physical books. </sarcasm>
I mean, I know that with e-readers book piracy is now potentially practical but is it really a concern for publisher? I'm really curious to know how mainstream it is.
I wouldn't be surprised if the main cause of piracy for ebooks was not the price but rather that the book is not available on a particular platform or only in paperback. Besides the demographics for book readers owning an e-reader is probably older and more wealthy than the average movie pirate.
The only numbers we have are those given by amazon, but we don't know exactly which books they used to make their statistics. We also don't know what the people who didn't buy the 15$ ebooks ended up doing, maybe they didn't buy anything at all, maybe they just bought the paperback...
I dont have numbers to back it up - but plenty of anecdotal evidence and just common sense too. I myself have borrowed that malcolm gladwell book or the other - because the cheapest I could buy it was 20$ - and while I was interested in reading it - not enough to spend that much. Had it been 10$ - it would be worth it for me to just buy it rather than ask around friends if someone had a copy I could borrow. (You can also "borrow" books from friends on Kindle)
This is only part of the picture. You're missing genre / topic which is a huge component.
Let me ask you this: would you rather buy one of the first 100 prints of Djikstra's "A Discipline of Programming" for $1000 or would you rather buy 200 Nancy Drew novels at $5/book? Books are not, to some extent, able to be substituted. Yes, if you are looking for a good vampire erotic fiction novel and are choosing between two unknown authors and one is priced at $15 and the other at $10, sure you would get the one priced at $10. But if both are priced at $10?
The point is that books are not bought as a simple commodity. Nobody says "I am low on books, let me go grab a random handful, based solely on price." No, people buy books with good reviews and by recommendation. When you are viewing volume book sales from Amazon's point of view, sure they all look the same. However, taking a closer look, a publisher might be able to price books more efficiently. If Amazon has helpful data to add to this, why don't they open it up and let everyone, publishers included, see it to help price the books better? Presenting a single data point in the huge possibility space of book prices is not a valid argument. Even if you let go of all the economics involved and stop thinking about how people buy books, don't you think that that ratio of 1.74 would be different for books priced at $12 and $17? Does this vary by month? Do certain genres have different price elasticity? Amazon is not trying to be helpful here. They are trying to squash publishers, gain control of the market and dictate prices, which they cannot currently do.
Also keep in mind that the "mass" entertainment market is not competing with speciality books, but is competing with other entertainment options: Netflix, movies, drunken debauchery, etc.
Then there is the price levels we're talking about. Everyone (probably) has some price X below which they will have no problem impulse-buying. Then there's a price Y below which they're willing to take chances, with information, and then there are prices above that, which require actual consideration. And for most people, at least those buying ebooks, we are definitely arguing in this range. For my inner economist, publishers want ebook prices up in the high segment, above Y, while Amazon wants them roughly between X and Y.
"If Amazon has helpful data to add to this, why don't they open it up and let everyone, publishers included, see it to help price the books better?"
The specifics are very likely competitive trade secrets. Don't forget Amazon gets to deal with Apple, B&N, and a host of other retailers. I'm surprised they released the one number they did. On the other hand, judging by negotiations I've been in, I would not find it unplausible that Hachette is aware of those numbers.
"They are trying to squash publishers, gain control of the market and dictate prices, which they cannot currently do."
Yes, just like the publishers are trying to squash Amazon, gain control of the market, and dictate prices. Heck, this isn't even a particularly new situation: I'm sure the negotiations between publishers and distributors that led to the lovely "stripping" practice were just as entertaining.
Some books have only so much market. Amazon could declare an August special, The Critique of Pure Reason, leather cover, sewn binding, acid-free paper, yours for $5 and free shipping. Do you think that this would rocket it up on the charts?
You seem to have not understood what books are for.
Once piracy becomes an easily accessible and socially acceptable mainstream habit, it's going to be very hard to claw back market share.
Right now, ebook piracy is by far not as easy and convenient as video or music. That could change as long as ebooks remain overpriced compared to physical books, and DRM impaired to boot. (Sooner or latter the general public is going to find out the hard way how much DRM devalues their "property".)
I dunno about the US, where Amazon is king, but in most countries ebook adaption is stagnating and price is quoted as the #1 reason.
