Monday, April 16, 2012

The Agency Model Sucks

If you're a regular reader of my blog, no doubt you've heard about the Department of Justice filing suit against five of the Big 6 publishers for collusion. If you haven't read the complaint, you should.

Personally, I don't care if their alleged collusion was illegal or not. I've been known to break laws on occasion myself.

What I do care about is how authors are reacting to this news.

I won't point fingers, but a Google or Twitter search will show how many authors seem to think Amazon is bad, the agency model is good, and the poor Big 6 are getting the shaft.

Uh, no. That's just plain wrong.

I'm going to explain why the agency model in this particular case is indeed bad for authors. But first go read April L. Hamilton's terrific breakdown of arguments and statements erroneously defending the Big 6.

Before I begin, let's make sure we're all on the same page about what the agency model is. Here's a detailed explanation, but in a nutshell it is this: in a wholesale model, the one supplying the goods sells to a retailer at a predetermined price, then the retailer sells to consumers at whatever price they see fit.

In the agency model, the one supplying the goods gets to set the price for consumers, and then gives the retailer a set percentage (in this case 30%.)

It should be obvious that the one who sets the price has a great deal of power over the market.

The agency model by itself is not illegal. Retailers can choose to adopt any pricing structure with their suppliers as they see fit. And as I said before, I care less about the legality of this particular business relationship, and more about if it was good for authors.

And it wasn't, for this very big reason:

Under the Agency Model Authors Make Less Money

I've gone into this in detail before, but let me distill it.

Under the prior model, Amazon bought ebooks at a percentage of the recommended retail price. Then they priced them how they saw fit.

The recommended retail price for ebooks was often about half of the hardcover price. So a $25 recommended retail price meant Amazon paid $12.50 for the ebook.

According to most contracts, the author made 25% of the net price the publisher received. So at the above numbers, an author would make $3.12 NO MATTER WHAT PRICE AMAZON SOLD THE EBOOK FOR.

In other words, if Amazon wanted to sell the ebook for $9.99, the author still makes $3.12.

Sell it for $5.99? Author makes $3.12.

Sell it for 99 cents? Author makes $3.12.

So what happens when the agency model comes into play?

First of all, Amazon no longer controls the price. We all know that this is BAD, because Amazon became the giant billion dollar company it is today by ruthlessly gouging customers, forcing them to pay high mark-ups at unreasonable prices.

Oh, wait a sec... Amazon doesn't do that. In fact, Amazon works its butt off trying to keep prices low. That's why so many people shop there.

Now, I've got reams of data that show lower priced ebooks outsell higher priced ebooks. My higher-priced legacy novels are underselling my lower-priced self-pub novels by 1 to 5 or worse.

In other words:

With the wholesale model, authors made more money per unit and sold more units.

If you are an author defending the Big 6 and the agency model, repeat that in your head until it sinks in.

With the wholesale model, authors made more money per unit and sold more units.

Funny thing is, publishers also made more money under the wholesale model. But instead the Big 6 decided they wanted an agency model.

Authors still get 25% of net. But net has gotten lower in almost all cases.

With the wholesale model, net was $12.50. With the agency model, net is 17.5% of the list price set by the publisher.

So the publisher sells it for $12.99, the author makes $2.27.

Sell it for $9.99? Author makes $1.74.

Sell it for $5.99? Author makes $1.04.

Sell it for 99 cents? Author makes 17 cents.

The Big 6 don't like low priced ebooks. It hurts their paper sales, and paper is the model they hold distribution power over. So once the agency model became adopted, the Big 6 kept ebook prices high.

In other words:

With the agency model, authors made less money per unit, and sold fewer units.

Is this sinking in yet? The wholesale model was better for authors. It was also better for customers, who benefited from lower prices.

So why are some authors defending the Big 6 for taking food directly out of their mouths?

Could be ignorance. Could be Stockholm Syndrome. Could be they feel the need to defend the industry that made them rich or successful (though not all authors defending the agency model are rich or successful.)

The point is, no author should be on the Big 6's side here. Even those who fear that Amazon will someday become a huge monopoly that will destroy the world by offering low prices, excellent customer service, and a platform for authors to directly reach those customers.

Q: But Joe, aren't you benefiting from the agency model? After all, isn't that what KDP is?

Joe sez: Absolutely. When I self-publish, I can set my own prices. I'm able to find that sweet spot in pricing to maximize profits. I love the agency model. It's terrific if you are the content creator.

But I don't want an archaic, inefficient industry controlling the prices of the books I've written to further their own Machiavellian agenda. It's absurd that I'm the one who wrote the book, and I get 17.5% of list price, while the company setting my list price is getting 52.5%. Even worse, that company setting this list price is NOT PRICING TO MAXIMIZE REVENUE. They are PRICING TO PROTECT THEIR STRANGLEHOLD ON THE INDUSTRY which is HURTING MY INCOME.

Q: But Joe, if the Big 6 are no longer allowed to use the agency model, Amazon might also take the agency model away from self-pubbed authors.

Joe sez: I'd be happy to go into a wholesale arrangement with Amazon. As you can see by the numbers above, a wholesale arrangement can also be beneficial to authors.

Q: But Joe, what if Amazon cuts author royalties and raises ebook prices?

Joe sez: Amazon has a clear history of trying to lower prices, not raise them. Right now the Big 6 legacy publishers are the ones who want high prices.

As for Amazon lowering my royalties, as long as there is competition I doubt that will happen.

Q: But Joe, if all the Big 6 ebooks are priced low, no one will buy yours anymore.

Joe sez: I disagree. I believe I'll sell even more ebooks and make more money than I am now if all prices drop.

First of all, lower ebook prices encourage buying across the board. Low prices fuel impulse buys. People are looser with their wallets and buy more then they normally would when prices are low.

Second of all, lower ebook prices allow the entire market to grow, as higher prices are a barrier to entry for many. When we have $49 ereaders and all NYT bestsellers are $2.99, more people will adopt the technology and buy the media.

Third, we're entering a global marketplace that will have an infinite, inexhaustible customer base. We'll never run out of readers to sell to.

Fourth, at low prices, there is no competition between ebooks. Instead of spending $19.99 on the new JK Rowling, if her latest was $3.99 a reader could buy that along with five of my titles.

In the comments, some keep insisting that once legacy ebook prices drop, indie sales will drop because of competition. Here's how I see it:

Ebooks aren't cars, where the buyer purchases one that will last for years. People who read books tend to read more than one.

If you read for pleasure, and ebooks become cheaper, I predict you'll buy more. This isn't about competing.

If a customer has a $25 book budget for the month and the choice is between my new hardcover and Patterson's, that's competing for dollars.

If we're both $3.99, the reader will get both. As a species we buy in bulk and hoard, even if we never use what we buy. That's how we're wired. And if prices came down unilaterally, I predict sales will go up unilaterally because the overall pie will get bigger--because more readers will enter the market--and those readers in the market will be able to buy more with their money.

Think about your own buying habits. Or think about what stores do. When you need toothpaste, and a tube is $4.99 or two for $5.99, which do you buy? Think about the bargain DVD section at Best Buy, where every movie is $2.99. If there is more than one you're interested in, do you get both? Contrast that to the new releases, which are $19.99. If there is more than one you want you have to think about it before buying both. At the lower price, you don't think.

Now think about going to the store to buy a refrigerator and expecting to pay $1000. You're thrilled to see a model you like for $399. Do you leave the store with $601 in your pocket, or do you keep shopping because you feel you saved money and can now spend some of it?

Lower prices will be better for everyone.

Q: But Joe, it isn't a question of money. It is a question of time. If people load up their Kindles on free or cheap ebooks, they'll never have time to read them all, which means they won't buy more.

Joe sez: People are already loading up their Kindles. That hasn't precluded buying more ebooks. Readers have always had To Be Read piles. But now they're cheaper to acquire, and portable.


Q: But Joe, Amazon is the devil and wants to eat my children.

Joe sez: I simply don't understand why authors are afraid of Amazon.

Amazon wants to lower ebook prices. The Big 6 want to raise them.

Amazon has given authors more opportunity than ever before in history, allowing them to make money. The Big 6 has "nurtured" thousands of my peers into depression and poverty.

Those who fear what will happen when Amazon rules the publishing world should instead fear the cartel that currently controls the publishing world: the Big 6. Forcing the agency model has hurt authors and consumers, and that's a damn poor business model and not one I want to align myself with.

You shouldn't worry about being eaten by a lion tomorrow when there is currently a pit viper biting you in the ass. And if you're defending the pit viper, you're an idiot.

164 comments:

Kelly Bryson said...

Stockholm Syndrome- Ha!

C R Myers said...

Well said, Joe, as usual. You spelled it out in details even my eight-year- old could understand. What's not to get? Some day it will sink in.

Thanks for all your time and effort!

Cat :)

Chad Aaron Sayban said...

A tip of the hat to you, sir. Very well said.

Kate Madison, YA author said...

Very crisp, clear, and humorous, as usual.

Great post. Thanks for spelling it out using facts and logic. Your voice is very much appreciated.

Kate

Derek J. Canyon said...

Excellent post, Joe. I've never been bitten by the viper, but I'm cuddling up to the lion right now and it doesn't look hungry.

Adventures in ePublishing

G. M. Frazier said...

It's interesting that Mark Coker (founder of Smashwords) is on CNN arguing for the Big 6's position in the case.

Steve Peterson said...

Joe,

I think a key point you made deserves to be highlighted: Legacy publishers aren't pricing to maximize revenue, they're pricing to keep paper book sales afloat. Which means authors get screwed.

Yup, Amazon may well do things in the future to screw authors. If you're an author with control of your ebook rights, you can stop dealing with Amazon and work with other channels. But if all your rights are locked up by a legacy publisher, you're a helpless bystander.

I think authors are better off when they control their ebook rights and can decide for themselves the best way to handle them. A big part of the problem for longtime authors has been that ebook rights were gobbled up by legacy publishers long ago, and they have no interest in disgorging them without a fight. Meanwhile, legacy publishers are using ebooks to try and keep paper books going, at the expense of authors.

Stephen T. Harper said...

The agency model is certainly bad for authors under contract with large traditional houses. But, though I follow your arguments about how the wholesale model is good for everybody, as an independent doing well with just one book (so far), I have a hard time believing that those $12 price tags on big six ebooks haven't helped my story find it's audience. I look at the agency model as an advantage in the marketplace.

Louis Shalako said...

Thanks for the insights. Amazon allows me to pursue a low-cost business model. I am learning how to use every marketing tool in the inventory. I want to remain independent and in control of rights and revenues. At present, maybe it's a little bit of B.S., but who knows what they will be worth 15 years from now.

Juli Monroe said...

I see all the time people shouting that Amazon is going to lower author royalties. (For the record, I'm not worried about it.) But I am curious. Does anyone know who started this Chicken Little call? I haven't been able to find a credible source for it, so I'm chalking it up to fear mongering by those who think they need to keep self-pubbed authors unhappy and scared. And then everyone picks it up because "ooooh it sounds so scary."

Anonymous said...

To the extent the issue is whether the agency model is good or bad for INDIE authors, it's obviously good. It results in higher priced legacy eBooks which allows for more price competition by indies.

To the extent the issue is whether the agency model is good or bad for LEGACY authors, it's also good. The model protects print investments, and sales of print books do in fact generate royalties for the authors. Sure, fewer sales of ebooks occur during the protected period, but then the prices come down. Under the agency model the publishers make more money in the combined markets of ebooks and print books. Since their authors get a corresponding cut of the combined market profits, the authors also make more money.

Anonymous said...

To the extent the issue is whether the agency model is good or bad for INDIE authors, it's obviously good. It results in higher priced legacy books which allows for more price competition by indies.

To the extent the issue is whether the agency model is good or bad for LEGACY authors, it's also good. The model protects print investments, and sales of print books do in fact generate royalties for the authors. Sure, fewer sales of ebooks occur during the protected period, but then the prices come down. Under the agency model the publishers make more money in the combined ebook/print market. Since their authors get a corresponding cut of the combined market, the authors also make more money.

