William: In case you haven't heard, Hachette (US) CEO Michael Pietsch is sending out a response to the emails he's getting. DBW has it: http://www.digitalbookworld.com/2014/hachette-ceos-response-to-amazon-advocate-emails-why-we-price-books-the-way-we-do/
As you might imagine, I have a few comments:
Thank you for writing to me in response to Amazon’s email. I appreciate that you care enough about books to take the time to write. We usually don’t comment publicly while negotiating, but I’ve received a lot of requests for Hachette’s response to the issues raised by Amazon, and want to reply with a few facts.
• Hachette sets prices for our books entirely on our own, not in collusion with anyone.
William: Seriously? This is how you start? That's a bad strategic move because you lied about not colluding in the past and you never apologized for it. We all know you colluded. You know you colluded. You may think that this statement is true because you aren't currently colluding with anyone, but until you admit that you colluded in the past, it's just bullshit. And, by the way, you best be careful. Any evidence of coordination with your former co-conspirators will land you back in court. The evidentiary requirements for antitrust collusion is really low. Even coincidentally ending up with the same proposed terms as other Big 5 publishers could be trouble. Recycling the same old price list that you and your co-conspirators adopted in 2010 seems like an astoundingly bad idea.
• We set our ebook prices far below corresponding print book prices, reflecting savings in manufacturing and shipping.
William: I decided check. I picked James Patterson's "Invisible" because Patterson has been one of your most vocal supporters and is your top-earning author. The list price for Patterson's book in hard cover is $28.00 and the ebook list price is $14.99. That seems like a big difference, but you and I know that's not the whole story. The price you charge retailers for the hard cover is about $14 and you charge them about $10.50 for the enook. That will have a big impact on the actual price the customer (you know, people like me) would pay. But it's even worse. Your position (as articulated by your boss Arnaud Nourry) is that you want to compel retailers to charge the full $14.99 for the ebook version. The actual selling price of the hard cover version of "Invisible" is $16.80 at Amazon and B&N online. One of the "sanctions" that you complain about below is Amazon charging full price for the print edition of your titles. The next time you write a public letter, could you explain why it's terrible for Amazon to charge full price for a print edition and terrible for them to charge any less than full price for an ebook edition of the very same book?
• More than 80% of the ebooks we publish are priced at $9.99 or lower
William: I'm calling bullshit on this. Maybe 80% of the ebook titles published are priced below $9.99, but that's just irrelevant. Far less than 80% of your ebook unit sales are for titles priced at $9.99. Another thing you can add in your next email update: What percentage of your ebook unit sales occur at prices above $9.99?
• Those few priced higher—most at $11.99 and $12.99—are less than half the price of their print versions.
William: See my comments above. That's disingenuous to say the least.
• Those higher priced ebooks will have lower prices soon, when the paperback version is published.
William: WTF? What does the paperback version have to do with the price of the ebook version? That makes no sense at all. Does the ebook version get cheaper to produce and distribute when the paperback comes out?
• The invention of mass-market paperbacks was great for all because it was not intended to replace hardbacks but to create a new format available later, at a lower price.
William: Wow. If that's your position, you should be windowing ebooks like you do paperbacks.
As a publisher, we work to bring a variety of great books to readers, in a variety of formats and prices. We know by experience that there is not one appropriate price for all ebooks, and that all ebooks do not belong in the same $9.99 box. Unlike retailers, publishers invest heavily in individual books, often for years, before we see any revenue. We invest in advances against royalties, editing, design, production, marketing, warehousing, shipping, piracy protection, and more. We recoup these costs from sales of all the versions of the book that we publish—hardcover, paperback, large print, audio, and ebook. While ebooks do not have the $2-$3 costs of manufacturing, warehousing, and shipping that print books have, their selling price carries a share of all our investments in the book.
William: Blah, blah, blah. Don't you guys get tired of this line of argument? I'm sure tired of pointing out how completely bogus it is. But since you are the CEO of a big publishing company, I assume you know a little something about economics. Let's talk about the marginal cost of production. The short version of the definition is that it is the cost of producing one more unit of something. The marginal cost of producing one more print book is the cost of producing a single copy of a POD book. The marginal cost of producing one more ebook is $0. There are some transaction costs associated with selling that additional unit, but they are less than the transactional costs of selling the additional unit of a print book. And let's not forget that print books have resale value that ebooks don't. I've done some economic modeling of this and I find that the difference in price between a hard cover and an ebook version of the same title would tend towards about $5-$7. That's the price differential that would maximize revenue and sales across a broad range of titles. Interestingly enough, that's about the differential that Amazon is arguing for. That's not really surprising to me because they are a retailer with lots of data on book sales. Here's the crux of the matter. The market doesn't care about your costs or business model or expense allocations. They are irrelevant. Hachette has a very high cost structure for producing ebooks. In one sense, Amazon is doing you a favor, long term, if they force you to confront that reality now.
This dispute started because Amazon is seeking a lot more profit and even more market share, at the expense of authors, bricks and mortar bookstores, and ourselves. Both Hachette and Amazon are big businesses and neither should claim a monopoly on enlightenment, but we do believe in a book industry where talent is respected and choice continues to be offered to the reading public.
Once again, we call on Amazon to withdraw the sanctions against Hachette’s authors that they have unilaterally imposed, and restore their books to normal levels of availability. We are negotiating in good faith. These punitive actions are not necessary, nor what we would expect from a trusted business partner.
William: Good luck with that. These so-called sanctions are permitted by your contract with Amazon, right? I mean, they must be because you've never claimed that they can't do this, just that they shouldn't. If these things are so terrible, why didn't you negotiate with Amazon to prevent them from pulling these shenanigans? One more thing. If you are worried by Hachette's authors, why didn't you take Amazon up on their offer to compensate them? It's beginning to look like the harm to your authors is something that you aren't willing to address. Other than by whining.
Thank you again and best wishes,
Michael Pietsch
William: Just to be clear, the comment about recycling the price list is important. In the Apple agreement with Hachette in January 2010, the customer price for ebook versions of new releases with hardcovers costing $27.51 - $30 was $14.99. Patterson's book costs $28 and the ebook list is $14.99. What a coincidence.
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The price you charge retailers for the hard cover is about $14 and you charge them about $10.50.
That should read:
The price you charge retailers for the hard cover is about $14 and you charge them about $10.50 for the ebook.
Thanks to Nate Hoffelder for noticing.
Glad to you have your thoughts on this William. I read this email online last night and thought it was a hot mess.
The first bullet point about collusion (or not) just left me shaking my head. What a way to start off!
We set our ebook prices far below corresponding print book prices, reflecting savings in manufacturing and shipping.
and
While ebooks do not have the $2-$3 costs of manufacturing, warehousing, and shipping that print books have, their selling price carries a share of all our investments in the book.
Although these two statements aren't complete contradictory, it seems like he is trying to have it both ways: ebooks are cheap to produce but they have to carry the weight of the cost of other versions.
Why? I mean, I'm THRILLED that my ebooks don't have ongoing costs associated with them. Why would I want to saddle my ebooks with the costs of producing another version?
I suppose it makes some sense given the business model of trying to protect the high cost of hardcovers.
IT DOESN'T ACTUALLY MAKE SENSE THOUGH! Publishers are loosing sales (from me!) when they price their ebooks high and/or take forever to release a paperback. I no longer buy hardcover books. Heck, I couldn't even find a book at the library I wanted. I like reading on my Kindle (and adjusting the font) way more than I like getting free, yet hard to read, hardcover.
***
There is one line in your post that I'm not following:
The price you charge retailers for the hard cover is about $14 and you charge them about $10.50.
I'm not sure what you mean there.
Thanks again for sharing your thoughts and thanks Joe for hosting them.
This to me is telling of the differences between the two companies. Amazon's letter feels like it was written by one, or even a few, people. It's flawed, but it feels human.
Pietch's letter, on the other hand, comes across as having crossed the desks of the finest lawyers money can buy. It couldn't be more of a boiler plate if it set off the metal detectors at an airport.
Also, I'm not sure I'd call this a response per se, since I know I didn't get it in my email inbox nor so far has anyone I know (who email him) received it. Not surprising, mind you. To do so would be an admission that we, the lowly indie author, might have an opinion that counts.