So, if Amazon takes $5, then whoever provided the book lost money on that deal. (Profit went from $10 to $5 while sales did not double). In fact, if Amazon takes more than about $4, it's a wash (which is actually a loss because some of those 75% more customers would likely have bought the book later at a different price point). If, Amazon takes $3, profit goes up by about 2% maybe 3%, if and only if that 74% increase occurs. If that increase doesn't happen, sucks to be the publisher, but Amazon's profit went up.
If Amazon wants to move more Ebooks, why doesn't Amazon reduce the amount they take? Simple, because it doesn't pay in profit. So, Amazon wants somebody else to eat the price drop. Not exactly altruistic.
All of the arguments about Ebook (less distribution cost, marginal volume cost, etc.) apply MORE to Amazon than the publishers. The publishers at least have to find authors. Amazon does, what, exactly, to justify taking $3 an Ebook? Um, right, it provides the market domination that is effectively a monopoly to the point that it thinks it can dictate pricing to publishers.
So the "total revenue" figure is pretty abstract; publishers (or authors, or distributors, or anyone, really) don't need to consider media as completely separate; what matter is total sales, including paper, on-demand, and ebooks.
The reason is: paper. Dead tree books weigh a lot and waste space. Therefore owning a library is a cost. Costs to move, costs storage space, costs effort to collate and maintain and protect.
E-books do not have that cost. Having a hundred e-books in your purse is a normal thing. Having a thousand? Well, it might make sorting through your personal equivalent of a branch library a little more fussy, but it won't weigh more or waste space.
People may not have more time, but they can divert time to books, and they can divert re-reading time to new-book reading time.
Owning a library has a higher value than owning a library of ebooks: social, decorative, nostalgic, works without power, easy share, can resell, etc. It more than evens out. But there is Steam effect - people will stockpile ebooks they don't read.
This is subjective and not monetary value. The only people that care about social, decorative, and nostalgic value of books are also the people who probably wont resell books.
> works without power
finding a place to charge your device is easy and ereaders last months without recharging
> easy to share, resell
Sure but the money you save by reselling a book is probably less than what you save by buying the ebook
Space and weight are real, expensive costs. Owning a library has negative monetary value. Owning a library of ebooks doesn't. It's stored on the internet and you can access it from anywhere.
Basically, if your books aren't furniture and you aren't sharing your books multiple times a month ebooks provide more value.
Not under the publisher's model.
This is what I had hoped for when Kindle came around and Amazon started pushing Ebooks - but unfortunately it just isnt true. The difference between ebook and paperback is currently low enough that if you maintain your paperbacks well - you'll still end up spending less (net) on the book - in quite a few cases. (Heck you can even resell the paperbacks using Amazon ;))
Kobo devices have microSD cards. You have to unscrew the case to get at it, but still, you'd probably only have to do it once.
That seems like a hard won data point, I'm surprised they threw it out to the public domain. It makes intuitive sense to me though. I buy a lot of ebooks and when they're really cheap I just buy them immediately rather than track them somewhere to go and purchase when I have time to read them later. My kindle has probably a half dozen books to read on it at the moment, and I imagine if they were $20-30 each I wouldn't be that flippant about it.
"Why not buy this game if it's only $5?"
20 minutes, 10 purchases, and $50 later with another set of titles to stale in the library.
"Why buy this game if it's not $1?"
I know there's other factors at work, but this is what publishers are (understandably) afraid of.
Your local thrift shop often has a pile of books for sale, and if you take a load of them off their hands, they'll usually give you a deal. I sometimes fill a couple shopping bags with sci fi books that way.
The fun thing about buying them by the bushel is poking through them, and discovering great sci fi you never knew existed. I enjoy the lurid artwork on the older ones, too.
I'd expect your local amazon has the same kind of resellers.
https://kdp.amazon.com/help?topicId=A22DBITFA52H1S
I imagine there's some sort of non-disclosure agreement attached to specific results (which is why I said effectively), but the universe of people that have access is so large (every KDP author), I don't think that matters much in practice - especially for general data points like this one.
Shots fired
What do publishers even do with regards to e-book distribution? Are they going the way of the record label company?