JPK said...

...many authors seem to think Amazon is bad, the agency model is good...

Wow. Just goes to show that just because you can write a book doesn't mean you're all that smart.

Mark Asher said...

I wish the publishers would keep their ebook prices at $12.99. What I don't want is them pricing at $2.99 or $3.99.

I'm no fan of agency pricing, but isn't it easier for an indie to compete with higher priced books than books that Amazon is free to discount?

I.J.Parker said...

I can certainly testify that Joe is correct about agency pricing. It has hurt me severely as a legacy author. Sales for 4 Penguin-owned titles are dismal at 12.99. Contrary to what someone else said above, my print sales for those titles are even worse.
As for my indie-pubbed titles in the same series: sales are (as in Joe's case) significantly better at the price I have set.

I'm not at all sure about the advantage of selling low. This has not led to increased sales for me. And the freebies under KDP Select are simply stacking up on people's Kindles without producing increased regular sales.

Anonymous said...

Look, the current law suit isn't in regards to the agency model...it's in regards to COLLUSION around the agency model. If you think Amazon is the best, so be it. Heck, lots of people think Wal-Mart is great too. Content is king and Amazon is going to use their weight to put pressure on price in order to garner more share and lock up more content. The "Big 6" do the same thing. Plain and simple, most writers don't know their arse from a hole in the ground when it comes to business and many comments surround this case prove that point. It's all about control over content and if you think Amazon isn't pushing their weight around in this area you're only fooling yourself. Everyone is trying to increase their pie slice and save their nut, Big 6 and Amazon alike. Facts are that Amazon has one distinct advantage over local bookstores, TAX FREE SALES. Amazon will choke the author for every last cent to increase share as will most all publishers. Wake up and small the squeeze. Here's an example: http://finance.yahoo.com/news/daring-cut-off-amazon-140209029.html

Joe Konrath said...

I have a hard time believing that those $12 price tags on big six ebooks haven't helped my story find its audience. I look at the agency model as an advantage in the marketplace.

Are you sure? Expensive ebooks don't sell as well as cheaper ebooks, but they are still selling. If they weren't so expensive, that would mean more money in a reader's pocket that she could spend on you.

When prices drop, does the whole market get bigger, resulting in more sales? I predict yes. We'll see if I'm right.

Joe Konrath said...

Since their authors get a corresponding cut of the combined market, the authors also make more money.

This week a bestselling author told me their paper sales haven't gone down. But that's a bestseller.

Midlist authors are getting creamed by 30% sell-through. They aren't making up for lost ebook sales with paper sales. They're losing money all over.

Spike said...

Just two words, Great Job!

Joe Konrath said...

It's all about control over content and if you think Amazon isn't pushing their weight around in this area you're only fooling yourself.

Yes, Amazon is pushing their weight around, offering authors more money than any entity in the history of publishing, while also trying to get lower prices for readers.

That's the precedent they've sent. But you're worried about the lion tomorrow and not the viper currently poisoning you.

Guess what? If I could somehow avoid sales tax, I would too. And the law says online retailers don't need to collect sales tax. That isn't Amazon doing anything wrong, anymore than I'm doing something wrong when I take legal deductions on my taxes.

Your premise fails because there is no evidence to support it, while I have ample evidence to support mine. As for the link, here's Amazon's response:

Amazon executives say it is shaking up an antiquated business model by eliminating middlemen and passing the savings on to consumers. Publishers that try to cling to the past, they have said, will die.

That's not predatory. That's evolution.

Mary Stella said...

All I know is when my print books were available for sale through my previous publisher, I earned roughly .60 royalty on a 9.99 trade size p-back and .42 on a 6.99 mass market.

If I'd stayed with the company, I'd have made a 50% royalty on a book sold for $3.29, or about $1.64. Currently, their ebooks are not available on Amazon.

On my self-published e-versions priced at $2.99, I earn $2.09 in royalties.

shah wharton said...

Seriously - this is such a great post - lets me know exactly whats going on and hey, I chortled too! :) Many thanks. X

Anonymous said...

"Midlist authors are getting creamed by 30% sell-through. They aren't making up for lost ebook sales with paper sales. They're losing money all over."

Midlist authors who are getting creamed under the agency model will fare even worst under a wholesale model.

The unfortunate reality is that if an author lands as mid-list, i.e., lackluster sales, the publisher probably lost money trying to pursue the print route for that particular writer. When an author becomes unprofitable, s/he will get dropped, typically sooner than later. That author will then be forced to become indie.

As discussed above, an indie will fare better when big-6 eBook prices are higher, i.e., under an agency model.

Karen Cantwell said...

Excellent post, Joe and an excellent breakdown on how the agency model hurts authors. I have also been confused how authors, who should WANT people to read and should WANT to encourage literacy, would so staunchly defend a model that actually inhibits the growth of literacy. In my mind, keeping ebook prices high is elitist and discourages those less economically fortunate to obtain book easily.

Robert Gray said...

Thing I don't understand is why does the Big 6 bother with Amazon at all? With Apple, B&N, Google and others available, why not just flip Amazon the bird, especially since they hate the company so much? Sure, they'd lose their biggest distributor, but with the internets being the way it is, it can't matter that much.

Joe Konrath said...

As discussed above, an indie will fare better when big-6 eBook prices are higher, i.e., under an agency model.

Based on what evidence?

Ebooks aren't cars, where the buyer purchases one that will last for years. People who read books tend to read more than one.

If you read for pleasure, and ebooks become cheaper, I predict you'll buy more. This isn't about competing.

If a customer has a $25 book budget for the month and the choice is between my new hardcover and Patterson's, that's competing.

If we're both $3.99, the reader will get both. We buy in bulk and hoard, even if we never use what we buy. That's how we're wired. And if prices can down unilaterally, I predict sales will go up unilaterally because the overall pie will get bigger because more readers will enter the market, and those readers in the market will be able to buy more with their money.

Stephen T. Harper said...

Joe said "Are you sure? Expensive ebooks don't sell as well as cheaper ebooks, but they are still selling. If they weren't so expensive, that would mean more money in a reader's pocket that she could spend on you.

When prices drop, does the whole market get bigger, resulting in more sales? I predict yes. We'll see if I'm right."

No, I'm certainly not 'sure.' You may indeed be right, as usual. But I think this is the shakey part of the argument you made in the original post. Without the wide net of multiple titles to cast, I need all the ways to stand out I can find. Price is a big competitive advantage.

Due to our respective catalogs, it could be that we're talking apples and oranges here. And it's not that I like seeing captive authors being taken advantage of, but timing is everything. And from a selfish perspective, the 12-16 dollar e-book hasn't exactly been keeping me from sleeping.

That said, I'm not going to sweat whatever comes of this too much either. Access to distribution is the horse that already left the barn. We've all got that now. So... writing more good books will always be the thing to sweat over.

Tom Simon said...

@C. R. Myers:

Well said, Joe, as usual. You spelled it out in details even my eight-year-old could understand. What's not to get?

Ah, but your eight-year-old is an intelligent human being. Eight-year-olds haven’t had their brains rotted by receiving paycheques for jobs that require them to act stupid. Remember what Upton Sinclair said: ‘It is difficult to get a man to understand something , when his salary depends upon his not understanding it.’

P.S. Great post as usual, Mr. Konrath. And thanks for the April Hamilton link!

Joe Konrath said...

Without the wide net of multiple titles to cast, I need all the ways to stand out I can find. Price is a big competitive advantage.

I added more to my blog post to drive the point home.

You say price is to your competitive advantage, but if every ebook was the same reasonable price as yours are you certain you'd sell fewer copies? Do you see how you might sell more because customers have more to spend?

April L. Hamilton said...

Thanks for the link and mention, Joe. I'm with you 100% on this issue, and it's incredibly frustrating to see all the misinformation being floated out there.

Anonymous said...

I'm not saying the agency model sounds great, but I'm confused. I just don't think that real readers do buy a ton of books. I think the average reader only reads like a few books a year, if that. The readers who stock up on books are usually online book reviewers and writers, which aren't very many people compared to the majority of the population who don't seem to read at all.

But I don't know. These are just some thoughts about pricing and eBooks that I've considered over the years.

Does lowering eBook prices really benefit authors? Surely the higher the price of an eBook means more royalties for the author when publishing direct with KDP.

I think (yes, sometimes I ponder) lower eBook prices are what's forcing traditional publishers out of business, yes, but won't this eventually push eBook prices so low that one day they'll have to be given away for free?

Maybe in the far flung future when traditional publishers have gone out of business and Amazon starts getting competition from other ePublishing platforms with even lower prices on eBooks and higher royalty percentages for authors, Amazon will be forced to lower their prices further. Then the other platforms will lower their prices. Then Amazon will lower their prices again. And so on and so forth until the only price readers will expect to pay for an eBook is nothing. Authors can't earn a living on nothing.

So maybe the prices of eBooks remaining cheaper in comparison to traditionally published books is the only way to keep all books from eventually costing nothing! So ePublishing is only beneficial to authors today. In the future we're all screwed! Oh great, now I've panicked myself into thinking the future will be one without books! Someone please tell me I'm wrong!

For now anyway, the competition between Amazon and traditional publishers means my discounted eBooks sell better at $4.99 because that's a cheap price for a "real" reader who thinks they might like to read my book. So I guess this is the time when the getting is good for authors an readers, but the future might not be? :(

Tom Simon said...

Anon @ 12:50 PM:

Facts are that Amazon has one distinct advantage over local bookstores, TAX FREE SALES.

Here in Canada, Amazon has to charge sales tax. They are still rolling over the brick-and-mortar bookshops. Sorry, that isn’t what makes the difference. Frankly, I buy from Amazon because they carry the books I want, charge less than physical retail stores, and deliver to my door (or my Kindle app).

But don’t get me wrong. Amazon isn’t about to get a monopoly on my account. I also buy ebooks from Apple, Smashwords, and directly from authors’ websites. It’s only paper books where Amazon gets the lion’s share of my business, and I buy a lot fewer paper books than I used to.

Joe Konrath said...

I just don't think that real readers do buy a ton of books.

Why not?

Disregarding your use of "real readers" let's say I believe most readers don't read more than a few books per year. Are these readers the majority of book buyers? Or do a few big readers buy most of the books?

Voracious readers can be found at the library, taking out several books per week. Is this because of price? Because there is a large selection?

Amazon has a bigger selection than most libraries, and if ebooks are cheap it's easier to download one on a Kindle rather than visit a library and hope the book is in.

but won't this eventually push eBook prices so low that one day they'll have to be given away for free?

Maybe. If so, I have a business plan for that. :)

Joshua Elliott said...

Mark Coker...appears to be...poorly...arguing against his own self-interest...

http://www.cnn.com/2012/04/15/opinion/coker-book-publishing/index.html?hpt=hp_bn7

By the way, thanks for this blog, Joe. You gave me the courage to sit in the chair, and the tough-love kick in the nuts to start clicking keys.

Tom Simon said...

Anon @ 1:56 PM:

I just don't think that real readers do buy a ton of books. I think the average reader only reads like a few books a year, if that.

It’s a classic Pareto distribution. About half the population doesn’t read for entertainment at all. Most of the rest read, as you say, only a few books a year. But a small minority of avid readers will go through dozens or, in some cases, hundreds of books a year. These are not reviewers or writers, either. (Speaking as a writer, while I might like to read a book per day, if I did that I wouldn’t have time to write.) So while the average reader reads very few books, the average book is sold to one of those odd people who read books by the score.

I think (yes, sometimes I ponder) lower eBook prices are what's forcing traditional publishers out of business, yes, but won't this eventually push eBook prices so low that one day they'll have to be given away for free?

That’s our old friend the Irish Stove fallacy. There was this Irishman, you see, who discovered that by buying a certain model of stove, he could cut his fuel cost by half. So he reasoned that if he bought two stoves, he wouldn’t have to buy any fuel at all.