Posted this weekend
http://www.animenewsnetwork.com/daily-briefs/2014-08-04/apple-us-450-million-e-book-settlement-deal-approved-by-courts/.77294
Apple's settlement with consumers for US$450 million was approved by U.S. District Judge Denise Cote in New York on Friday. The amount will be distributed between lawyers and a class of consumers in 33 states and territories. Consumers will receive US$400 million and lawyers will receive US$50 million if Apple loses its appeal at the 2nd U.S. Circuit Court of Appeals in New York.
If the court finds in favor of Apple, they will be liable for no monetary pay outs. If the court overturns Judge Cote's decision in favor of a new trial, the company is liable for US$70 million, with US$50 million going to consumers.
Judge Cote stated that she believes it is unlikely the courts will overturn the case, and the US$450 million settlement includes provisions to make the scenario less likely.
Judge Cote set a last fairness hearing for November 21.
Thanks, William, for shedding additional light on this dispute. I'm thankful every day for the new publishing reality that has allowed me to make a living as a writer.
Well, that ebook price window might have a point. IIRC, Baen had to _increase_ and window-price its ebboks to get them on Amazon, a couple of years ago. And, yes, I agree most of the letter is bullshit.
For the rest, we mostly agree. [*]
Take care.
PS: I'll try to follow the thread, but the email feature carries too much spam. Do please put a capcha or some sort of filter.
[*] http://fbdorr.blogspot.com/2014/08/mr-prestons-personality-disorder.html
but we do believe in a book industry where talent is respected and choice continues to be offered to the reading public.
Rewritten to adhere closer to the truth (and maybe I'll get it right this time):
But we do believe in a book industry where talent is respected as long as it makes us money and the books we choose continue to be offered to the reading public.
I'm mystified by the tone and substance of this post. If Hachette is leaving money on the table, that's their decision. Re: collusion it was on Agency model, not pricing of individual books. Regardless, today they are not colluding on eBook pricing. Further, changing eBook prices at different points in time is exactly what Howey, Eisler, Konrath and many other thriving self-oublishers do; why would this be wrong for Hachette to do? Tied to paperback prices? Yup, they sell multiple formats and are looking to maximize TOTAL REVENUE, not eBook revenue. You may disagree on how they can best maximize their profits, but why are you so angry? If they are making a mistake (based upon their own internal data that none if us has access to) why do you care? I am NOT an advocate for the Big Five - as is amply documented many places (see @twliterary) I am a strong opponent of their eBook royalties, many of their contract demands, and many other aspects of their relationships with my clients. But ill-tempered, ill-argued commentary such as that above sadly emboldens them and persuades no one with any actual power to change things. And to all those self - publishing advocates, why so angry about what Hachette does or says? The truly wonderful thing about Smashwords, Amazon and the others is the opportunity to not care one bit about the legacy publishers.
You can be indifferent to whatever you like, Mr. Weinstein, and let us be angry about what makes us angry. Me, I get angry when anyone poisons the wells of discourse and misleads the public with lies, propaganda, and bullshit. Hachette have been bullshitting authors and booksellers for years. Now they have suddenly discovered the existence of the general public, and they are trying to bullshit them as well. This needs to be fought against, because it matters if people believe the lies they are being told.
Your refusal to get angry about the matter is your own business, of course. But it does not in any way justify the mantle of moral superiority in which you are choosing to wrap yourself. Whereas your cheap attempt to shame other people into not getting involved bespeaks intellectual torpor and moral sloth.
Ah! Now I see where the shoe pinches. I just clicked on the link in Ted Weinstein‘s name above. He’s an agent, and as such, has a vested interest in maintaining the old model of publishing. So, Mr. Weinstein, when you claim that you are not an advocate for the Big Five, you are simply lying. You get your bread and butter from them, and if you did not advocate for them (as you are doing in substance, by trying to shut up their opponents and let their propaganda go unanswered), you would be biting the hand that feeds you.
I credit Mr. Weinstein for not posting anonymously.
To answer one of his questions (as an indie author): the reason I get upset about Hachette is because I care about authors. Even those who are still wedded to traditional publishing. I believe they should be fairly compensated for their work and Hachette's PR campaign to put authors in the middle of this dispute strikes me as disingenuous and wrong-headed. It also annoys me that Amazon's efforts to help those authors has been completely rejected—three times now—by Hachette.
Thanks, Rob. But I still don't hear anyone answering my substantive points re: Hachette's decisions on eBook pricing and overall profit maximization. As Brian DeFiore has carefully detailed elsewhere (sorry, I don't have link), Big Five make more and authors make less on eBook sales compared to paper. So their actions to 'defend' or balance paper sales via eBook pricing decisions are actually against their immeduate economic interest, but overall is how they think they can best maximize profits. Again, despite the ad hominem attacks by others above, I fight with publishers every day about their unconscionably low eBook royalties, and I have done direct publishing for clients. But Ockham's factually incorrect points above serve no one.
I know that my former agency, Trident, fought very hard for higher royalties, but publishers don't listen. And I assume they're thinking about their economic interests.
But it seems to me that the first and most important component in your business plan should be the one who profits first and most. But then I guess that would shoot the plan all to hell.
As for the ebook pricing, I would probably care if I were still traditionally published, but right now I'm able to sell thousands of books at a lower price, so it doesn't much matter to me what they do.
Again, my only concern is for those Hachette (and all trad pub authors) who get the smallest cut of the profits despite the fact that they are the only indispensable part of the industry.
I don't buy the suggestion that Hachette should be free to make poor pricing decisions if they so choose - because it isn't that simple.
My perception here is that Hachette wants to make a poor pricing decision, enforce that on Amazon, and still require Amazon to foot the bill for all the co-op extras such as preorders, discounts, and warehousing books for immediate delivery.
If the price model that Hachette wants will make Amazon less money, then why should they be required to take less money and still offer red carpet treatment?
@Ted Weinstein
I am not upset that Hachette varies the price of their ebook. I am pointing out that Pietsch is being deliberately misleading. Why lie about something that is obvious to anyone paying attention?
The whole point of the ebook conspiracy was to wrest control of retail pricing from retailers. Hachette is still trying to do that. I think that is a bad thing for readers.
I have an appointment, but I will respond in more detail later.
Sorry, William, I'll quote you: "WTF? What does the paperback version have to do with the price of the ebook version? That makes no sense at all." Demand pricing, time windowing, promotions, all kinds of factors go into the pricing of ebooks (or any product). It's no secret that ANY seller (indie or major publisher) can choose to price their product wherever they want. BECAUSE Hachette sells both ebook and paper, they want to price discriminate and maximize their income at every publication stage. I don't know why this is so hard for the Amazon partisans to advocate for all self-publishers, but deny to someone else (i.e. a legacy publisher).
"Good for readers" is utterly a distraction - Amazon AND the Big Five are profit-making enterprises. You've gone from saying "Hachette would make more," which they simply disagree with, to "readers will benefit." You can't have it both ways. That's an entirely different argument and not a factor in any publicly-traded corporation's decision-making (Amazon, Walmart, Hachette, Procter & Gamble), except as it will help their own profits.
Here's my take on Pietsch's last windowing bullet point and why Hachette and the others can't pry themselves away from price points above $9.99.
http://motherearthseries.wordpress.com/2014/08/11/windowing-why-big-publishers-cant-jump-on-board-the-ebook-train/
As a self-published author, I do not want anyone capping the price of ebooks. No one. Let the market decide. Readers will tell you what's too high with their dollars.
Have we capped the price of a movie ticket yet?
What about a one-day ticket to Disney Word?
Hachette isn't my publisher. How they choose to pay their authors and how they choose to price their books is between them and their authors.
I'm self-publishing because I don't like the terms of NY contracts.
I was concerned when the price of gas was over $5 a gallon. That's the stuff most people can't live without.
Ted Weinstein, thanks for your comments. I'm generally a big Amazon fan, but have been perplexed by why they want to tell Hachette how to price their books.
Surely if Hachette has it all wrong, the market will eventually make them change.
A book is worth what readers will pay for it.