Are they worth 35% of the profit? I don't think so. But probably more than 0%. I personally think it should be 70% author, 20% publisher, 10% Amazon.
http://devblog.avdi.org/2014/04/02/why-does-amazon-hate-eboo...
I've yet to run into a problem sending all sorts of files, ebook or otherwise (aside from epub), to my Kindle.
That article seems to overstate issues with generating files readable on Kindle.
(Do modern Kindle readers not include browsers? I've never looked on mine.)
I'd be a lot happier if everyone went to no-DRM or at least interchangeable DRM so you could move to a different e-reader. Amazon and iBooks are the odd ones out. iBooks doesn't have a big marketshare, but Amazon definitely does.
I personally go to bookstores to find books and authors that I've never heard of before---something that is actually quite hard to do online.
Which shouldn't that be built into the price of those devices?
Barnes & Noble had a brief moment of glory when their first Nook color tablet was cheaper, better and unlocked. Devs were selling rooted Android SD cards on eBay. If BN had opened up the hardware, they had a chance of gaining the scale needed to compete with Kindle. Instead, BN went the other way, locked down Nooks, created their own App Store with poor selection and the rest is history.
Apple has managed to charge premium prices for devices (enabling a market for many cheaper competitors) AND keep leverage on app/content distribution.
Digital publishing needs to separate distribution from payment. Convert "pirates" into "free logistics services" and focus on customers connecting more closely with authors. Why can't authors accept elastic (value-based, pay-what-you-want) bitcoin payments?
If Amazon were worth only 10%, it would be irrelevant and publishers would go elsewhere.
If the combined value to an author of a publisher and Amazon were only 30%, they wouldn't rely on either so heavily. But here we are.
IMO they are going the way of the record label. Some publishing houses and record labels will continue to add value, while larger ones who used to use their brand to add value and had scaled to a point where that is their main value proposition are going to have a hard time, as we are seeing right now in OP.
Second, publishers also make losses on books that don't sell and that they have to recover. The majority of books don't actually sell a whole lot of copies, so the fixed costs associated with producing a book can be a pretty high percentage of revenues for the average book.
Finally, publishers provide editing, translation into foreign languages or negotiation with foreign publishers (assuming your agent didn't retain translation/foreign publication rights), production, marketing, accounting and sales services, distribution, and warehousing (for dead tree books).
Note also that you can equally ask what Amazon provides with regards to ebook distribution: In the end, it's just another middleman that got a head start because it was first to market with the Kindle, but is otherwise unnecessary. In some markets, publishers selling directly to readers (on non-Kindle platforms) makes up a significant part of sales.
Are venture capital firms going to go the way of the record label company?
This is an important point when you consider the vendor lock-in of the Kindle "ecosystem." Instead of "e-book," a better phrase might be "Kindle software."
Amazon should be careful of throwing stones about illegal collusion as they approach market domination. It will be very easy for them to make a mistake which runs afoul of anti-trust law.
Sale vs. licence
These are two separate issues.
I 'buy' DRM-free books from O'Reilly. The lack of DRM means that O'Reilly won't ever be able to remove my ability to read those books on a new device. However, I still don't own the books, and have no second-sale rights.
http://gyrovague.com/2013/03/26/down-down-down-books-e-books...
Some crappy code for pulling these stats from Amazon:
http://whatever.scalzi.com/2014/07/30/amazons-latest-volley/
(Shorter Scalzi: Amazon are presenting as "good for authors" policies which, in fact, are only indisputably "good for Amazon"; the only authors they might be good for are those who cleave unto Amazon like limpets and don't do business with the other 70% of the book distribution business, and even then, it's somewhat questionable: Amazon's T&C's for authors publishing directly are invidious and include binding arbitration clauses and boilerplate giving AMZN the right to vary their terms unilaterally -- meaning AMZN basically have those authors by the short and curlies, in a manner that no real publishing company even attempts in their author contracts.)
I easily see #3 resulting in the bottom end selling at $5 and the top end selling at $9.99 because I suspect the reason Amazon picked that number is, overall, it generates more total sales [by dollar volume]. One of the few things Amazon is good at is accurately pricing products to maximize gross revenue.