What is happening now is unique: consumer prices are going down, but payments to authors are going up. Both sides have an incentive: consumers to buy more books, authors to write more. But this is being done by cutting out the middleman, the publisher, who used to take approximately half the retail price for himself. You can only cut the publisher out once. After that, it’s a matter of the reader and the writer striking a bargain between them, and it is that bargaining that will determine prices in the future. No honest bargaining process ever leads to a price of zero.

Anonymous said...

You have a business plan for earning money on books if one day they are all given away for free? Please share! :)

Walter Knight said...

What I wish is that Amazon wouldn't take 65 percent of 99 cent E-books.

Mid-list authors love Amazon for marketing our books, but we're totally dependant on Amazon's goodwill, too.

Anonymous said...

Tom Simon, so you're saying that as long as there are readers willing to pay for books, there will always be writers to provide for a fee?

Well that's good.

But what about all the ePublishing platforms that will end up competing with each other for the lowest prices on eBooks for customers with the highest royalties for authors? Will platforms eventually have to start paying authors more than 100% royalties?

HAHA! ;)

Charlie Lange said...

I wish you had answered the Amazon eating babies question to a further extent.

Tom Simon said...

Stephen T. Harper @ 1:30 PM:

You may indeed be right, as usual. But I think this is the shakey part of the argument you made in the original post. Without the wide net of multiple titles to cast, I need all the ways to stand out I can find. Price is a big competitive advantage.

If we were dealing with a market in equilibrium, you would indeed be correct about this. But the market is not in equilibrium; it is growing rapidly and still very far from saturation. Tens of millions of people have either bought ebook readers (or tablets, smartphones, etc., that they use to read books). Several billion people have not done this, including several hundred million people who read books for pleasure (and many millions more, I suspect, who would read books for pleasure if acquiring books were as easy as switching on the TV).

Cheaper ebooks increase the advantage of this new medium over print, and thereby increase the rate at which new customers will buy ebook readers and join your potential audience. When Mr. Konrath says sales will skyrocket with $49.99 e-readers and $2.99 bestsellers, it’s really the $49.99 readers that will drive most of the increase. The $2.99 bestsellers are just the incentive that drives the learning curve. Like computers and software, tablets and apps, music players and MP3s, the availability of cheap software increases demand for hardware, and the increased demand for hardware creates economies of scale that lower the prices of that hardware.

Writers, in this system, are the app writers of the digital book business. The experience of the software industry shows that while traditional software publishers can sell apps for 99 cents, they cannot stop independent developers from writing their own apps and getting rich. In fact, they make it easier to get rich by drawing the big public into the pool of potential customers.

P.S.: My apologies, Mr. Konrath, for going on at such length in your combox. I’ll try to put a cork in it now.

Anonymous said...

I've just thought even further into the future and realised that ePublishing platforms will go out of business too and there will be no publishers at all! No middle man. It will just be authors selling direct to readers! WIN! YAY! :)

Stephen T. Harper said...

"You say price is to your competitive advantage, but if every ebook was the same reasonable price as yours are you certain you'd sell fewer copies? Do you see how you might sell more because customers have more to spend?"

Sure, I see how that might work out. And considering that this seems to be where things are heading, I hope you're right.

Price is just one differentiator. But it IS a big one. Just speaking as a business person in any field, given the choice of having a big differentiator that will help my product stand out, or counting on the buffet principle... I'd certainly choose to keep the advantage.

But, of course, however these details work out, like you've said many times, the key is always to keep writing good books.

Stephen T. Harper said...

@Tom Simon, I understand all that and am not arguing with any of it. But differentiators are differentiators, no matter what the state of market place.

All I'm saying is that if the agency model goes away, the independent publisher will lose one advantage. Not the end of the world, could even be a good thing, I guess. But if I had a choice (which I don't) I'd like to keep mine.

Bruce Andrews said...

Anon "ton of books":
Have you spent much time watching people walk out of a book store? Do 90% of them come out with a single book or two at most? I always walk out with a sizeable stack. That's what I observe others doing too. My wife works an exhausting corporate job, and somehow finished 52 books last year. I'm not quite as prolific, but certainly well over a dozen.
Observations from others? How do you buy books?

Ramon Terrell said...

You shouldn't worry about being eaten by a lion tomorrow when there is currently a pit viper biting you in the ass. And if you're defending the pit viper, you're an idiot.

HAHAHAHAHAHAHAHAHAHAHAHA!!!!!!!!!!!!!!!!!!

I think I come here just as much for the humor as I do for the valuable information. lol

Wayne said...

Anonymous said...
You have a business plan for earning money on books if one day they are all given away for free? Please share! :)


I've no clue why people think books would be given away for free, but libraries have been doing it for what, around 2 centuries? And people still buy books. There's enough content out there that you could read a mystery (for example) book every week for the rest of your life and never read anything published past 1950. All bought at used bookstores with no royalties to the authors. Since that's been true for decades, think about why people even buy new books.

As for free books, there are already models like that out there, many sites pay for themselves by advertising. There's also people doing serials where you pay a monthly fee. A while back I think there was a blog post on Chinese authors and the different structures they are using.

Todd Trumpet said...

Joe said: "You shouldn't worry about being eaten by a lion tomorrow when there is currently a pit viper biting you in the ass."

Lion = Gryffindor
Viper = Slytherin

I get it: A clever but thinly veiled guffaw to J.K. Rowling pricing her new NON Harry Potter eBook at $19.99...

...or, uh, is that just me?

Todd
www.ToddTrumpet.com

Ann Voss Peterson said...

"The unfortunate reality is that if an author lands as mid-list, i.e., lackluster sales, the publisher probably lost money trying to pursue the print route for that particular writer."

Actually in the traditional publishing business, an author is identified as midlist long before his first book is released. The publisher decides how many books to print and which books to push and which to throw against the wall like spaghetti.

Lackluster sales don't lead to defining an author as midlist. The publisher itself determines the amount it will invest in a given author and therefore the potential for sales.

Gary Ponzo said...

My latest blog post titled, "Is Amazon Helping Dissolve Writer Profiling?" details another benefit Amazon offers the Indie world.
www.strongscenes.com

Stella Baker said...

Anonymous said...
I'm not saying the agency model sounds great, but I'm confused. I just don't think that real readers do buy a ton of books. I think the average reader only reads like a few books a year, if that. The readers who stock up on books are usually online book reviewers and writers, which aren't very many people compared to the majority of the population who don't seem to read at all.


It's true, Anonymous, Americans, as a whole, are reading less. As a librarian and writer, that does not make me happy. But there's good news, and it's the eBook. People with eReaders read much more than other readers; more people are obtaining eReaders very quickly; people with eReaders prefer to buy their material, rather than borrow it. Win for literacy, win for writers.

Look at the facts about reading and eBooks:

From the Pew Report: The Rise of eReading, April 2012:

21% of American adults own an eReader (up from November 2011
)
The average reader of ebooks read 24 books in the past 12 months, compared to 15 books for non ebook readers.

Print is still the dominant format, but landscape changing quickly: there are 4 times more people reading ebooks on a “typical” day now than was the case two years ago.

Owners of ebook readers/tablets are “much more likely” to buy their books than other readers. (61% versus 48% of all readers) and are more likely to start their searches for ebooks at online bookstores.

Complete report here: http://libraries.pewinternet.org/files/legacy-pdf/The%20rise%20of%20e-reading%204.5.12.pdf

Tom Simon said...

Stephen T. Harper:

All I'm saying is that if the agency model goes away, the independent publisher will lose one advantage. Not the end of the world, could even be a good thing, I guess. But if I had a choice (which I don't) I'd like to keep mine.

It depends on what it costs to keep that advantage, doesn’t it? I’ll give up that advantage if it means that the entire market grows big enough to compensate. From my point of view, it’s better to be a small fish in a big pond: in a big pond, you have room to grow.

As Art Linkletter used to say, ‘I’d rather have 3 percent of something than 100 percent of nothing.’ Well, I’d rather sell to 1 percent of a billion readers than 10 percent of 10 million readers. (Not that I’m ever going to sell in either of those quantities; but the principle is sound, and you can move the decimal point to suit your particular situation.)

brian-nonfiction said...

Joe,

Your points are well-made but seem to apply best to fiction like yours.

What about nonfiction, as in, serious narrative nonfiction, a la Robert Caro or Laura Hillenbrand? Should they slave for years doing research to write a big nonfiction history book, and then sell it for $2.99 on Amazon?

In my own case, I am doing a big nonfiction history book and I plan to self-pub it, and I would MUCH rather get 70% on a price I designate than some wholesale model.

Care to comment?

Netta said...

I can't believe no one seems to be worried about Amazon eating babies. What a bunch of heartless bastards.

Books are like Lay's Potato Chips. Nobody can eat (or read) just one (unless you started with "Twilight"). I have rarely left a bookstore with less than three or more books. Minimum. If I have a budget of $25, I would rather purchase three books for that price than one, and I'm much more likely to take a chance on an unknown (to me) author. If I like what I read I'll purchase more from that author. Most likely from Amazon.

As a reader, a book is not a "commodity". It is (or should be) an experience, a journey, an education in a subject with which I was ignorant, or just plain escapism/entertainment. Some books change you. Those who are hooked on words are usually hooked for life and I know I will die with a book (or Kindle) in my hand. Good news for the authors I like (you know, until we get to the dead part. That's not a win/win for anyone, especially not me).

And, speaking as a reader, I have brainwashed my children into loving reading as much as I do, infecting the next generation.

As a writer, I'm keeping my eye on all this horseshit floating around, but I have come to the conclusion the best thing I can do is keep on writing, producing the best material I can.

I had a point when I started this response, but it seems to have dropped on the floor and rolled under the fridge. I hate when that happens.

And I'm still worried about Amazon eating babies.

Tom Simon said...

In my own case, I am doing a big nonfiction history book and I plan to self-pub it, and I would MUCH rather get 70% on a price I designate than some wholesale model.

On the wholesale model, you get 100% of the wholesale price that you designate. What’s wrong with that?

By the way, most ‘serious narrative nonfiction’ is written by academics with the aid of grant money. It is not expected to pay its own way from the author’s royalties, and very seldom does so.

Bryan said...

Been reading this blog ever since I decided to skip the publisher/agent hunt and go it on my own (When I finally get the damn first one finished that is :] )I'm grateful for the supportive and knowledgeable posts here. Keep it up!

Just saw this on Yahoo headlines about EDC cutting off Amazon.

http://finance.yahoo.com/news/daring-cut-off-amazon-140209029.html

Another not so friendly piece about Amazon. Seems Amazon bashing is quite fashionable!

Sarah Woodbury said...

I don't think anyone has pointed out yet that Amazon never wanted to bring prices down into what is presently the 'indie range'. All they wanted was to discount to $9.99. Maybe I'm wrong, but I don't see Amazon taking a loss on its book selling (I think the DOJ settlement actually forbids this for 2 years). It wants to do target sales.

My books are already mixed up with a bunch of traditionally published but non-big six books (Sourcebooks being the biggest publisher of them) that often discount into the indie range. When that happens, those books sell more and encroach on my books in the rankings. I don't like it, but I haven't seen my sales decrease as a result. In fact, Amazon often has several hundred traditionally published books on sale at any one time already. They just want to be able to include big six books in its sales.

Joe Konrath said...

Should they slave for years doing research to write a big nonfiction history book, and then sell it for $2.99 on Amazon?

Value isn't determined by cover price. It is determined how much money the book earns.

Unless the advance is huge, it will earn more money self-pub in the long run. And everything I know about price points says inexpensive is the way to go.

Wayne said...
This comment has been removed by the author.
Mira said...

Wow, Joe, GREAT article. You spelled everything out really nicely. I also loved your pit viper analogy - You can really turn a phrase. :)

So, I have a suggestion. I'm dead serious abou this. I think a group of authors who are published by legacy but no longer care about their relationship with them should sue them for lost profits.

Publishers have no right to participate in illegal collusion that results in less money for authors, and with publishers stealing e-book rights and fudging their records to pay authors less, it is way overdue for authors to stand up for themselves in the courts.

If the States can sue, I don't see why authors can't.

I'm not a lawyer, of course, but I suspect authors would have a case, maybe even a class action suit.