@Ted Weinstein
You are making a different argument than the one Pietsch made. I understand your argument (and I agree with parts of it). Pietsch said something very different. He first said that ebook prices were based on costs. He makes a very specific claim that ebook prices are determined by costs. That is false. Hachette sets their ebook prices based on the current price of the print version.
You are being honest and talking about how they are trying to maximize profits. That is a reasonable conversation to have. I don't have a problem with Hachette pursuing their goals. I have a problem with lying about it and breaking the law.
Ted,
You said "BECAUSE Hachette sells both ebook and paper, they want to price discriminate and maximize their income at every publication stage. I don't know why this is so hard for the Amazon partisans to advocate for all self-publishers, but deny to someone else (i.e. a legacy publisher). "
If pricing an ebook at $14.99 is what a publishing company needs to do to maximize it's income, it's got bigger financial problems behind the scenes.
Legacy Publishing had plenty of opportunities to jump on the ebook bandwagon, they chose not to.
And by the way, it is a very tired tactic to raise a question, get an answer, and then claim that your opponent is changing his story. I am capable of making a complex argument with different aspects to it. Hachette's tactics are bad for readers AND dishonest. At the same time.
You are fixated on Hachette's profits. I only brought up revenue maximization in the discussion of marginal costs. It is the marginal cost issue that is important.
Mr. Weinstein: all of your arguments, as well-thought-out and consistent as they may be, are based upon the erroneous assumption that the wholesaler (Hachette) gets to set the retail price of the item. This renders most of your statements disingenuous, and as such, untrustworthy.
Amazon, as the retailer, does not have to accept such an arrangement, and in fact and in the real (competitive) world, most retailers set the price of the items they sell. Amazon wishes to remain in control of their own business, which entails being able to set their own prices; Hachette, along with the other big 5 illegally colluded to force Amazon to cede some control of their business to them.
Which is illegal.
Hachette's clear determination to re-impose their control over part of Amazon's business is clear -- and guess what? It's still illegal.
If Hachette wants to set their own prices, let them set up their own website and become their own retailer. Let them compete with Amazon. You know. Real World. Free Market. All that jazz?
Amazon doesn't have to accept Hachette's terms. But they also cannot tell them what the "retail" price of their books will be.
They get to set the "selling" price on their site as long as they don't go against the DOJ settlement, which means they can't sell the ebooks below the cost they purchase it.
AnnB. said, "I'm generally a big Amazon fan, but have been perplexed by why they want to tell Hachette how to price their books."
The problem isn't Amazon telling Hachette how to price their books. The problem is Hachette telling Amazon how to run their store.
Any store should have the authority to stock the items they want to stock and charge the prices they want to charge. If I open a discount store and call it "the dollar store" can Hachette force me to carry their products and charge what they demands?
What I'm hearing Hachette and Hachette authors say is "Amazon will do what we want. Amazon will stock enough books so that customers can get their orders quickly. Amazon will give us pre-order buttons. Amazon will either discount or not discount as we dictate (depending on whether it's an ebook or hardcover) and if Amazon doesn't do exactly what we want, we will say that Amazon is hurting authors.
Like other writers here, I've dealt with agents and major publishers.
The fact: Agents and publishers are accustomed to getting their way. They are not used to anyone standing up to them. That's what happens when you've had your ass kissed so long.
Ted Weinstein, thanks for your comments. I'm generally a big Amazon fan, but have been perplexed by why they want to tell Hachette how to price their books.
Why, why, why?
I keep hearing this over and over again. RETAILERS set prices, not manufacturers. Manufacturers SUGGEST prices and retailers are free to ignore them, as they often do.
Retailers setting prices fosters competition and works in favor of the consumer.
To everyone: Remember MSRP? You know, Manufacturer's SUGGESTED Retail Price? Yes, because manufacturers, except when they collude, DON'T set the retail price.
They can suggest a retail price.
They can offer incentives to the retailers they deal with to set a retail price matching their desire.
But they can't demand it, and can't collude to set it.
Why does this have to be repeated so often?
So often . .
So often . . . . . . ?
Was Posting as BL on the article at Digital Book World.
http://www.digitalbookworld.com/2014/hachette-ceos-response-to-amazon-advocate-emails-why-we-price-books-the-way-we-do/comment-page-1/#comment-709118
Apparently they didn't like the place I was heading, you know, thinks like facts.
Last three comments, and they were considerable length, apparently censored.
The DOJ has already settled the collusion issue.
This is not what is going on now or Hachette would be back in court.
Solution: Amazon not carry those Hachette books over $9.99.
Hachette wants to keep their prices artificially high. They can't say "we want to keep our prices artificially high" so they are speaking in code, but that is what they are saying.
Why?
Hachette has to charge a lot of money for ebooks to cover the cost of their hardcovers.
Why?
Without hardcovers and the paper distribution market, Amazon will too much power over them.
Hairhead: Yes, yes, yes. The law isn't clear on many points, but colluding to fix prices is a great big no-no.
Here is what gets me: A supplier is badmouthing and launching a negative PR campaign against their largest retailer.
I don't get it. Is that stupid, or am I missing something?
Is it just me or does DBW censor it's comments? I have tried to post a couple of times on there about this statement from Hachette with no luck.
I'm the same anonymous above:
Also, adding: Didn't include the obvious: As purchasing moves online and ebooks replace paper, publishers loser their relevance.
One problem with Amazon's approach is that if you price a book too high your 70% royalty disappears.
It's weird that traditional publishers seem happy with that.
But it's not good for indie publishers either as the guys on the Self Publishing Podcast pointed out in their last episode. It makes it hard to sell bundles at anything but a ridiculously cheap price.
In effect Amazon is deciding the price of your work, unless you want to accept less than half the standard royalty figure.
Smart authors will do what the Self Publishing Podcast guys are doing, set up their own direct channels so that the author, not Amazon, decides the price of the product.
Brave move on the part of SPP. They are hoping that what they lose in Amazon reviews they will make up for in profit. It remains to be seen whether this works. I'm equally curious about Joe Konrath's moves into his own publishing empire.
If more indies decide that readers are prepared to sideload books onto their devices, (and it's really easy) then this might also have an impact on Amazon's own market. Amazon doesn't write books. Authors do. And maybe they will wrest some of the publishing power away from Amazon, iTunes, Nook, Kobo etc.
I'm sure the Big 6 are considering their own publishing options. They might be slow, but the fact is they publish and market (or should that be market and publish?) the authors the public want to read.
Kendall @ 6:49 - Hachette aren't colluding NOW; however, they seem to be angling for exactly the same deal they were convicted of colluding on before, that is, the agency model. The Big 5 are just trying to do it one at a time (Hachette will be first, then Random House, then another and another --- and surprise, surprise, ALL THE DEALS WILL LOOK EXACTLY THE SAME! Cue the Big 5 CEO's scratching their heads court and saying how it is a mystery that the market produces such results -- but hey, what dan you do? *smirk*).
Do I have a crystal ball and can tell the future? Based on the previous and present actions of the Big 5, I'd say yes.
Tom Simon said:
"You can be indifferent to whatever you like, Mr. Weinstein, and let us be angry about what makes us angry."
I don't know Ted Weistein but he has a point.
If Hatchette are leaving money on the table, then maybe their authors should be angry. Others can consider it an opportunity to take that money.
It's like crying because your rival is doing bad business.
It seems to me that a lot of indie authors are angry because they are not represented by a leading publisher.
While those that are represented by Hatchette are angry because Amazon wants to cut their book prices.
Amazon don't get angry, they're calling all the shots.
I am sure it will all sort itself out in due course. As with all publishing disputes, this too will pass.
Hairhead said:
"Do I have a crystal ball and can tell the future? Based on the previous and present actions of the Big 5, I'd say yes."
Ah, the Gambler's Fallacy.
"If Hatchette are leaving money on the table, then maybe their authors should be angry. Others can consider it an opportunity to take that money."
They are not leaving money on the table.
Amazon wants to maximize ebook revenue.
Hachette wants to maximize paper, hardcover, and physical bookstore revenue at the expense of ebook revenue.
They see that as their best interest -- and they are right. Without paper, hardcover, and physical bookstores, they become irrelevant.