That being the case, I don't think its likely to be the disastrous price point Scalzi thinks it is even if it squeezes the publisher's margins on the higher end books. Ebooks, once created, are a sunk cost...not an ongoing one so maximizing gross revenue works in everyone's favor.
What you're missing is that, from the author's point of view, ebooks are not interchangeable. A unit of my sales is not usefully interchangeable with a unit of Scalzi's. To Amazon we're fungible produce, but to us we're suppliers of bespoke one-of-a-kind products. The Amazon move squeezes those of us who are able to sell at a higher price point -- like me (current lead title priced at $12.99 on Amazon and selling jolly well; and at £7.99 in the UK, and doing well there, too).
Amazon's proposed $9.99 guillotine on pricing would basically impose a 30% cut in my income if sales volume of my titles remains static. And I haven't seen any evidence that the price elasticity of demand for novels by Charles Stross will respond to crude pricing signals the way that aggregate demands for all books will do across the board.
> we're suppliers of bespoke one-of-a-kind products
People who make specialty designer products all think this way, it isn't just authors. I'm well aware of the mindset, I just don't subscribe to it. Many software products are as unique as two different ebooks, however, they meet the same general need/desire for products of that category and are ultimately interchangeable under the right market conditions.
> Amazon's proposed $9.99 guillotine on pricing would basically impose a 30% cut in my income if sales volume of my titles remains static. And I haven't seen any evidence that the price elasticity of demand for novels by Charles Stross will respond to crude pricing signals the way that aggregate demands for all books will do across the board.
The number of authors I don't buy on price is a very, very small list compared to the majority of my ebook purchases. FWIW, I've never bought any of your books precisely for this reason.
So, if you accept Amazon's premise that aggregate demand for all ebooks will increase, that leads to the basic question of:
Why should I specifically value the net outcome for Charles Stross over any other author that benefits from the increase in demand?
You sure about that? I haven't read anything by either one of you. You both have a bunch of good reviews and some interesting titles. Or, I could just go get a new paddle leash for the price of your book and go kayaking.
"Amazon’s assumptions don’t include, for example, that publishers and authors might have a legitimate reason for not wanting the gulf between eBook and physical hardcover pricing to be so large that brick and mortar retailers suffer, narrowing the number of venues into which books can sell."
So Scalzi and Hachette want me to subsidize Barnes & Noble? Mighty nice of them.
"...it appears to come with the ground assumption that books are interchangable units of entertainment, each equally as salable as the next, and that pricing is the only thing consumers react to."
That's an interesting statement to appear next to the Kirkus review of Lock In: "...yet more evidence that Scalzi is a master at creating appealing commercial fiction." My impression is that Amazon is more correct than Scalzi concerning the specific market in "commercial fiction".
Further, I'd be a little more sympathetic to him if he didn't include the argument, "...then I feel perfectly justified in considering your cost of production position vis a vis publishing as entirely hypocritical," if the publishing industry had not made that same argument for all of the price increases in the thirty years previous."
And then, of course, there's the bit about "Which is to say that between my publisher and Amazon, one of them gets to utter the immortal Darth Vader line “I am altering the deal. Pray I do not alter it further” to authors doing business with it and one does not."
It contrasts entertainingly with the fact that neither he nor his publisher are operating under the terms of the Kindle Direct agreement with Amazon, although I suspect his publisher has more authority than he admits, if he wants to get anything new published. Also with the fact that "Amazon is just 30% of the market."
". And that 74% increase in copies sold makes it much more likely that the title will make it onto the national bestseller lists. (Any author who's trying to get on one of the national bestseller lists should insist to their publisher that their e-book be priced at $9.99 or lower.)"
Well, that's all well and good until everyone prices their e-books at $9.99 or lower, at which point we're back to square one. Unless the objective is to then have people who want a leg up to price their books at $8.99...
Also got a bit nasty when they mention, "ilegally colluded with their competitors" - was this ever established? I thought the publishers settled before it went to court, and only Apple was found guilty.
Finally, Love how Amazon is now trying to drive a wedge between the publishers and authors - "While we believe 35% should go to the author and 35% to Hachette, the way this would actually work is that we would send 70% of the total revenue to Hachette, and they would decide how much to share with the author. We believe Hachette is sharing too small a portion with the author today, but ultimately that is not our call."