I'm really serious. Really, really serious. I wish I was legacy published so I could take the lead on this, but I'm not and never will be at this point, so I can't.

But you and Barry and other people reading this could, Joe. It's time for authors to start becoming real players in this game.

Just an idea.

Wayne said...

@brian-nonfiction

The standard hardcover royalty rate works out to around $4 for the author. So, the 2 you quoted would only have to sell eBooks at $5.75 to make $4.00 per book if they self published. How many more people would buy it at $5.75 than $30 or so? Quite a few I suspect. They can also publish through Createspace a paper copy.

The author guild's math on eBooks vs hardcovers sold by traditional publishing under agency:
http://authorsguild.org/advocacy/articles/e-book-royalty-math-the-big.html
(edited it, implied a quote instead of my actual answer)

Mira said...

Oh, I also want to add that I think the Stockholm syndrome is quite real. Writers have been trained for years to believe they are "less than" and should be grateful for crumbs and their allegiance should be with the publisher who treats them terribly.

I also think the press is against Amazon, and that is feeding the negative reaction to the DOJ lawsuit. I think the press consists of many people who want to publish books someday, who do not want to alienate the Big Six, and are taking their side in this.

When the press puts their slant on things, it can really spread. Unfortunately!

Which is why I really appreciate this post, Joe!

J. R. Nova said...

Libraries give us free books...that never hurt anyone. I don't understand why people would assume inexpensive ebooks would.

Hiroko said...

Who are they to put a price on a book like this?

David Gaughran said...

Excellent post, Joe (and April's was great too).

I just love the crocodile tears being shed by the large publishers for authors. If they really cared for them, of course, they would raise their royalty rates.

Nice way to drive home the point that Agency was bad for authors.

Merrill said...

The agency model is only bad for authors who agree to terms that limit them to low royalties on their work. The agency model is great for me because I set my own price, I can change the price if I want to for special offerings or to find the "sweet spot" for that particular book, and I get 70% royalties on the books I publish. I control the content. I control the price. And I get a nice royalty rate. What's not to like about that?

Someone said it earlier. The issue is not the agency model, it's collusion by a group of publishers to control ebook prices.

Merrill Heath

PatrickGannon1938 said...

Monday,April 16,2012----12:12pm/Pacific Time to 3:17pm
---3 hours & 5 minutes.

Dear Joe Konrath :

Hello.

The agency model is DEFINITELY not the best one for ebook authors !

Further,there is simply NO WAY that
"The Big 6" can/will/wants to compete with Amazon on author royalties of 35%
for ebooks from 99 cents to $2.98
and 70% from $2.99 to $9.99.

The innovative Amazon has now made it possible for ebook authors to get paid MONTHLY
(not twice yearly !!!)
and also earn a decent to GREAT part to full-time income from
their ebooks !
Simply sweet !

Why this agency ebook
price fixing model ?

Apple & the 5 publishers were NOT happy with the
artificially low price of $9.99
or less that Amazon sold their ebooks for !!

OR as described by one of the publisher’s CEO,
"the wretched $9.99 price point.”.
Too funny !

( Of course,this was a loss leader "BUSINESS strategy" by Amazon
to woo readers to use the new Kindle ebook reading platform
and it worked INCREDIBLY WELL !!!

The Kindle became more & more popular with the public masses !)

How long has this AGENCY ebook price fixing been going on ???

From January 24 to 26,2010 !!
( and it lasted OVER 2 years,
until April 11,2012,
MUCH to many people's surprise !!)

The negotiations between Apple and Publisher Defendants
culminated in all 5 Publisher Defendants signing the
Apple Agency Agreements
within a three-day span,
with the last Publisher Defendant signing on January 26, 2010.

(The next day, Apple announced the iPad # 1 at a launch event.

Believe it or not,in 2010,Apple saw having a competitive ebookstore
as an important part of its strategy for introducing the new tablet computer
known as the "iPad".

Let's face it,it is NOT ebooks that make the Ipad so appealing
but its use FOR---- games,
internet use,Facebook
& other applications !)

How did the agency model BENEFIT the big 5 publishers ?

It allowed MUCH HIGHER ebok prices (up to $14.99 being acceptable),
brought them EXTRA time to react to the EBOOK REVOLUTION,
and it allowed 4 ebook competitors (Apple,Barnes & Noble,Google,and Kobo) to get a
MUCH stronger toehold
against Amazon,
the ebook selling
and
reading device
pioneer !

This lawsuit was clearly
earth-shaking for the ebook business :

1) On April 11, 2012, the United States filed a civil antitrust Complaint alleging that Apple,Inc. (“Apple”)
and 5 of the 6 largest publishers in the United States
(“Publisher Defendants”)
restrained competition in the sale of electronic books (“e-books”),
in violation of Section 1 of the Sherman Act

http://www.justice.gov/atr/cases/f282100/282143.pdf

OR

http://newsandinsight.thomsonreuters.com/uploadedFiles/Reuters_Content/2012/04_-_April/e-books_complaint.pdf

“I think this is a strong case,” said Nicholas Economides,
a professor of economics at
New York University.
“The way U.S. antitrust law is written,
in a conspiracy case,
it does not have to show adverse effects on consumers.”

However,did you know that 3 of the legacy book publishers
have ALREADY SETTLED the lawsuit ??

On the SAME DAY of the lawsuit !!!
Settled on April 11,2012 !

Is that UNBELIEVABLE
or what ???!!!!

Not taking ANY chances of
WINNING the court case,
are they ??

Who were the
TERRIFIED (but smart) THREE ??
Hachette, Harpercollins,
and Simon & Schuster !

Apple (the biggest tech company
in the world)
and 2 publishers
(Macmillan and Penguin)
did NOT settle.

And now for the REALLY BIG
settlement NEWS :

2) Wednesday, April 11, 2012---Justice Department
Reaches Settlement with
Three of the Largest
Book Publishers
and Continues to Litigate Against Apple Inc. and Two Other Publishers
to Restore Price Competition
and Reduce E-book Prices :

http://www.justice.gov/opa/pr/2012/April/12-at-457.html

Sincerely & generously yours,
PatrickGannon1938 Blog.
In Chocolate and Ebooks I Trust.
Monday,April 16,2012

David L. Shutter said...
This comment has been removed by the author.
David L. Shutter said...

I can't believe no one seems to be worried about Amazon eating babies. What a bunch of heartless bastards.

Poor, orphaned, black market, conlict zone babies at that! Bezons drinks their blood after sacrificing them to maintain his dark, evil powers.

I stopped paying attention to the evil Amazon arguments. They've gotten that silly.

About Joe's original post: His current batch of predictions could prove completely wrong. The Big 6 could pull a market changing game plan out of their asses. Amazon could change course and set new precedents for screwing authors. The stigma of "all" indie work as "crap" could spread from print obsessed elitists to the mainstream. Suddenly no one buys $.99-$2.99 books anymore without some corporate seal of approval.

In this instance, I'll wait for the sky to actually start falling before I worry about it. Until then self-pubbing with Amazon is the best deal out there.

Thanks again Joe.

Bill Smith said...

Joe, as always I agree with almost everything you say.

Now, the big "oh noes" worry, that Amazon will squeeze authors for lower royalty rates when they have more control over the market.

I don't believe this is a "scare tactic" that's ungrounded in reality so much as it is an extrapolation of Amazon's prior business tactics with other suppliers -- Amazon has a history of squeezing suppliers for lower and lower percentages with threats to delist and remove their products unless they capitulate.

Of course, that is a "what might happen" in the future, as opposed to "what is happening now." What is happening now is that authors are making a lot more money through Amazon than through New York. Now that there is a choice, many authors are finally waking up to the fact that the New York publishing houses have never served the interests of authors, but rather the interests of the publishing houses themselves, while regarding authors as disposable factory-ant-cogs that can be replaced as soon as you wear them out or a shinier one comes along.

Amazon's potential ability to reduce royalty rates is greatly diminished if it has real competition. Which gets back to Charlie Stross's latest soapbox issue (and I know in my heart that he is right): Publishing houses need to ditch DRM so that they can sell to any customer regardless of which reading device they are using.

If Amazon is just one of many competing ebook vendors, each offering all (most) of the major titles, then Amazon's "platform lockin" advantage is gone. Amazon is reduced to being just a device vendor, a la HP or Dell, or KMart vs. Target vs. Walmart, let them slug it out. In such a frictionless, DRM-free environment, readers can buy their "software" (content) from anyone.

Merrill said...

Preach it, Bill. Dead to rights about both the interests of publishing houses and the impact of a DRM-free environment for books.

Merrill Heath

Richard Beckham II said...

Cheers, man! There's still a big shift going on in the publishing world: a shift that will teeter away from New York City. This may be the rise of regional presses, or maybe everyone in the country will have his or her own book--downloadable for 10 cents....

Joe Konrath said...

I've been anti drm since the early days of Macrovision, but dropping it, though good for consumers, won't allow competition to flourish.

If proprietary formats can be easily swapped, people will shop at the best ebook store. That's Amazon. It's got the best selection, best user experience, easiest browsing, etc.

wannabuy said...

@Bill Smith: Amazon's potential ability to reduce royalty rates is greatly diminished if it has real competition. Which gets back to Charlie Stross's latest soapbox issue (and I know in my heart that he is right): Publishing houses need to ditch DRM so that they can sell to any customer regardless of which reading device they are using.
That is the clearest I have seen that debate. Ever. It is one of those obvious truths once read.

Neil

Mark Asher said...

@Bill Smith: "If Amazon is just one of many competing ebook vendors, each offering all (most) of the major titles, then Amazon's "platform lockin" advantage is gone. Amazon is reduced to being just a device vendor, a la HP or Dell, or KMart vs. Target vs. Walmart, let them slug it out. In such a frictionless, DRM-free environment, readers can buy their "software" (content) from anyone."

You're not taking into account the difference between buying an ebook and having it loaded for you onto your e-reader and buying and having to side load.

Customers don't want to side load unless they save money by doing so. If the price is the same, you buy from the place that puts it on your e-reader for you.

I have a Nook. If there is no DRM I'm still buying from B&N because I can sync my Nook and get my purchase on it that way. Click to buy and then click to sync.

The alternative is to buy from someone else, download the ebook to my PC, hook my Nook to my PC, and transfer the ebook to my Nook. Why would I do it that way when I can buy direct from B&N?

Aaron Patterson said...

Amazon rocks! I make a great living selling low cost eBooks and this is just another fear driven run and hide deal. Joe, you are right on, but we all knew that already. Keep up the good posts, oh and most authors that are angry or fighting for the big 6 just don't sell anything. Bitterness. That is all.

Concerned India Author said...

Hi Mark,

You're incorrect, as explained here:

http://jakonrath.blogspot.com.au/2012/04/agency-model-sucks.html

Authors and publishers should be optimizing unit pricing for maximum revenue, not to prop up the legacy print industry. You of all people should know that.

Concerned Indie Author

Concerned Indie Author said...

Disregard last post...that was meant for Mark Coker's blog :)

antares said...

Joe, my experience says you speak the truth.

I have hundreds of books on my Kindle (including yours), yet I still buy new books. I read more, and I buy more. But Kindle changed my price point. If the price is more than $9.99, no sale.

Yeah, you're right. Some imagine the evils Amazon will do in the future while the PaperPubs are cheating them today.

The PaperPubs developed the habit of cheating writers. They don't wanna break that habit.

Amazon developed the habit of treating writers well. That habit is making Jeff Bezos richer. Is he gonna break a habit that makes him money?

Wish you all the best. Soon as I catch my breathe from reading The List, I shall buy another of your books. Wait! I already did! Ain't eBooks great?

Paolo Amoroso said...

Joe said: Amazon has a bigger selection than most libraries, and if ebooks are cheap it's easier to download one on a Kindle rather than visit a library and hope the book is in.
The increased availability of cheaper ebooks may make more convenient and less expensive to buy new books rather than driving to the local library.

Anonymous said...

Joe,

Take the publisher out of the equation (and I believe that publishers soon will be taken out of this equation) and now I disagree with your argument.