In their fight to stay relevant, they are overcharging customers for ebooks.
Amazon doesn't want a supplier overcharging its customers to subsidize the paper/hardcover market.
Preston and others benefit when Hachette keeps power over paper and hardcovers. That's why Preston and others are all for overcharging customers for ebooks and selling fewer ebooks. There is no other way for them to be assured of continuing to collect millions each year.
Do you think EA is overpricing their customers for video games?
How about Nike with their stuff?
Louis Vuitton?
Levis? I think those jeans can be a bit expensive.
Microsoft office one license is way expensive, IMO.
Why is Amazon policing the price of ebooks.
And why on earth would authors want a cap on ebook prices.
If I could demand and receive $16.99 for my ebooks, you bet I would gladly take it.
Nora Roberts has been writing for over 30 years. She has millions of fans. I say if readers are willing to pay $14.99 for her ebooks the minute they're realease, she deserves it.
Beverly, you're missing the point. The fact that some goods are overpriced is beside the point.
Hachette isn't selling to the consumer. Hachette is selling to Amazon, and Amazon is selling to the consumer.
You understand that, right?
There is a difference between a supplier, a retailer, and a consumer.
Hachette can charge whatever price it wants. But Amazon doesn't have to pay it.
Or do you think Hachette should have the right to force Amazon to buy Hachette products at whatever terms Hachette sets?
If Hachette wants the consumer to pay $14.99, then it is forcing Amazon to pay a very high wholesale price.
Since when is that how things work? Since when can a supplier walk into a store with his goods and say, "You WILL stock my product. You will charge the consumer the price I demand. If not, I will launch an international smear campaign, and the producers of my product (writers) will accuse you of deliberately and maliciously hurting them."
Does that sound right to you, Beverly?
I do understand all that.
And my point is, is Amazon trying to get those manufacturers to lower the price of those products?
No. Why? Because this isn't about fair pricing or they'd be doing this to all their manufacturers who have inflated prices.
It's Amazon's store. They get to choose who to stock and who not to. They just spent 18 months wrangling over a contract with Kensington without the negotiations devolving to this.
Why haven't they walked away?
They say that they are determined to fight for lower ebook prices. But that's not what this is about, anymore than Hachette is working to do what's best for "their" authors.
This is about profits pure and simple. And trying to disguise it as what's best for authors and consumers is disingenuous.
Beverly I still think that's a simplification.
If you exchange "power" for "profits" you might have it right.
I understand a supplier worrying when a retailer gets too powerful. Widget manufacturers face this with Home Depot and other huge stores, and everyone faces it with Walmart.
But that's what it is about: Hachette is afraid of giving too much power to Amazon, because if Hachette does, it will become irrelevant (causation is complex, but I think you understand why).
by the way, I'm anonymous because my publisher would not like me talking this way :) My publisher does not like Amazon.
Thanks, Joe, for letting folks like me stay anonymous.
I would like to remind people that the original collusion occurred very publicly in January 2010. It took over two years before the original complaint was filed. The fact the publishers aren't currently in the dock is NOT proof that they aren't colluding. What matters is what they are doing. Evaluate their conduct according to this:
http://www.justice.gov/atr/public/guidelines/211578.htm
@Anonymous
I do appreciate your reasons for remaining so. :)
But I also believe that authors, especially those of us self-publishing, should be worried about any retailer becoming too powerful. Whether that's Amazon, Apple, Kobo, B&N or Google Plus. Healthy competition is good for everyone.
I too clearly remember ACX slashing rates from an escalating 50-90% down to a flat 40%. At that point, I'd done 2 audio books. Haven't done another since.
But I don't have all my eggs in one basket and Amazon is around 65% of my earnings on a good (new release month) and about 50-55% on a regular month. My job is to make sure I can ride out and survive any changes that may come down the pipe.
Seriously, when did this stop being a free county? If Hatchette wants to sell it's product for $X, that's entirely their business. News flash, private companies are run by the people who have the investment at stake. If that's not you, then quite frankly its none of your business. If you don't like what they're doing, start your own company and do it better. Same goes for whether you think Amazon should change or not. It's their business, not yours.
RJ
Just want to report that on my third try, my comment did show up on DBW. It was probably a glitch and not censoring.
I don't have any problem with Hatchette setting the wholesale price for both paper and ebook.
Isn't this fight more about the percent cut of revenue Amazon gets more than the ultimate price an ebook sells for to consumers? Doesn't Amazon want a bigger slice than they currently get?
I don't have a problem with Amazon wanting a bigger cut, if indeed that's what they are after. That's business. I also don't have a problem with Hatchette not wanting to give up that slice.
The way Hatchette treats authors is between Hatchette and the authors. I think even Amazon said that.
I don't know about other readers, but for me it has nothing to do with side loading books onto my Kindle. I do that pretty regularly. What I don't want to have to do is open accounts with a bunch of small vendors and go to site after site.
One of the reasons I love Amazon is they have it all. I know I'm not the only one. At a meeting of a couple dozen people not long ago, we started discussing a certain product, and while the discussion was going on, there were people looking on their phones and buying the item from Amazon. Even if you narrow it down to books only, Amazon pretty much has them all. Who wants to go to dozens of small vendors to see some tiny percentage of "all"? Some, obviously, but I suspect an awful lot of customers are like me.
I don't understand what business it is of any of the people complaining about what Hachette wants to charge Amazon for the price of their books. It's purely their decision. If you think the price is too high, don't buy their books. It's that simple. And for the 100th time; the marginal cost of an ebook is meaningless. The cost structure for the publisher for an ebook has nothing to do with the manufacturing costs other than the fact they we make ebooks less expensive than print books. The primary cost of the ebook is the advance that the publisher has paid that is being amortized over all of the formats of the book; whether it's a hardcover, trade paper, mass market or an ebook of each edition. The price when an ebook comes out is based on the format of the printed edition that is released at the same time. This is how the publisher recoups their investment and tries to make money on the book. When the next format comes out; the publisher then lowers the price of the ebook as well. If when the hardcover came out the ebook was only $6.99, the entire hardcover market would disappear and the entire advance model would have to change. When you criticize what Hachette wants to sell their books for you are telling them what their authors should make as well. It's none of our business; it's theirs.
Amazon says, "We want lower e-book prices. Hachette does not. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book."
Maybe it is but why should Amazon get to set the prices for another company's products?
That's not really what the dispute is about, is it? From what I've read Amazon wants 50% of ebook sales instead of 30%. I'd be happy if someone would confirm or deny this.
If true, that has little to do with ebook pricing other than it allows Amazon more leeway to discount. It doesn't force Hatchette to lower wholesale prices. If anything it will cause them to raise them.
I'd like to see Amazon agree to staying with 30% if Hatchette would agree to wholesale pricing that resulted in $9.99 ebooks. My guess it's not likely to happen on either end.
Mr. Zacharius,
Hachette already gets to set the wholesale price of its ebooks. That is not what the dispute is about.
Hachette does NOT get to set the retail price that Amazon charges for its ebooks, but it believes that it should have that power. That is the solution that the Price-Fix Six tried to enforce upon Amazon in 2010, and they were convicted of a per se violation of the Sherman Act.
So let me turn this around on you: I don't understand what business it is of any of the people complaining about what Amazon wants to charge the consumer for Hachette books. It's purely their decision. If you think the price is too low— But at this point, the analogy breaks down; nobody is refusing to buy from Amazon because the price is too low.
Tom there is more to it than that. Amazon wants a bigger piece of the sale to the consumer. They want to move from 30% to 50% if I read things right. Please correct me if I'm wrong.
I do think Hatchette wants to protect hardback sales by not having ebook sales dramatically undercut the hardback price. This makes sense from their perspective but are they saying Amazon cannot discount? I think the finding by the court was that Amazon can discount, but cannot take a loss.
Let the chips fall where they may.
I don't understand what business it is of any of the people complaining about what Hachette wants to charge Amazon for the price of their books. It's purely their decision. If you think the price is too high, don't buy their books. It's that simple.
Hachette can ask whatever it wants in selling stuff to Amazon.
Amazon can ask whatever it wants in selling that stuff to consumers.