This is Amazon turning up the heat on the publishers. Remember, Amazon/Bezos are ruthless - they could not care at all what is fair - but they are going to use every tool in their kit to win at this negotiation.
Does any company of that size care what's "fair"?
I fail to see how the authors getting 35%, unhindered by the publisher's whims, can be unfair.
Everyone is talking about the price, but that's not the only thing they're negotiating. We've heard about some of Amazon's demands from some of their other negotiations, so I'm not surprised that Hachette is holding the line.
In what sense? In the sense that we know to a fairly high degree of certainty that it happened? Yes. In the sense that you would never lose a libel suit for saying that it happened? Also yes. In the sense that a final judgment was entered in a trial case to this effect? Only then would the answer be no.
No. At least not according to OP. They suggest that books compete against other forms of information and entertainment and that below $9.99 a larger share of that market would be occupied by ebooks.
Is this an implicit admission that Amazon is eating the cost of those returns? Or do they mean something specific like the physical infrastructure for returns?
Publishers don't want paperbacks back, they just want proof that the book didn't sell. That was always just the front cover. You may have shipped the books to someone who did the stripping, but I very much doubt the publisher ever saw the text block.
What % I get when it's sold (kindle or dead tree) is absolutely none of Amazon's business. I negotiated with my publisher (not Hachette), I'm happy with the results, I don't need other people telling me what's best.
If you're an author the absolute best you can hope to get is 35% of the sale price -- that is, the price your readers are willing to pay to read your work. Usually, it's even much less.
The publisher keeps at least 35%; the distributor, 30%. It's unclear to me what value these actors are offering, for this amount of money.
Disintermediation hasn't happened yet (what happened is, Amazon took the place of bookstores, and publishers are still around).
But disintermediation will happen eventually; when that day comes this discussion will sound silly and strange.
But what is the alternative for those customers: do they maybe buy the paperback version instead? If that's the case, Hachette might miss out on revenue, but they also keep their paper-based business running and stay somewhat independent of Amazon.
Their post is titled "Update re: Amazon/Hachette Business Interruption". However, they don't state what their specific demands are and why the business was (in their words) interrupted.
Amazon's proclaimed objectives aren't as important as knowing what their specific demands (from Hachette) are. I'm not a book-author, but as a developer, I set the prices of the software products I develop (Apple and Google let me do that, Amazon doesn't). So my sympathies are with the book publishers, but even if they weren't, I'd still like Amazon to explicitly spell out their demands instead of using self-serving pricing elasticity theories to sway public opinion.
Won't this mean actually the reverse?
Well, with Amazon there could be lost sales due to refusing to stock/sell.
Despite Amazon's talking points, they are relatively price inelastic. Perhaps, right now, they aren't, since people are still dealing with market novelty, but over the long term, time is a bigger sink than money, when it comes to books.
I'd be surprised if your data was better than Amazon's.
If I stop collecting books, can I become a people? Is there like a specific process or licensing body?
I'd bet your average book consumer, with rows and rows of beautiful, trendy, or important books on his shelves, has read maybe 10% of those tomes. If that. 10% is probably a generous figure. Even true bibliophiles have read maybe 25-50% of their books.
There is a long and well-known phenomenon in the publishing world, which I'll call "trophy collecting." It's the process by which someone buys and conspicuously displays popular or well-regarded books on his shelves, mostly for the social esteem of being seen to have them. This is, more or less, how most literary fiction and wonky nonfiction gets sold.
But here's the thing. How do you do that with ebooks? No physical object to collect. Much different. Nothing to display.
Ever "follow" someone on social media because you like their writing? Collecting books from an author is like that, except that you're also feeding the author, so they can write more books for you to read. So you get 64,000 words in a book instead of 64 words in a tweet.
A lower starting price increases the initial pool of people who are exposed to an author's fiction or non-fiction worldview. Authors need more input into the price curve which modulates growth of their community of readers. Neither publisher (old boss) nor Amazon (new boss) is maximizing the use of technology to improve relationships between reader-people and writer-people.
I'm reading less at the moment than I used to, but I regularly have periods of reading around three novels a week. If it were not for the existence of libraries and second hand book stores, I would find money to be a far bigger restriction than time, especially when I was a teenager.