When I sell a book in the iBookstore, I set the price and get 70% of that price. When I sell a book in the Kindle bookstore I have to choose what price to set so that I get either 30% or 70% - AND Amazon can and does unilaterally change the price I set and still pays me only a percentage of that price they set.

I prefer the Agency model - but without publishers in the middle.

Daniel

Sean Patrick Reardon said...

Great explanation!

Top100EbookRanking said...

"Amazon wants to lower ebook prices."

Agreed! All this fear that once Amazon dominate the ebook market, it will abuse its position and raise prices is flat wrong.

1) DOJ will be watching if a dominant player abuses its power
2) If Amazon raises price, a competitor could undercut Amazon by selling cheaper ebook

Something to keep a look out for:
Amazon Publishing. They are signing up a lot of authors

I counted 196 authors so far (haven't counted AmazonCrossing yet)

from

AmazonEncore
Thomas & Mercer
47North
Montlake Romance
Amazon Publishing New York

http://amazonpublishingauthors.blogspot.com/

Klawzie said...

For what it's worth...

At the moment I read a minimum of one book a month - merely because I'm a person of many interests/hobbies and not enough time to spend on all of them. That said, I remind you that I said "minimum". When I'm in Voracious Reader mode, I average a book a day until VR mode cuts off (generally around two weeks with a downtime of another two weeks before it might kick in again - or might not). If I've read fewer than 24 books a year since the second grade, I'd be surprised. And there were several years there where I'd take actual laundry baskets to the library each week and return the several dozen books on-time, all read.

As for buying habits - currently I go book shopping a few times a year and never leave the store without three or so. Once I have a larger paycheck again, I'm sure that number will go up. Especially since I'm getting an ereader soon so I can shop for books more frequently. (Even though my TBR pile is quite large as it is.)

----

For those worrying about Amazon pulling the rug out from under self-publishers... I'm not expecting that for years yet. Right now, they're pimping the success of their self-publishing program. I was logged into Amazon doing some window-shopping and on the homepage itself, in place of the usual BUY A KINDLE! advertisement was an add for an Amazon success story instead.

So, by all means, prepare yourself for a future where Amazon goes up-ended and makes a grab for more of a self-published author's cut. Even plan for it to happen next week. But don't let that stop you from publishing this week. You might get a few good sales and pick up a few loyal, book-hungry fans before then, hey?

Julie Kramer said...

Read what happened to author Boyd Morrison here:
http://www.huffingtonpost.com/boyd-morrison/self-publishing-traditional-publishing_b_1426321.html?ref=books

I'm rooting for him to go straight to the top when his new book releases in the US.

Anonymous said...

Joe said: Amazon has a bigger selection than most libraries, and if ebooks are cheap it's easier to download one on a Kindle rather than visit a library and hope the book is in.
Paolo said: The increased availability of cheaper ebooks may make more convenient and less expensive to buy new books rather than driving to the local library.


Well, sure. But it's not happening. Not in the foreseeable future.

I have a Kindle. I use it to purchase inexp e-books. I also have a library membership. I use it to borrow books that are too exp as e-books. Of course, most of these are NTYBSs, so I have to go on a reserve list. But I don't waste a car trip until I get that phone call. Anyway, there's no way in hell I'm paying over $9.99 for a book when I can borrow it.

Alas. My library also has Overdrive, so I can borrow ebooks & audios, but they don't have many of those I'm eager to read.

My point? Joe's correct. IF ebooks are cheap, I'd rather buy them than hoof it to the library. (And I worked as a librarian. Thinking about where those books have been makes me shudder. Ick. I'd rather not borrow them.)

But they're not cheap, those ebooks. And it doesn't look like they're going to be cheap for some time, if ever, and I only have a limited book budget. So I'm stuck w this half-assed, pain in the ass way of getting to read what I want.

Which brings us back to the most important point: why does the Big 6 not care about their customers and what they are crying out for? The readers???

Jon VanZile said...

I agree with most of what you wrote, except for one key thing: I agree with Shatzkin that the loss of the agency model will seriously hurt self-published ebook authors. You wrote: "Fourth, at low prices, there is no competition between ebooks." But this is just not true ... there's ALWAYS competition, as you pointed out later in your post regarding toothpaste. Books are not only consumed in terms of money, but also time. So a reader goes to the Kindle store looking for a book or two to read that week or month ... They see two titles. One is by a familiar name they already know and trust. The other is by an unknown author. They are both priced the same. Simple logic says they'll choose the familiar author and, because their reading requirements are now satisfied, forgo purchasing the other book.

I'm not a fan of agency pricing, but I don't think this will ultimately be a good development for the thriving and growing self-published market. Like Shatzkin said, right now, the $2.99 ebooks from indie authors don't have to directly compete with big-name, well-known and beloved authors. When they do ... well, look at who has historically dominated the market. I see very little reason that pattern will change.

Alan Tucker said...

Two things strike me as I read Joe's post and the subsequent comments.

1) People fearing that ebooks will all eventually be given away free are just silly. Amazon has no interest in free books. They don't make money on free books. Why do you think they structure their royalties like they do? To encourage you to price your book between 2.99 and 9.99 because that's where they want to see the prices. So stop with the Chicken Littling about all the books will be free.

2) Joe, I see your point about lower prices meaning more total book sales. What I'm not so sure about is Indies seeing much benefit from that. I think, in most cases, the consumer will simply buy two Patterson books instead of one, rather than trying out an unknown. Under the current model, there is more incentive to give the unknown a shot since the price is so much lower.

Danielle Blanchard said...

It was great to read another interesting and thought provoking piece about this whole issue with Big 6 & Apple pricing over ebooks.

However, to the fellow who claims Amazon "makes" you choose between 70 or 30%, actually, it is 70 & 35%. You don't have to take the 35% if your novel is over 2.99 bit a lot of people have become Amazon indie publishing stars selling at 99 cents. How many Apple stars have emerged? I am still waiting to hear from indie authors who sell the lion's share of their work in any other venue besides Amazon.

Their model seems to work and if it ain't broke then why should they fix it?

Danielle Blanchard said...

*but*... the joys of writing on a mobile phone. ;-)

Joe said...

People worried about the lack of the Agency model hurting independent authors. Don't sweat it. The publishers will NEVER be able to compete with $2.99 and $3.99 books. They're crying about having to go to $9.99.

The lower prices will not cover their bottom line.

Cat said...

Joe - I just wanted to say thanks for a detailed, thought-provoking, and educational post on the DOJ/Big 6 suit. The links with supporting detail are even more appreciated.

I'm not a writer *well, not professionally anyways* - just a measly reader.

I've only had an eReader for a little more than a year. Before that, I rarely visited bookstores. Mostly, because I just wouldn't spend the monies on an "armload" of books others have mentioned. I bought books at Costco, where the paper-backs were a little more affordable, I could buy more, and read more.

Since owning my ereader, I've read more books in the past fourteen months than I've read in the last 10 years. I know this because I keep track (sick, I know, but true).

I've purchased more eBooks than I ever thought I would, and certainly, from authors that were new to me.

Tom Maddox said...

I don't think the Agency System will actually go away anytime soon. Remember that the problem was the collusion and not the Agency Model.

I saw one interpretation of the agreement for those publishers who settled said that they could indeed sign new agency models with Amazon and continue to set the price of their books. The difference with the new agency model is that the retailer would be able to discount the book, but could not discount more than their cut. So if Amazon gets 30% of a book listed at $14.99 then the most that they could discount that book to is $10.49.

So, if a new agency deal is agreed upon will it become common for the publishers to simply price their books at that new bottom line price of $14.99 to keep the potential discounted retail price above $10.00? If that happens then I don’t see much changing at all for the reader. The books they want to stay above $9.99 they simply retail at a high enough price to do so. It won’t be different enough for the readers who don’t follow this situation to even know the difference.

John Barlow said...

Joe, great post, but one doubt: you seem to believe that if ebooks are all cheaper people will buy more of them forever. But don't consumers get used to low prices, forget they are low, and adjust? Example: someone who spends $25 per month on one h/back, or 2 p/backs. Suddenly, these cost only $3-6 per month, so he grabs a load of other stuff. But eventually, having realised that he never reads most of this extra stuff, he reverts to buying his monthly 1-2 novels, and spends the remaining $19-22 on something else.

Your logic seems to suggest that spending in a given sector never contracts as a consequence of overall price reduction

JB

The Phantom H said...

The illogical and irrational manner in which author and those in the gears of the big 6 publishers react to this DOJ case is a perfect example of money and prestige driving the argument, not facts or care for the industry. Better stated, the IDEA of money and prestige, not reality.

There are quite a few people out there who stand to lose if the big 6 goes belly up (no doubt) but they are not focusing on all there is to gain. If you look at all the delivery methods of media that have come on gone, there are a few things to be taken from past experiences.

The first and one of the biggest is, it's inevitable. I felt protective of film vs when digital when it first came on the scene. Clearly digital won. Like radio and TV before it, evolve or die.

Second is, how might all those involved in those older formats benefited from early adoption and working with it the new distribution, instead of against it? iTunes and Napster are great examples.

3rd, cheaper prices means bigger sales. Just look at iTunes again, or at digital film cameras sales, or netflix, etc.

What all these legacy folks are doing is protecting an IDEA of being special. When given an alternative to being controlled or being free, people will opt for free. And should Amazon stop caring and get greedy, they will lose as well.

Elisa Nuckle said...

But that pit viper is so friendly and nice, Joe. He wants to nurture me and bring me good luck and stuff. That lion's just going to hack my face off.

Hey, I feel a little woosy. The pit viper keeps trying to hug me with its teeth, and I think it's starting to get to me.

wannabuy said...

@John Barlow:"Your logic seems to suggest that spending in a given sector never contracts as a consequence of overall price reduction"

Unless it is an elastic market. Drop the unit price in half and there will be 10X the volume (or 5X the dollars). It is a matter of convenience as well as price.

Video/DVD rentals were cheaper than theaters and expanded the market. Why wouldn't ebooks?

Neil

Bryan Chapel said...

Yahoo headlines are full of Amazon stories lately.

http://finance.yahoo.com/news/amazon-s-knock-off-problem--35-shades-of-grey--anyone--.html

This one talks about Amazon allowing Self-pubbers to blatantly rip off successful books and spam the marketplace. They make it sound like Amazon is perfectly fine with people making a living doing this.

This article annoys me. On one hand I hope Amazon comes up with a way to more effectively quash these people before they become a real problem. On the other, it does nothing to say that many self pubbers are legit.

Thom said...

I'm with @Sarah Woodbury. Amazon will not try to lower blockbuster writers to $2.99, because they can get more than $2.99 and still have lowered prices for the consumer. That was the gift of agency pricing: lower the price a bit and we still feel like we're getting a deal.

Why would Amazon lower Stephen King to $2.99 when we would be happy to have him at $7.99 to $9.99?

It's just good business.

There will still be room for us to compete on price once everything shakes down.

Sariah Wilson said...

Anon@1:56 PM

My mother is neither a reviewer nor a writer. But she easily reads three to four books a week. As do all three of her sisters (not reviewers or writers, either). As do my sisters and my brothers (eight in total). My dad reads about a book a week. My 12-year-old son reads a book every couple of days. That's my normal.

There's a reason Harlequin was so successful for so long - it had a ready-made, voracious audience who would read the six books sent to their homes every month, and would still clamor for more.

Anonymous said...

I just don't think that real readers do buy a ton of books. I think the average reader only reads like a few books a year, if that.

It’s a classic Pareto distribution. About half the population doesn’t read for entertainment at all. Most of the rest read, as you say, only a few books a year. But a small minority of avid readers will go through dozens or, in some cases, hundreds of books a year. These are not reviewers or writers, either. (Speaking as a writer, while I might like to read a book per day, if I did that I wouldn’t have time to write.) So while the average reader reads very few books, the average book is sold to one of those odd people who read books by the score.

Agreed. I'm one of those "voracious readers" and have been all my life. I was the kid checking out 10 books a week from the library during the summer. Now, with my Kindle and ebooks, I'm even worse (or better, depending on your perspective), reading at least 200 books a year (and that's with a full-time job, home and family to care for, and a dozen mags and dozens of blogs to read).