If Amazon doesn't want to pay Hachette's asking price, fine.
If consumers don't want to pay Amazon's asking price, fine.
Any problem with that?
The primary cost of the ebook is the advance that the publisher has paid
Are you serious?! Are you actually saying the primary cost of books are advances???
Wow, just wow. Now I've heard everything. And I thought I couldn't be surprised any more at the BS coming out of publishers.
Tom there is more to it than that. Amazon wants a bigger piece of the sale to the consumer.
The supplier gets 100% of the revenue from the sale to the retailer. There are no pieces.
The retailer gets 100% of the revenue from the sale to the consumer. There are no pieces.
This is how it works in millions of businesses.
"The supplier gets 100% of the revenue from the sale to the retailer. There are no pieces.
'The retailer gets 100% of the revenue from the sale to the consumer. There are no pieces."
I'm not sure that's how the model works with ebooks, though, since the retailer doesn't buy ebooks in lots but waits until the customer makes the buy.
Amazon has only ever paid me when they sell something. They never bought in advance. They sell to the customer and take their cut and give me my cut. It's not like they order a box of books and pay for them.
Mark, Amazon stated publically that they are satisfied with 30%. It's purely--or at least primarily--an issue of retail price.
Steven, perhaps the entire advance system should change. It seems to hurt more authors than it helps, anyway.
I'm not sure that's how the model works with ebooks, though, since the retailer doesn't buy ebooks in lots but waits until the customer makes the buy
It's easy. Amazon owes $X to the supplier for each book they sell. That's it. Simple.
It doesn't matter what the consumer pays. The consumer can pay $100, or he can pay a nickel. It has no bearing on the fact that Amazon owes the supplier $X.
Amazon has only ever paid me when they sell something. They never bought in advance. They sell to the customer and take their cut and give me my cut. It's not like they order a box of books and pay for them.
Amazon owes you 70% of the list price you entered into KDP each time they sell a book. Let's just call that $X. It's a fixed price.
The KDP contract says Amazon has sole discretion in setting retail price.
So, Amazon can sell the book for $100, and it owes you $X. It can sell the book for a nickel, and it owes you $X.
Matt wrote~~The primary cost of the ebook is the advance that the publisher has paid
Are you serious?! Are you actually saying the primary cost of books are advances???
Wow, just wow. Now I've heard everything. And I thought I couldn't be surprised any more at the BS coming out of publishers.~~~~
Maybe Mr. Z meant the cost of advances to bestselling authors (that can run hundreds of thousands to millions). I'm pretty sure he didn't mean the piddly 4 and 5 digit advances the majority of authors seem to get these days. I just said "adios" to one author who after 20 decades and numerous fab reviews and awards has left writing due to her publisher's offers being insufficient to , you know, eat and have a roof. So, how much could that advance have been? Huh?
I do find it hard to believe that a 2K or 5 or 10 or 15K advance is the largest cut of a book expense pie.
So, how much does it cost to edit, design, print, promote, ship and warehouse hundreds of thousands or millions of megaseller books and pay the execs patting their backs big bonuses for some good bestseller placements? Wondering...cuz, um, if there's big promo ads and what not...one wonders just how much that all costs for the Stephen Kings and Pattersons...
I wish Amazon had stopped stocking and selling Hachette books the moment the contract with Hachette expires. Just make a public statement saying that they no longer had a business contract in place with the publisher and could not offer their books until such time as a contract was in place. Period. Done.
I think most folks would understand. "Well, they don't have a contract, guess nothing to be done until they do."
Authors would maybe have pressured HACHETTE, not Amazon then.
"Mark, Amazon stated publically that they are satisfied with 30%. It's purely--or at least primarily--an issue of retail price."
If that's the case, what does Amazon want Hatchette to concede? Hatchette has a right to set the wholesale price, doesn't it? Is this really just a dispute about the wholesale price Hatchette wants?
Mark said...
If that's the case, what does Amazon want Hatchette to concede? Hatchette has a right to set the wholesale price, doesn't it? Is this really just a dispute about the wholesale price Hatchette wants?
Hachette also wants to set Amazon's retail price. Amazon is sick of discounting the prices set by publishers, which if they didn't would really annoy readers i.e. customers.
So Amazon says "hey Hachette, price ebooks at $9.99 or below and you'll actually make MORE money. If you're going to continue to price higher than this then we want 50% to compensate us for the loss of revenue your price point causes."
To which Hachette replies "Amazon is greedy they just want more of our money. And we want to keep high ebook prices to protect the print market, it's not about profit for us."
The CEO is spinning history.
Yes, many paperback books were reprints of hardcover books first brought out a year or so before the paperback.
But Dell and other paperback publishers also brought out tons of paperback originals. Mysteries, science fiction, romance, and much more.
Paperback originals were not as prestigious as being published in hardcover, but countless authors spurned by snooty hardcover editors earned good livings from paperback originals. Many, such as John D. McDonald, built their audience base to the point where the hardcovers eventually welcomed him.
I'm disappointed. You didn't call Amazon out on asking us to Spam the CEO. I love working with Amazon as an author, and I vote with my reader dollars about too-high fiction prices by not buying, but as neither am I down with that tactic. I'm not going along with spamming people for any reason. Even folks I don't agree with.
@Steven Zacharius
I have no beef with publishers, like you, who sell ebooks on wholesale terms to retailers and let the retailer set the retail price. I have no beef with publishers who sell direct to consumers and set their own retail price. I have a big problem with publishers who want to institute retail price maintenance for copyrighted material. Hachette has said repeatedly said that agency with RPM is their goal in these negotiations.
If you believe that the marginal cost of ebooks is irrelevant to this discussion, you have confused your business accounting model with economic reality to your own detriment. I understand that they way you do business makes sense to you and you have been successful.
From an outsider's perspective considering the writer's cut (advance and royalties) as an expense makes no sense. It is part of the profit of the overall enterprise. A novel generates economic value by primarily by providing a desirable leisure activity to readers. Most of that economic value is derived from the story itself. A producer of stories would prefer the format with zero marginal costs. The economic interests of writers of fiction and publishers are diverging.
@ Steven Zacharius
I have asked this a few places, but I will direct it to you since you are making decisions as a publisher every day:
How many people who want the hardcover would still buy the hardcover even if a reasonably priced ebook (or paperback) was released at the same time? And on the other side, how many people who do not care about the hardcover get discouraged when they don’t see the book for a reasonable price and so don't buy the ebook, or just move on to another title or author and never come back to buy the book?
What if these two groups actually cancel out the people who will buy the cheaper ebook/paperback but who would have bought a hardcover instead if the ebook was not available, and the publishers would sell just as many hardcovers and more paperbacks and/or fairly priced ebooks if they released them all at the same time? Or what if they could make more overall by releasing them all at once with a smaller print run of hardcovers or no hardcovers at all?
Reminds me of the old story about the family who always cut the ends off of the ham before baking it on Easter, until the youngest daughter asked why. The mom did not know, so she asked the grandmother. Grandma did not know so they asked the great-grandmother and she said that back in the day, her oven was so small she had to cut off the ends to fit the ham in the oven.
Are publishers wasting ham for no good reason other than, “That is the way we have always done it?” Amazon has sales data that show the actual effect of different ebook prices. Do publishers have actual sales data that show that delaying the paperback or keeping the price high on ebooks (at least at first) actually maximizes their sales revenue overall? Or are they just following their decades long habits? Has anyone ever tried a different approach to see if that would make them more money?
What is the basis for the windowing of paperbacks and setting the price high on ebooks other than a perspective clouded by tradition?
Thanks as always for interacting on these forums.
When the very first statement is a bold faced lie it's very difficult to take the rest of the email response seriously. The sanctions against Hatchett for their collusion are a matter of public record.
As this battle rages on, what do we hope for? As a consumer, I want Hatchett to fail. As an author, I want them to win because consumers unwilling to spend $9.99-$14.99 on an eBook will look elsewhere - perhaps in my direction. But as an author I'm appalled at what's happening as well. Amazon wants to compensate Hatchett's authors and they say, no? How does that make any sense?
It doesn't. None of their actions make any sense whatsoever.
Trying to find the truth in Hatchett's statements is like trying to pick fly shit out of pepper.
Carol Weston on CNBC at the moment defending Hachette (she signed some letter). Is she talking nonsense? She thinks 8.99 is too cheap for an ebook.
@ Steven Zacharius
I'll stay anonymous for this, as it's a real world example.
First, thank you to Mr. Z for both your contributions/honesty in your communications here, but also dealing with your authors, one of which was my spouse. Your terms with her were more than fair, but I'd also like to use them as an example if I may.
We've reacquired the rights back from a few Kensington published books. A few more are still within their initial 7 years of primary term. One book I'll use as an example was originally published in trade format for around $14. No longer available(pub'd a little before 2011), but Kensington published a cheaper paperback version selling on Amazon for a little less than $6. The Kindle version of this book is currently listed at $8. We _thought_ the ebook price is high because the title also happens to be listed in Kindle Unlimited. But when you look over at bn.com, the same title is available for the Nook at $10.
So, I can imagine this genre fiction book isn't selling so well. As mentioned, we've asked for and received rights back for other, older books, previously priced in a similar fashion. When the price on one of these older books is reissued by the author (us) at a lower price, sales go up. All is not lost, however concerning the author's books still at Kensington. Your author's terms for ebooks was so generous, increasing their sales still benefits the author (us). When the rights reversion time for that book hits, we'll be asking for those rights back. If they're still priced relatively high like they are now, the sales will be so low your people will probably recommend releasing the rights.
Mr. Z, you are the publisher, and you know better on many things. But maximizing the income per title of some of your genre fiction probably needs to be investigated.
I think that the conjectures about Amazon asking more (like, 50%) if the ebooks are priced higher than $9.99 totally make sense.
Why? Because the only clue we have is the removal of preorder buttons by Amazon and other advantages like faster delivery of books by stocking them. There is also an unconfirmed rumor about Amazon asking the publisher to be allowed to print on demand the paperback books with Createspace instead of stocking them.
So, what could we deduce from these clues? We can deduce, IMHO, that Amazon has partly ceased to treat a big publisher, Hachette, like a publisher, and has begun to treat it like a self-published author as a way of punishment.
We have to remember that Amazon takes 70% of the ebook price if we, indies, price it more than $9.99. So, Amazon asking 50% to Hachette in the same case would still be a favour to Hachette, if we compare with self-published authors.
Of course, Hachette has much more leverage than a self-pub author, and that's why the negociations are stalling for the moment.
It's only a guess, of course, but an accurate one, I think.
Kirk Jolly commented on Hugh’s recent thread in response to some questions I asked that are similar to the ones I asked Steven Z above, and it finally cleared something up for me by explaining that publishers goal in all of this is to protect their relationship with their distributors and bookstores, not their relationship with readers, or even their paper sales. Here is what Kirk said:
“You have to remember the underlying reason that the Big 5 has such a stranglehold on the paper market is because of their relationship with paper distributors. If they suddenly start throwing their efforts into maxing out ebook revenue and paying less attention to their paper sales the bookstores and book distributors will not just roll over and let them. No, they will feel the publisher has turned their back on them so they will do the same. They’ll start carrying Amazon published books and maybe even print on demand and start making big 5 published books actually have to compete in the paper market. Sure they are trying to protect their paper sales, but what they are really trying to protect is the loyalty and relationship they have with the paper distributors, even if it means losing out on some ebook sales now.”
And here is what I wrote in response:
Thanks for that perspective, it is a part of this, I had not considered or at least fully understood. I have often heard that publishers are trying to protect their paper sales, but this is clearer: they are trying to protect their somewhat exclusive access to the paper market, probably even if it hurts their paper sales as well as their ebook sales. Ironically, when they price ebooks very high to protect their exclusive access to the paper market by slowing down the adoption of ebooks, they may also speed up the adoption of ebooks by other readers. If someone gets too frustrated with the whole pricing structure of the traditional publishers, they may just stop shopping for new paper books altogether and simply limit their purchases to used paper books and reasonably priced ebooks (in fact I have read many comments suggesting people are doing just that). The publishers may be like someone in a flood trying desperately to stop water from coming in their front door without noticing that the water is already pouring in the back door.
It does seem the publishers are focused more on their relationship with distributors and bookstores than with their actual customers: readers. This creates all kinds of distortions in their business model, and requires them to resort to convoluted logic and strategies to try and keep all of this going even when their actual customers end up dissatisfied, and they lose sales as a result at the same time they protect their relationships with the middlemen.
It really does seem like they need to reinvent their business model, or else some new innovative company will come along and out compete them….oh wait that is already happening with Amazon! But it also seems like there is a big opening here for small to medium publishers that can change their business practices more quickly to take advantage of the new opportunities. I am sure that is already happening also. And just like independent bookstores have actually benefited the most from Border’s demise, maybe there will be some small and medium sized publishers who can really benefit along with self-published authors.
I posted some on news articles online about how Pietsch is being misleading by saying 80% of the ebooks they publish are priced at $9.99 or less without telling us how many books sell in that price range, so I came up with an illustration:
To exaggerate a bit to make the point clearer: if Hachette only published 100 ebooks and had 99 ebooks priced $9.99 or less and 1 ebook priced at $14.99, then Mr Pietsch could accurately claim that 99% of the ebooks Hachette publishes are available for $9.99 or less. But let's say that all of those lower priced ebooks sell on average a total of 1 book a day for a total of 99 books a day, and that the one book at $14.99 sells 10000 copies a day. Well guess what, in that scenario 99% of the ebooks that Hachette sells are priced $14.99 (even though it is still true to say that 99% of the books they publish are priced at 9.99 or less)
The difference is probably not even close to being that extreme, but since Hachette did not tell us, we have no idea what percentage of actual sales (not the percentage of books published) are at a price of $9.99 or less. It is reasonable to assume that they price their best selling ebooks higher, so it is reasonable to assume that a much higher percentage than just 20% of sales are at a price point above $9.99. As always, there are lies, damn lies and then there are statistics.
I'd guess that the reason we hear from Preston and Patterson and others of their stature among authors is because they are the leverage that Hachette has over Amazon. Amazon doesn't want to be the book retailer who doesn't sell King and Child and Patterson and Preston and the other blockbuster authors in their "stable". I'd hazard a guess that Amazon (like Hachette) makes most of their bookselling revenue off of authors like them. That's why Amazon doesn't simply pull the plug on Hachette titles.
On the other hand, why should Amazon be "forced" to warehouse titles that are going to sell slower because of their price points? Why shouldn't the publisher have to give up a little to get that perk on their print titles?
I have rarely if ever paid MSRP on a hardcover or a paperback at Barnes and Noble (10% discount, 15% or 20% coupon most every time I buy a book from them). B&N discounts HC titles 20% or more (every now and then they have one at 40% or even 50%). I'm sure they're not pricing them under whatever they pay for them, but can't e-books work the same way online at Amazon? If they can, then a 50% discount doesn't seem unreasonable when the price is over a certain point. Does it have to be $9.99? Maybe not...
Gotta love the New York Times hard hitting investigative reporting on this letter from Hachette. All they did was reprint the letter in its entirety without a single comment or any analysis (and they do not allow readers to comment either):
http://www.nytimes.com/interactive/2014/08/11/business/media/11amazon-doc.html
I guess having your allies buy a full page ad also lets you write the entire story and have it posted as is.
The first place I saw this email was:
http://www.digitalbookworld.com/2014/hachette-ceos-response-to-amazon-advocate-emails-why-we-price-books-the-way-we-do/
That says: "According to a company spokesperson, Hachette CEO Michael Pietsch has received “a few emails” in response to a call earlier this weekend by Amazon to contact the executive, demanding he and his company give in to the retailer’s demands for lower ebook prices.
In response to those emails, Pietsch is sending the below note.
Sounds like is a form email to me.
I'm always amazed at how well high priced E-books sell. You'd think lower priced competition would force a lower price, but brand makes a valuable difference even among E-books.
@ Walter Knight: Have you seen the charts from authorsearnings in this blog post:
http://www.hughhowey.com/data-guy-on-price-points/
I would suggest that high priced ebooks are not selling well at all compared to lower price points.