Even though I get many of the free books and have over 6,000 ebooks in my Amazon library, I still spend around $100/month on sale and indie books, far more than I was spending on physical books before my Kindle.

When the agency model was first introduced and most of the prices of ebooks on my wishlist jumped, I discovered indie books and haven't gone back. I rarely go above $2.99 and never over $5 and won't go back, regardless of what happens with the court case. Why would I when I can get so much more bang for my buck with indies? At $2.99, I get 3 books for the price of that "discounted" $9.99 bestseller.

I've found that, except for a favorite author or two, I don't miss those grocery store bestsellers.

Anonymous said...

I have a Nook. If there is no DRM I'm still buying from B&N because I can sync my Nook and get my purchase on it that way. Click to buy and then click to sync.

The alternative is to buy from someone else, download the ebook to my PC, hook my Nook to my PC, and transfer the ebook to my Nook. Why would I do it that way when I can buy direct from B&N?


Agreed, but Amazon is the winner here too because you don't have to sideload, you can email the file to your account where Amazon will store it for you and you can download and read it on any device. Even if you stick with the free 5GB, that's a lot of DRM-free ebooks.

paul wolfe said...

"but won't this eventually push eBook prices so low that one day they'll have to be given away for free?

Maybe. If so, I have a business plan for that. :)"

Now that's a post I'd like to read!

Rik said...

Official: this blog is no longer relevant to self-published authors.

Scott Daniel said...

Joe, do you have any data on how the KDP select program in terms of its overall effect on sales?

My own experience is this: there are excellent freebies that go up every day on Amazon ... I'm actually paying for fewer books. I've not yet gone back and purchased books from authors that I've enjoyed for free, either (not to say that I won't eventually).

Frank R. McBride said...

As a side note - in Germany, the Agency model is pretty much law. Publishers set the price - and no retailer (neither Amazon nor the smallest mom&pop shop in a rural area) is allowed to deviate from that price in any way, shape or form.

The publishers offer various discounts to retailers and middlemen - but that is it.

Tracy Sharp said...

There's a phenomenal writer out there who self-pubbed her crime book, which is selling really well. She's looking to sell the series to one of the big 6.

I think that is really too bad, because she's doing so well on her own. She already has a large audience which just keeps growing and she really is outstanding. *sigh*

Adrian said...

" I just don't think that real readers do buy a ton of books."

I don't get it. What is a 'real reader' and if he isn't buying books, what the heck is he reading? Soup cans?

At any given time I'm reading two books 1 fiction 1 non-fiction, usually history. I buy at least a book a week, sometimes an ebook, sometimes a dead tree book and I finish at least one per week sometimes more.

I don't know if I'm a real reader, an average reader or what, but I know I buy a hell of a lot of books of all kinds.

As for pricing, in my case 'discount' prices on ebooks help the author ALOT. Because I'll pay $4.99 for an ebook, I won't pay $9.99, I don't care who the author is. And FWIW, I don't consider books in the $2.99 - $4.99 range to be discounted. I think they're just priced fairly for a product that costs next to nothing to deliver.

Anonymous said...

No comment about your "writers are whores" quip at RT this past weekend?

I'm disappointed...

:)

Joe Konrath said...

Pro writers are whores without integrity. If you aren't, good luck making a living.

Bill Smith said...

Mark Asher said:

You're not taking into account the difference between buying an ebook and having it loaded for you onto your e-reader and buying and having to side load.

Customers don't want to side load unless they save money by doing so. If the price is the same, you buy from the place that puts it on your e-reader for you.



Sideloading is no big deal, IMO...it's no different than putting a file on a USB drive so you can bring it with you.

On the other hand, I am in complete agreement that Amazon's store is BY FAR the best in the industry and you can't beat the convenience of direct downloads. So even if DRM is abandoned, Amazon will most likely retain its advantage.

Chuck Rothman said...

You've gotten things completely wrong about how book contracts are structured, especially the meaning of "net." So let's go to the basics. There are two types of books -- paper and ebooks. Both have different contracts, and you've conflated the two randomly.

Paper books: Authors are paid a percentage of the cover price. If Amazon discounts them, they get the same royalties as if the book was sold at full price.

eBooks: authors are paid a percentage of the net sales. If Amazon discounts the book, the authors get less (this is the definition of "net," which you have confused with "gross," i.e., the cover price). Authors are already seeing this in Amazon's self-publishing arm: if Amazon decides to sell your ebook for 99 cents, your royalties are calculated on that 99 cents. That's what's wrong with Amazon's model -- if the price is cut on e-books, then, because the price is determined by the net, then the royalties go down.

Since the big complaint about the agency model is that it means the books cost more (i.e., the publishers set a higher wholesale price), then it clearly doesn't help authors if the books are sold for less.

As for the percentage of royalties, that's an individual negotiation between the author and publisher. No one can have their royalty rate cut because they have a contract that specifically sets the rate.

With the agency model, that rate will remain where it is. There is no reason to cut it, since the publisher factored it in when they made up the contract (and it will piss off your authors and agents). Like any other business, publishers set their price in order to cover their costs and make some profit (and book publishing profits are very low).

However, if Amazon can dictate the payment, then publishers will be forced to cut somewhere, and royalty rates will be cut -- just like you predict (and the publisher can afford to piss off authors and agents, because the alternative is not buying the book). It would be inevitable if the publishers make less money on their books, since their income will be arbitrarily cut by Amazon.

So, if Amazon has its way, authors would get a lower a net payment for their books, and would get a smaller percentage of that smaller amount.

How is that a good deal?

Charmaine Clancy said...

I believed the overpriced Traditionally Published books were helping my book sell too, but you have turned me around with your convincing argument. Lower prices = more money for the market.

Joe Konrath said...

You've gotten things completely wrong about how book contracts are structured,

No I haven't.

Previously, authors got paid for ebooks at 25% of what the publisher receives, which in most cases was 40%-50% of a hardcover price (the wholesale price) based on the retail price the publisher sets.

So a $25 hardcover would mean the publisher sold the ebook version to Amazon for $12.50, and the author got 25% of $12.50, which is $3.12. The author ALWAYS got $3.12, no matter what retail price Amazon set.

In agency models, the publisher sets the retail price.

Reread what I wrote and do some more research. The link I provided is a good place to start:

http://www.macstories.net/stories/understanding-the-agency-model-and-the-dojs-allegations-against-apple-and-those-publishers/

Anonymous said...

Q: But Joe, aren't you benefiting from the agency model? After all, isn't that what KDP is?

Joe sez: Absolutely. When I self-publish, I can set my own prices. I'm able to find that sweet spot in pricing to maximize profits. I love the agency model. It's terrific if you are the content creator.


This is incorrect...not what you say about your pricing but about KDP being agency. And yes, I'm kind of splitting hairs here, but I think people need to know the distinction.

An author using KDP is merely suggesting a retail price, and Amazon is accepting it. However, the final discretion of the retail price belongs with Amazon. This makes it a wholesale model.

Agency = Final price discretion with the distributor. Wholesale = Final price discretion with the retailer. KDP only has the appearance of agency pricing.

Tim Easley said...

Joe,

I have to agree with you completely. After seeing Borders die a miserable death, it made me realize how much of a struggle it would be to even bother trying to get a traditional deal (nothing against those who do).

I worked over a year on editing and polishing my novel "Tranquility" for publication (went live on Amazon and CS 2 days ago). I feel an overall sense of pride in what I've done. More than that, as you have stated, I can make more money doing it myself.

I've only sold 9 copies or so as of now, making about 22 bucks off my 8.95 novel. But you know what? That's way more than any publisher would ever give me for those same nine copies.

Maybe I won't be a superstar self-pubber like you Mr. Konrath. Maybe I won't even get to be a decent living mid-lister like others. But I know is that it is a brave new world out their that traditional business models want to stifle because they are scared, yet do nothing to breed loyalty to their cause.

As you said before, the sky's the limit. I've sold a few copies, hope to sell many more. Soon enough, I'll be starting my next project, and keeping my eye on your advice to guide my way a bit. This is a perilous profession to be in, but to quote a phrase, "Rise and rise again, until lambs become lions."

Keep up the good work Mr. Konrath.

Anonymous said...

"I wish the publishers would keep their ebook prices at $12.99. What I don't want is them pricing at $2.99 or $3.99.

I'm no fan of agency pricing, but isn't it easier for an indie to compete with higher priced books than books that Amazon is free to discount?"

I agree with the above statement.

Sure, consumers will have more money to spend on books if the traditional bestsellers start to match new indie prices, but...

Will the consumers buy more indie titles...

OR WILL THEY JUST BUY MORE TRADITIONAL BESTELLER TITLES...

People usually stick with the familiar, "the tried and true"...

People usually don't become adventurous and try something new unless they are somehow coaxed into it, the low indie prices coax peopleinto trying them out.

Alan Cramer said...

Joe you hit the nail on the head when you said it isn't about competing. When I was printing books I introduced a few people I know to the genre I write in. They had never read it before. One girl in particular became an avid reader of the genre after reading my books. I made money and many authors who never met me or her made money.

A street book vendor once told me, good books make customers come back for more books.

Tom Simon said...

Anon @ 1:31 AM:

Will the consumers buy more indie titles...

OR WILL THEY JUST BUY MORE TRADITIONAL BESTELLER TITLES...


Speaking as a reader, I don’t give a hoot who publishes the books I’m reading. I don’t buy books because they are ‘traditional’, or because they are bestsellers. I buy them because they look to me like something interesting to read.

On Kindle and iBooks — I can’t say about B & N, because they foolishly refuse to sell ebooks outside the U.S. — self-published books, small-press books, and products from the Big Six are all cheek by jowl, competing for the same virtual shelf space. So far as I have noticed, there is not even an option to sort by publisher. By author, title, category, popularity, best ebook sales, yes; but Amazon knows what I know, which is that the name and size of the publisher are utterly irrelevant to me.

Now, speaking as an author, if I have a bestselling ebook, which will I want: 17.5 percent of the sale price, or 70 percent? Gee, I might have to think about that for a bit. I mean, I’m not sure 70 percent is a better deal; after all, 17.5 looks bigger, because it has more digits in it.

Who are we kidding? Once ebooks top 50 percent of the market — and that can’t be far away — there will be no conceivable incentive that print publishers can offer to a bestselling author that outweigh their confiscation of the lion’s share of ebook money. So most of those bestsellers will be indie books, too. (There will always be diehards.)

Anonymous said...

It's not so much about the traditional print publishers, it's bout being FAMOUS.

(note traditional publishers still have a lot of money and media clout and are able to keep their already FAMOUS authors in the spotlight)

Jon VanZile said...
"I agree with most of what you wrote, except for one key thing: I agree with Shatzkin that the loss of the agency model will seriously hurt self-published ebook authors. You wrote: "Fourth, at low prices, there is no competition between ebooks." But this is just not true ... there's ALWAYS competition, as you pointed out later in your post regarding toothpaste. Books are not only consumed in terms of money, but also time. So a reader goes to the Kindle store looking for a book or two to read that week or month ... They see two titles. One is by a familiar name they already know and trust. The other is by an unknown author. They are both priced the same. Simple logic says they'll choose the familiar author and, because their reading requirements are now satisfied, forgo purchasing the other book.

I'm not a fan of agency pricing, but I don't think this will ultimately be a good development for the thriving and growing self-published market. Like Shatzkin said, right now, the $2.99 ebooks from indie authors don't have to directly compete with big-name, well-known and beloved authors. When they do ... well, look at who has historically dominated the market. I see very little reason that pattern will change."

Stephen T. Harper said...
"Price is just one differentiator. But it IS a big one. Just speaking as a business person in any field, given the choice of having a big differentiator that will help my product stand out, or counting on the buffet principle... I'd certainly choose to keep the advantage."

In my opinion, Amanda Hocking made it by pricing her books as a GOOD & CHEAP alternative to the current GOOD FAMOUS & EXPENSIVE bestsellers.