@Joseph Ratliff
That is hilarious. I think it perfectly represents the attitude of the Big 5. Just keep repeating the company line.
Long term loan are source of easy cash that you can have in the same day without any credit checks. Repayment of such loans is less burdensome to make as you can pay off the loan in many months.
Long term loan
Long term loans
I posted this on the earlier thread about David Streitfeld, but I am posting it again as I would especially appreciate hearing William Ockham's view:
I was surprised to discover Amazon is still discounting some Hachette ebooks enough to sell them at a loss (The Goldfinch ebook list price is $14.99 and the ebook is for sale on Amazon for $6.99)
Why doesn’t Amazon just let Hachette have a taste of their own medicine and stop discounting their ebooks altogether? If Amazon’s sales figure are correct, that would reduce Hachette’s take considerably and perhaps wake them up to the folly of overpricing ebooks. At the very least it would be leverage, because if Amazon is discounting from the retail list price, then it seems it is enabling Hachette to make even more money while these negotiations continue (lower price = more sales on top of Hachette still earning their share based on the high list price).
I know Amazon wants to encourage ebook adoption, but why not just focus all of their efforts on other publishers ebooks for now?
This is all way too strange sometimes :)
It's been said here many times that
"In their fight to stay relevant, they are overcharging customers for ebooks."
But Hatchette can charge any price they like as long as customers continue to buy at that price.
When customers stop paying, publishers will charge less. Authors will get paid less. Amazon will also make less.
Amazon have a right to not take any product they don't want to stock. But they don't have any right to dictate the retail prices of those products. They are free to give them away if it suits them. But not free to set that policy on the company that make those products.
Neither part comes out of this well. But it's a good indicator for authors not to put all their eggs in Amazon's basket.
Alan Spade said:
"We have to remember that Amazon takes 70% of the ebook price if we, indies, price it more than $9.99. So, Amazon asking 50% to Hachette in the same case would still be a favour to Hachette, if we compare with self-published authors."
Any idea why traditional publishers are given more favorable rates the indie publishers?
Is it because their books are judged to be a higher quality or just more likely to be bought because of the publisher's marketing efforts?
What other Amazon deals does the indie author not benefit from?
And why?
Nirmala says:
"I would suggest that high priced ebooks are not selling well at all compared to lower price points."
Not all ebooks are the same. Genre fiction is low priced. Academic works can be as much as $50 or higher.
Nirmala said: "Why doesn’t Amazon just let Hachette have a taste of their own medicine and stop discounting their ebooks altogether? If Amazon’s sales figure are correct, that would reduce Hachette’s take considerably and perhaps wake them up to the folly of overpricing ebooks. At the very least it would be leverage, because if Amazon is discounting from the retail list price, then it seems it is enabling Hachette to make even more money while these negotiations continue (lower price = more sales on top of Hachette still earning their share based on the high list price).
I know Amazon wants to encourage ebook adoption, but why not just focus all of their efforts on other publishers ebooks for now?
This is all way too strange sometimes :)"
I couldn't agree more. Once more, I have this strange feeling that Amazon's left hand doesn't know what does its right hand.
Anonymous @11:23:
But Hatchette can charge any price they like as long as customers continue to buy at that price.
Sure they can. They can even charge a price that no one will pay. But that doesn’t stop it from being a stupid idea, and it doesn’t put retailers under any obligation to play along.
When customers stop paying, publishers will charge less. Authors will get paid less. Amazon will also make less.
Amazon’s own numbers, which it has made public, and Hugh Howey and Data Guy’s numbers, which are also public, indicate that this is already the case. Some customers are paying the higher prices, but so few that Hachette is leaving large amounts of money on the table, and forcing Amazon to do the same.
Amazon have a right to not take any product they don't want to stock. But they don't have any right to dictate the retail prices of those products.
On the contrary, they have every right in the world to dictate the retail prices of those products. They are the retailer. The supplier has the right to suggest a list price; Amazon does not want to take that right away from Hachette. But the retailer has a right to set a different retail price, and Hachette wants to take that right away from Amazon. (That is what ‘agency pricing’ means.)
If other retailers want to charge a higher retail price than Amazon, they are welcome to try; Amazon will gladly take their customers. (‘Your margin is our opportunity,’ says Bezos.) But in no way is Amazon trying to dictate prices to other retailers, as Apple was convicted of doing (through the ‘most favoured nation’ clause in the price-fixing agreement that the DoJ struck down).
Alan Spade:
Any idea why traditional publishers are given more favorable rates the indie publishers?
Because at the time the rates were negotiated, traditional publishers controlled all the bestsellers and most of the backlist books. And they did not want ebooks to be sold at all; which meant that Amazon had to offer them an extraordinary deal to persuade them to sell ebooks at all. (The same was true of Apple, which, however, offered the publishers a deal that was so extraordinary, it broke the law.)
These things are no longer true – which is why Amazon is no longer willing to offer Hachette such a sweetheart deal.
Anonymous said, "Not all ebooks are the same. Genre fiction is low priced. Academic works can be as much as $50 or higher."
That is a not very relevant comparison as academic books are never expected to sell well (except maybe to students required to buy them), and so are priced and marketed differently.
High priced genre ebooks sell fewer copies than low priced ebooks in the same genre, and that is probably true of almost every genre. It might even be true of academic books if you compared high priced academic books to low priced academic books. I know when I was in school, I would often buy a used version of the textbooks I needed even if it was an older edition.
Anonymous @ 11:33:
Not all ebooks are the same. Genre fiction is low priced. Academic works can be as much as $50 or higher.
Academic publishing is a notorious ripoff. Scholars, university libraries, and students all complain very loudly about being forced to buy books from publishers at extortionate prices.
I’m not sure this comparison helps your case at all. In fact, you might have been better off not to go there.
Anonymous said: When customers stop paying, publishers will charge less. Authors will get paid less. Amazon will also make less.
The fact that this gets repeated so often is perhaps due to it being counter-intuitive that a lower price can make everyone more money. But one more time:
If pricing an ebook at $10 means only 100 sell, but pricing that same ebook at $5 means 1000 will sell, then Amazon, the publisher, and the author all make more money if the ebook is priced at $5. Amazon gets 30%, the publisher gets 52.5 % and the author gets 17.5%. And 30% or 52.5% or 17.5 %of $5000 ($5 x 1000) is more than 30% etc. of 1000 ($10 x 100).
Maybe this will eventually sink in for people, but it is a basic part of business and economic theory that there is a price point that maximizes revenue and in a free market it is almost never the highest price or even a particularly high price. If raising the price always made more money, then everything would cost a million dollars.
Nirmala says
"If pricing an ebook at $10 means only 100 sell, but pricing that same ebook at $5 means 1000 will sell"
That's a big if and without any supporting evidence.
Try it. Price your book at $10 and see how many sell. Then price it at $5 and see if you sell 10 times as many.
Truth is most indie authors are lucky if they sell any books. So promising them 10 x sales isn't going to cut it.
If you think publishing companies don't have accountants, you are very much mistaken.
Nirmala said:
"That is a not very relevant comparison as academic books are never expected to sell well (except maybe to students required to buy them), and so are priced and marketed differently."
Oh, and how many students are there? Hmm millions!
And buying academic books is virtually compulsory.
Academic books sell so well that they have a thriving second hand market.
Which is also why publishers can keep the ebook price high.
Want to make money writing? Forget vampire stories. Write a book that makes it onto a college curriculum.
Does anyone know if all the other traditional publishers have accepted Amazon's terms. The same terms they are offering Hatchette?
Or does Amazon do different deals with different publishers?
Anon @ 6:36:
Amazon has to do a different deal with each publisher. The DoJ settlement set a specific period of time during which each publisher had to abide by its terms, after which they could negotiate new deals individually.
It’s my understanding that since Hachette was the first one to settle, Hachette is the first one up for a new contract. And Hachette seems to be dragging its feet for all they are worth, perhaps in the hope of protracting the negotiations until the next publisher’s time is up and they can form a tag team. Of course the DoJ’s word for ‘tag team’ is ‘collusion’, but that doesn’t seem to bother the Big Five unduly, even after being burnt once.