If the traditional print publishers evolve in order to be more competitive (competitive pricing)...

Then, try being a GOOD & CHEAP alternative to GOOD FAMOUS & ALSO CHEAP bestseller.

Who's going to look twice at your indie books if J.K. Rowling, Anne Rice, Stephenie Meyer, Stephen King, James Patterson, and other FAMOUS authors start pricing their books at $.99

BB LaBoss said...

As a consumer and a new kindle owner ( well I’ve had it for a year) I buy tons of cheap eBooks. I do not buy high priced eBooks ever. If I'm going to pay 12.99 for something I want to hold it in my hands. I want to feel paper. I believe a lot of people feel this way. Do I get around to reading every eBook I buy? probably not but maybe eventually. I always leave a book store with a pile of books. I do the same thing at the library. If the Big 6 authors eBooks were just as cheap, I would buy those along with the indie author books. A book for under 3 dollars can’t be beat.

Warren said...

Anonymous wrote, "So a reader goes to the Kindle store looking for a book or two to read that week or month ... They see two titles. One is by a familiar name they already know and trust. The other is by an unknown author. They are both priced the same. Simple logic says they'll choose the familiar author and, because their reading requirements are now satisfied, forgo purchasing the other book." And "Who's going to look twice at your indie books if J.K. Rowling, Anne Rice, Stephenie Meyer, Stephen King, James Patterson, and other FAMOUS authors start pricing their books at $.99"

Maybe I'm unique for a reader, but when a friend hands me a book, or recommends me a book, or I go to the bookstore looking for something to read, I don't ask first, "Is the author famous? Have I read the author before? Because I only read the tried and true." Your notion of what "readers" will do is too, too simplistic and not entirely logical. Readers read. It's what we do. My past reading list is made up of recommendations from others, books by authors I like, books I discovered through reviews, and books I discovered quite by accident at the library or the bookstore. I refuse to believe I'm alone in this.

And if Stephen King and the other gods of fiction want to sell their books for 99 cents, then good for them. That will bring in more people browsing the books, which will lead to increase sales all across the board. Everyone wins.

BB LaBoss said...

One more thing. One of my favorite authors is Neil Gaiman. Last time I checked he wasn’t whipping out a new novel every year. So, if his new book suddenly became available as a very cheap eBook, I would buy it and read it and then…..what? Not buy another book for two years? No. I would fill my time buying more eBooks for under 3 bucks. There are only a hand full of traditional authors that I even wait for their books to come out anyways. I am always looking for a good story to read. I do not care if it comes from a famous author or an indie author. I would much rather take a chance at .99 on someone I’ve never read before than to buy a higher priced eBook from an author I’ve heard of, but have never read. I don’t really give a crap if the book sucked if it only cost me .99. If It sucks and I spent 10 bucks on it…well… then I am pissed.

Joe Konrath said...

It's not so much about the traditional print publishers, it's bout being FAMOUS.

No, it's not.

When people want something to read, they look for what is available. In print, they have a limited selection that grows more limited depending on where they buy the book.

Distribution is why the majority of bestselling authors sell tons of copies. Not name recognition.

Print dies, the playing field is level. There's more choice than just 15 titles at a Walgreens.

I explained this in detail a year ago.

http://jakonrath.blogspot.com/2011/02/end-of-bestseller.html

J. R. Tomlin said...

Joe, a lot of us are curious about your comments elsewhere that you are taking your self-published novels out of Select. I'd very much like to know your reasoning. This isn't a criticism or an assumeption (I've seen some make) that you are mad at Amazon. I assume it's a marketing decision, so if you'd share the basis of that decision, that would be great. Thanks for all you do share with the rest of us.

Thom said...

Anon 8:03 feared that best selling authors might start selling at $.99.

I argue that they won't (except perhaps as a crazy promotion) because, they don't have to. They will not cheapen their brand by selling at a bargain basement price, because they can command more. we would all be delighted to buy King at $5.99 because with agency he sells at so much higher a price. So no company in their right mind will leave that kind of money on the table.

Ebook prices will come down, but I don't believe that brand name authors will go down to $.99, or even $2.99.

Starbucks Coffee sells at Costco for more than the other brands because it is Starbucks. Sure, it's cheaper there--but it does not compete on cost with the cheapest brands--it doesn't have to.

William said...

I agree that the agency model sucks for readers, but is it better or worse for indie authors?

Indie authors are stigmatized by trying to charge lower prices for books than publishers. So will the fact the books are priced the same or closer be a good thing for indie authors? Maybe this will help remove the stigma of choosing a less known book based on price. Or maybe it will decrease the chances of someone choosing the indie book.

Anonymous said...

"Should they slave for years doing research to write a big nonfiction history book, and then sell it for $2.99 on Amazon?"

"Value isn't determined by cover price. It is determined how much money the book earns.

Unless the advance is huge, it will earn more money self-pub in the long run. And everything I know about price points says inexpensive is the way to go."

Absolute rubbish. Academics regularly publish books knowing they will sell only a few hundred, usually from a preordained audience in their field. Publishers pay them a fee for writing it (not an advance), which they can only get back if the books are priced in excess of $100. If an academic decides to self publish and sell the books for $2.99 they won't sell any more books, and won't make nay money from doing it (nor do they have the time to edit, proof and format a book).

Tom Simon said...

Anon @ 8:03 PM:

If the traditional print publishers evolve in order to be more competitive (competitive pricing)...

Then, try being a GOOD & CHEAP alternative to GOOD FAMOUS & ALSO CHEAP bestseller.


If traditional print publishers lower their prices, they also lower the amount paid to their authors. Right now, they are only making money because they are hogging 52.5 percent of the retail price on ebooks.

If you were a bestselling author, able to sell books on the strength of your name alone, why on earth would you let your publishers do that AND lower your retail price?

If (let us say) James Patterson’s next novel comes out from his print publisher as an ebook for $2.99, he will receive 17.5 percent of that, or 52 cents per copy. Why on earth would he settle for that when he can get $2 a copy for himself? His publisher assumes some editorial and production costs, but he could pay those many times over out of the extra $1.50 a book, at the volumes he’s likely to sell. At $9.99 for an ebook, at least he gets $1.75 out of the deal.

Put another way, Patterson’s publishers are already taking 75 percent of net on his ebook sales. Why would he let them rob him of 70 percent of the pittance that is left?

If publishers lower their prices to squeeze out indie authors, they will just end up by driving their own authors into the indie market.

PatrickGannon1938 said...

Friday,April 20,2012
--1:54pm/Pacific Time

Dear Joe Konrath :

Hello.

Is the ebook lawsuit
going VIRAL ???
Har-har !!

From the
"When it rains,it pours"
department :



1) April 11,2012---Attorney General George Jepsen announced today that 16 states,
led by Texas and Connecticut,
have filed an antitrust lawsuit in U.S. District Court in Texas alleging Apple Inc. (Apple),
and 3 publishing companies (Macmillan,Penguin,
and Simon & Schuster) engaged in an anticompetitive price-fixing scheme for marketing electronic books.

http://www.ct.gov/ag/cwp/view.asp?Q=502294&A=2341

2) April 12,2012---The Australian Competition and Consumer Commission has urged local retailers to voice their concerns about
eBook price-fixing as it considers a lawsuit against Apple and five of the world’s largest
book publishers :

http://www.bgr.com/2012/04/12/australian-government-considering-lawsuit-against-apple-over-ebook-price-fixing/

3) April 18,2012---Allegations of e-book price fixing
hit Canada :

http://www.theglobeandmail.com/news/technology/tech-news/suit-filed-in-bc-over-allegations-of-e-book-price-fixing/article2406068/

Are these lawsuits a good thing ??

"For the growing number of Americans who want to take advantage of this new technology,
the Department of Justice is committed to ensuring that
e-books are as affordable as possible,"
Attorney General Eric Holder declared.

Let's face it,all Amazon is doing is making the EBOOK/BOOK world "much more efficient".

How ?

By eliminating MOST,not all, of the numerous middlemen (agents,paper/print publishers,
book manufacturers,
book wholesalers,and retailers/physical bookstores) between the product creator (author) and the product buyer (reader),while taking a 30%
(to 65%) cut for ebooks priced from
99 cents to $9.99.

In this way,ebook authors are MUCH better off financially and readers pay A LOT LESS for ebooks !

Sounds great for everyone
BUT the unfortunate middlemen !
Progress/new technology
CAN be VERY painful !

Okay,so 3 publishers settled !
What does the settlement
look like ??

1) Wednesday, April 11, 2012---Proposed Final Judgment
as to Defendants Hachette, HarperCollins, and Simon & Schuster

---For two years, Settling Defendants shall not restrict, limit, or impede
an E-book Retailer’s ability to set, alter, or reduce the Retail Price of any E-book
or to offer price discounts
or any other form of promotions
to encourage consumers to Purchase one or more E-books,
such two-year period to run separately for each E-book Retailer,
at the option of the Settling Defendant,etc. :

http://www.justice.gov/atr/cases/f282100/282141.pdf

Interesting but i really wonder---How will this all play out for Apple?

Apple is NOT likely to be a
BIG LOSER in this
ebook legal fight !!!

Why not ??
Most people do NOT realize it but ebooks are a VERY SMALL part of Apple's total yearly revenue.
Really ?

Ebooks are a FAR less than 1% part of Apple's TOTAL yearly revenue
from worldwide operations !

( Apple's annual revenue from
ebook sales totaled around
$50 million,
or a fraction of the more than
$100 billion in YEARLY revenue)

1) April 12,2012---Apple's Antitrust Lawsuit Might Be A Big Deal For You But NOT For Apple----
Apple doesn't really make much of a profit on e-books,
serving mainly as a conduit between readers and publishers.


http://www.huffingtonpost.com/2012/04/11/apple-antitrust-lawsuit_n_1418764.html


In the end,what matters most is EBOOK AUTHORS earning MORE money
and ebook readers paying LESS for ebooks !
(Win-win !)

WHOEVER does that should be encouraged,
eh ?



Sincerely & generously yours,
PatrickGannon1938 Blog.
In Chocolate and Ebooks I Trust.
Friday,April 20,2012

Tom Simon said...

Anonymous @ 11:15:

‘Absolute rubbish,’ you say, and then give an argument that is absolute rubbish itself. When you claim that a product will not sell any more units at $2.99 than at $100, you contradict lesson #1 of basic economics.

I myself have often wanted to buy academic works, but had to borrow them from my university library instead because I could not afford the price of the print edition — over $600 in some cases!

Make those same books available as ebooks as a reasonable price, and you will sell much larger quantities of them to other academics, as well as students, independent scholars, hobbyists, interested laymen, and for that matter, less affluent colleges and universities.

Will the extra sales, plus the absence of up-front printing costs, make up for the lowered price? That depends on the book and the circumstances. But there will be additional sales.

The only time a product sells in an absolutely fixed quantity, regardless of price, is when (a) certain people are REQUIRED to buy the product, and (b) all other people are FORBIDDEN to buy it. Neither of these things is ever the case with a book.

I.J.Parker said...

Name recognition (fame) plays an enormous role in people's buying patterns. Many readers wait anxiously for the next book by their chosen author. They also believe that if many other people are buying the book, it must be good. That means they buy bestsellers even when they are unfamiliar with the author. Traditional publishers hold on to those authors. They are a safe investment.

The problem is that most of the authors trad. publishers publish never reach that level of fame because they receive no promotion at all and are dropped before they can establish themselves firmly in the popular mind. Those authors are far, far better off self-publishing. There at least they get more and longer exposure to the market than they could ever hope for from the big 6.

Anonymous said...

I think this epublishing revolution is great, but there is one thing I can't figure out.

I still see many authors going with traditional publishers. Big names such as Stephen King, George R.R. Martin, James Patterson, Nora Roberts. And not only big name authors, but mid-list authors are still going the traditional route.

For example, I'm interested in science fiction. Of those science fiction writers who went with traditional publishing 7 years ago, my educated guess would be that at least 95% of those who came out with a book last year and this year still went with the traditional publishing route. Why?

Anonymous with a Name said...

Lemme take a non-professional stab at that, Anon.

1. Advance money
2. 100% market access (theoretically, anyway)
3. Sell It and Forget It
4. Validation
5. Fear, Uncertainty, and Doubt

Anonymous said...

It's not just about distribution.

If distribution was all that mattered then, every mediocre title that the Big 6 got behind would have been huge bestsellers.

The fact is that some authors have more creative ideas, better story telling skills, a wider knowledge base of the language, and a better grasp the mechanics of the writing "craft".

Those four traits far OUTWEIGH distribution. That's how those FAMOUS authors made it.

Just take indie e-publishing as a separate example. Why do some indie authors have huge amounts of success and others not so much? Supposedly they all know how to use the Interwebs to market their books, there are several places where you can find out how -- one of the most prominent is this blog here.

The traditional print publishers aren't going to go out of business if they don't have to -- they will evolve, they will slim down, they will give authors a higher percentage on e-published titles, etc. Just because they are not acting fast now, doesn't mean that they are going to just lay down and die. They still have lots of money and can afford to wait a while. They will cross the bridges they need to cross when they come to them.

What will happen when the traditional print publishers evolve?

What will happen if the big name FAMOUS authors become "indie" authors?

I wouldn't be too eager to see the traditional print publishers evolve, or too eager to see the big name FAMOUS authors become "indie" authors.

FAME is a huge advantage.

Talent is a huge advantage.

Sure the playing field is level on the e-publishing market.

But some players have a better starting position, not to mention better game playing skills.

Casey Moreton said...

The fact is that some authors have more creative ideas, better story telling skills, a wider knowledge base of the language, and a better grasp the mechanics of the writing "craft".

Those four traits far OUTWEIGH distribution. That's how those FAMOUS authors made it.


That is just flat out wrong. Distribution is EVERYTHING.

Tom Simon said...

@Casey Moreton:

Hockey players have a saying: ‘Goaltending is 80 percent of the game. Unless you don’t have it, in which case it’s 100 percent.’

If a major publisher puts all its distribution muscle and marketing oomph behind a turd of a book, it will sell like a turd. Baen took a huge bath on Newt Gingrich’s 1945, and Gallery is still suffering from its inexplicable idea of marketing Snooki as a novelist.

But while the Big Six have a very high failure rate, they have — or had, until recently — nearly a 100 percent success rate at making other people fail. They could not create a bestseller, but they could prevent one. The majority of books that got ‘The Treatment’ were not bestsellers, but a book that did not get ‘The Treatment’ was virtually certain not to become one.

What’s happening now is that distribution is being removed from the equation — which means that talent and persistence will out.

chris said...

I can absolutely say that if not for Amazon and it's free trial offers and price staggering, I wouldn't have sold all the copies of my latest Sf novel. Sales have sky-rocketed since my affiliation with Amazon, Kindle.

Joe Konrath said...

What’s happening now is that distribution is being removed from the equation — which means that talent and persistence will out.

Maybe. Luck always plays a part in success. Always.

There are many great books that never found their audience. At least, since ebooks are forever, those books might have a chance to now.

Casey Moreton said...

@Tom Simon

What’s happening now is that distribution is being removed from the equation — which means that talent and persistence will out.

Distribution has not been removed from the equation, the result of the Kindle store is that distribution has become a level playing field. Amazon's servers distribute my books automatically at the touch of a button. Talent and persistence has finally been given an opportunity to find an audience. X number of my books don't have to be ordered by a major chain or by X number of indie stores to have a chance at a shelf life. But it's still all about distribution. And yes, the Big Six could ABSOLUTELY make a bestseller, but they sucked at it.

Anonymous said...

There is one bit of irony here, on Amazon's part, despite their being on the side of the angels, for the most part.

Where public domain books are concerned, it has acted like the large publishers, trying hard to keep them at bay; short-sheeting consumers by providing very poorly formatted versions in nearly all cases, and not allowing users to upload additional public domain works, or corrected versions. You really have to sideload any public domain work you want from gutenberg.com to get something readable.

Amazon absolutely doesn't want its bread and butter works to be in a fair competition with free books. But I can't help but think that public domain works will be more and more competitive with recent work as time goes on, and that competition will eventually force Amazon to mend its ways and provide convenient access to truly attractive editions of public domain books, just to keep up.

I think public domain books will slowly come to take up much more of the "market" for books.

I.J.Parker said...

Re public domain works taking up more of the market: As a working author, I certainly hope not. I don't need any more competition from free or cheap books. I have to earn a living. It's bad enough we practically have to give our work away to find customers. It used to be we gave it away to the Big 6, permanently. Now we still struggle to keep our heads above the rising tide of worthless e-books.

Wayne said...

You can put up public domain books on Amazon. It's just after the flood of poorly designed and identical ones they cut it out. Your book has to be materially different such as illustrations or commentary. If you download a book, relabel it yours and upload they will take it down(though it can take time).

Anonymous said...

As a publishing student, this scares me. Bad enough people declaring the book is dead, but a monopoly on ebooks isn't going to help anything.

Dara Beevas said...

This could not be more true. I truly don't believe the Big 6 could change if they wanted to. I was speaking to an agent the other day and God bless her. She defended the Big 6 left and right, but she has to. They keep her employed. As for the Big 6 are bound to their bottom-lines.

Matthew Coble said...

This was an eye opening read that has encouraged me to keep writing with the hopes of getting my book(s) epublished. That someone other than forced family members could have words I wrote in front of them. I will not allow myself to think of actually making money at such activities but the very idea of a second option to the big 6 gives me that hope.

Thanks

Cody Young said...

Oh, thank heavens. A post that actually explains what the heck is going on. Thanks Joe.

Olga Naranjo said...

I would have never found Konrath, (well, it was Kilborn I found first) at Barnes. I found them on Amazon where I was looking for something affordable that would help me escape for a while. (I work at a bank, I need to escape a LOT.) King said, "If you want to be a writer, you must do two things above all others: read a lot and write a lot.” Amazon offers me a platform where I can do both in one place. It's friggin' genius. I haven't been this inspired in many moons. Thank you Joe, for letting us know how and why it works and for los cojones to inform outloud.

mischy said...

dog training canberra


Hi Joe. I don't think the Agency's model sucks. It is quite good. But, if that's what you think, then I have to respect that. Feel free to say what's on your mind.

Scott Daniel said...

Joe, an off-topic question for you. Do you ever endorse other indie books? Not that I have one, but I was curious if you and some of the other more successful folks make positive recommendations for lesser-known writers?

thip said...
This comment has been removed by the author.
Gianluca said...

Hello Joe, I write from Italy. Forgive my English ...
Many thanks for the information of this post, very enlightening.
Hi.

Gianluca
g.sgreva @ narrativita.it

Anonymous said...

Joe, you mentioned Gamestop selling used games in an earlier post and compared it to Amazon buying back and reselling books. Thing is, used games are currently really hurting the developers out there, and a lot of good indie developers are closing down.

Know why? Because they have to rely on distribution from companies like EA to get their product out there, and folks like me are sick of paying $60 for EVERY game, when Skyrim is worth twice that and many others are worth maybe half that.

Sound familiar?

John Paul Allen said...

Joe sez: People are already loading up their Kindles. That hasn't precluded buying more ebooks. Readers have always had To Be Read piles. But now they're cheaper to acquire, and portable.

I've got almost 100 books on my Kindle and I added two more today. It's human nature.

Embrack said...

I publish by KDP. Whenever I raise my ebook price from 99 cents to 2.99, for most of my titles Amazon runs the 2.99 as the "list price" and still runs 99 cents as the "Kindle price." Either KDP makes changes really slowly or I'm getting big sixed myself....is this happening to anyone else or is it just me?

Marlowe said...

Whilst the current system isn't working, I'm not sure about the Wholesale model as an alternative. If distributors start offering authors a flat rate no matter what they charge for the book, then they'll have to move away from low e-book prices. You can't pay every author you have $3.99 and still sell your books at $0.99, otherwise you'll lose money. That means that either new authors or higher selling authors will have to make up the short-fall, or prices will have to level out across the board.

In addition to that, whilst paperback sales have dropped by about 30% in the last year, e-book sales haven't yet risen to fill the gap. If e-book retailers drive their prices up, consumers aren't going to see the point and will most likely trundle back to paperback titles - we're creatures of habit, after all.

A positive move is called for, especially in light of the rapid changes in publishing technology, but I'm not sure the Wholesale model is the right one. Someone has to sit down and come up with a viable alternative, otherwise things are just going to repeat themselves.

Jason Brant said...

I just had to leave a quick reply to what the anonymous poster said about indie game publishers.

This is one of the best times in history for independent game developers, just like independent authors.

Between Steam, Google Play, and iTunes, indie game developers are thriving.

Jami said...

Here is a thought I had after reading your post... would it benefit the author to e-publish the book while shopping the same novel to agents and publishers? That way they have control of the e-book side while possibly getting a deal for the printed books and reaching both audiences. Or would they be passed over because they e-publish?

Gary Dobbs/Jack Martin said...

I think Amazon provide a great service but I still find the thought of them being the only bookseller to be a frightening one. I am totally against the agency model but you yourself are making a good living from eBooks and yet not everyone can do this. There are many good books available on eBooks that just don't sell at all. I think publishers will always be needed to some extent, and whilst I agree with much of what you say I would point out that you seem to have nothing but bile for the traditional publishing industry.

JulieW8 said...

I've loaded my Kindle with free e-books - and $0.99 and $1.99 and $2.99 e-books. I scour the top 100 free e-books list regularly, even though I know I will probably never read all the books on my Kindle, much less all the books on my library wishlist (all digital). However, that leaves me a LOT of options for low-priced e-books.

There's no way I'm paying $7.99 and up for an e-book. I don't care who the author is. I'll buy used paperback first. Fortunately, the bestselling authors are also available at my digital library. Free. Do I care that there are already 90 readers on the wait list and I have to wait 3 months to read it? Not at all. It beats the heck out of paying $12.99 or more for it.

I wrote a post about e-book pricing at my blog, but I'll say it again: publishers and authors get nothing from used book sales and trades. IMO it's not very smart to price e-books so high that people will go to the used/trade paper market instead of buying an e-book. I don't understand why they wouldn't want to price the e-book low enough to not only generate more sales, but capture the market of people who would otherwise buy the book from a source that generates zero revenue to the publisher or author.

Nirmala said...

It crossed my mind that the effort by the publishers to slow the adoption of ebooks is also hurting self-published authors by reducing enthusiasm across the board for ebooks and ereader devices. A reader who is a late adopter of new technology may look at the high prices of bestsellers as ebooks, and decide not to buy a Kindle or Nook. They may decide it doesn't make economic sense when ebooks cost almost as much as or sometimes even more than a paper book. They are used to reading paper books and so might just stick with that delivery system for now.

And based on my experience with self-publishing both ebook and paperback versions of my books, it is a lot easier right now to reach a new reader through sales of my ebooks, in part because I can charge only $2.99 for an ebook versus $11.95 and up for my paperback books. I also have enough ebooks out there to offer some of my ebooks for free, and those free ebooks reach a lot of new readers. But if someone does not buy a dedicated ereader in the first place, I am much less likely to reach that new reader because they do not own a Kindle or Nook.

Thanks to the DOJ, maybe ebook reader device sales will increase and bring more ebook sales to all of us.

Nirmala said...

I wonder what will happen now that 3 of the 5 publishers have settled? Will they still hold onto agency pricing and raise the retail prices? Will they go back to wholesale pricing? Maybe Amazon can keep paying them 70% of 12.99 or 14.99 and then discount to 9.99 like before. That would be the best of both worlds for Amazon (who would still be paying less and now also get to discount like before) and consumers, but not so great for legacy authors. More reason to self-publish!

Eye said...

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Electronics Patent Attorney said...

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Anonymous said...

"Amazon wants to lower ebook prices. The Big 6 want to raise them."

Sooooo.... if the Big 6 raise prices and want to keep doing so, why wouldn't the "net" price eventually be higher than under an agency model? Then, your royalty would be higher than under a wholesale model. Hmmm.