Anon @6:31:
Want to make money writing? Forget vampire stories. Write a book that makes it onto a college curriculum.
I’ve known a few professors who did just that, and none of them made any serious money at it. The royalties they pay to textbook writers, it seems, are as low as the textbook prices are high. Plus, there are so many textbooks out there, and most of them have very limited print runs; so the little money that does go to the authors is divided into tiny slices.
It’s my understanding that academic publishers expect their writers to make a living off of grant money or from their faculty jobs. They consider that they are doing academics a favour just by consenting to publish them at all, for each publication can go on the author’s C.V. and improve his chances of getting tenure.
This worked a lot less badly for the authors before the tenure-track positions started to dry up several years ago.
Anonymous said: "And buying academic books is virtually compulsory."
That is the point exactly....when someone is compelled to buy something, then price becomes almost a non-factor. Or as you also said, it creates a thriving market in used versions. Which is why I said it was not a valid comparison for examining the ideal price of a non-compulsory purchase like a novel.
Nirmala: Exactly.
Or, to put it in slightly more technical language, when a good becomes compulsory, price elasticity of demand disappears, and the price tends to rise to the highest level that the captive market is able to pay. But then the captives try to escape by buying the good on black or grey markets. The higher the price rises, the more incentive the consumer has to evade the rules.
At that point, basically, the price depends on how hard the seller is willing to squeeze. For instance, the universities could adopt a rule that nobody shall receive a degree unless he can present all the receipts for his textbooks, bought new, at full price, at the campus bookshop. But then people would rebel entirely and not go to university, because a university degree itself is not compulsory.
That may sound crazy, but not crazier than some things that have actually been tried. Jean-Bédel Bokassa, the rather mad dictator of the Central African Republic, had himself crowned Emperor Bokassa I (in a ceremony that almost bankrupted the country in one day). He then decreed, among other things, that all schoolchildren must wear uniforms bought at a factory that he himself owned; and the uniforms, as I recall, cost as much as several months’ income for the typical Central African.
Some of the schoolchildren staged a peaceful protest against the cost of the uniforms, and Bokassa massacred about a hundred of them. (According to some reports, he personally killed some of the children.) The country then went into rebellion, and Bokassa was overthrown shortly thereafter, with the help of the French Army.
Clearly, academic publishers have a lot to learn about squeezing their captive market. But they have got the general principle right.
"Clearly, academic publishers have a lot to learn about squeezing their captive market. But they have got the general principle right."
And this is relevant in the current conversation, because we have to remember Hachette has the market of public shools textbooks in France. Which gives this publisher a great advantage over other publishers, and creates links with this publisher and the French government (being from either left or right wing, it doesn't matter), which also explains the anti-Amazon law in France and the current position of France's ministry of culture.
I worked in a Barnes & Noble back in the early 1990s and back then, it was the same fight with a different enemy. B&N discounted all books; NYT bestellers at 30%, hardbacks at 20%, and trades at 10%, if I remember correctly. B&N was the Great Satan of publishing for this, driving out mom & pop stores in an assault on culture (Sleepless in Seattle, anyone?).
At the same time, the big publishers swallowed it because it also meant more books on the market in more locations. The discounts were steep, but where else could readers go? B&N's model was about bulk and never anticipated alternatives like the Internet, Amazon, or even ebooks.
Now, Hachette is having the same fight with Amazon, where it sells 60% of its books. That's hardly a position of strength from which to negotiate. I think Amazon knows it and Hachette will yield, taking what it can get in the new lansscape just like they did against Barnes & Noble's discounts.
Tom Simon points out:
"Academic publishing is a notorious ripoff. Scholars, university libraries, and students all complain very loudly about being forced to buy books from publishers at extortionate prices."
Everyone complains about the price of things they need but can't afford.
But work has value. Barring Amazon intervention it's up to you how much you sell it for.
The education system is as much part of capitalism as any other aspect of society.
Others on this blog think the academic book market is small when discussing pricing.
Amazon disagrees. Yesterday Amazon announced that it is opening its second campus bookstore.
Maybe after taking over campus bookstores everywhere they'll do a Hatchette and 'persuade' publishers to reduce those prices too.
http://www.digitalbookworld.com/2014/amazon-expands-campus-bookstore-program-launches-at-purdue/
Re making money by writing academic books Tom Simon says:
"I’ve known a few professors who did just that, and none of them made any serious money at it."
I'm sure different people will have different experiences. Some authors are not smart when it comes to contracts.
I have known people who have sold works on a buy out that then went into twenty printings and became standard texts. They regret that decision.
But I also know people who have done very well by negotiating a better deal rather than feeling grateful to be asked to write by the publisher.
Non fiction does very well if carefully researched. Books take longer to write. But have many author benefits. You might not get invited to events to talk about your latest zombie opus. But you can be deluged with invitations to talk about your latest work on behavioral economics.
We talk a lot about price and sales in the indie world. But very little about quality. A point raised by The Guardian newspaper recently.
http://www.theguardian.com/books/booksblog/2014/jun/04/is-your-book-self-published-masterpiece
Nirmala offered some good examples of how earnings vary with price.
"Specifically, on average $4.99 ebooks sell a bit more than 3 times as many units as $9.99 ebooks. Do the math. It still means that pricing an ebook at $4.99 earns you more: about 1 and a half times as much. Pricing an ebook at $4.99 earns over 7 times as much as pricing one at $14.99. These are average results and do not predict how any one ebook will actually sell, but it does clearly show that lower prices can sell more ebooks and earn more dollars."
I appreciate your point but that's comparing two different books at two different prices.
The only way to test this is to market the same book at two different prices and see which makes the most money.
Like split testing used for websites.
Self-publishing authors change their prices all the time. But usually it's lowering it from around $5 to a dollar or even free in order to try to gain a fan base.
They rarely put it up to near $9 because there is a perception among their buyers that the book isn't worth $9. That's a different argument of course.
Stephen King's fans on the other hand expect to pay a higher price and do.
Will Stephen King or James Patterson sell more books at a lower price? They are best selling authors already. What's to gain?
Fans of best selling authors are already happy. They queue to buy those books. Only Amazon gain by trying to control the price of the goods they sell.
Good luck to them if they can get away with it.
Anonymous said: "I appreciate your point but that's comparing two different books at two different prices."
Actually, Data Guy compared the rankings,and then using data about the average daily sales at various ranks, he calculated daily sales of the top 500 books at $4.99 to the top 500 books at $9.99. He removed the top 10 in each category to remove the effect of extreme outliers, but even when he does the same comparison for the top 10 in each category, the results still show $4.99 as on average having the best total revenue, although not by as much of a margin.
Also, It might not tell you that much to compare the same book at different price points as there are other factors than price that affect sales day to day (i.e. promotions or reviews coming out.) Although a split testing scenario would be interesting except that Amazon has no way for a KDP author to do that.
But when you compare the average sales of 500 books to 500 other books on the same day, that suggests a pretty strong pattern is at play.
And on what basis do you claim that there is nothing to be gained for a best-selling author to price lower? Do you know of any study that shows this? And do you know of any best-selling author that launched their book with an ebook priced at $4.99 or even $9.99? Maybe there is nothing for them to gain, or maybe there is. We will not really know unless they try it sometime and someone does release the data.
Actually, I take it back. Amazon probably does have data that shows there is something to be gained by bestselling authors. When they shared recently that ebooks priced at $9.99 sell 1.74 times as many copies as ebooks priced at $14.99 (for a 16% increase in revenue), I would guess this included a lot of titles by bestsellers, especially since Amazon does discount a lot of bestsellers down from the list price set by the publishers. So it would seem likely that this principle of finding the ideal price can benefit anyone including Stephen King.
Why don't Hachette and the other big publishers set up their own online bookstore and pull all their books from Amazon? They could even have someone design their own e-reader.
Rex Kusler:
The short answer is that the people who run the big publishers are pretty nearly clueless about technology. They are not engineers or computer scientists; they don’t even know enough about those fields to know which firms to outsource to, or how to hire in-house experts of their own.
Passive Guy (from thepassivevoice.com) says, based on quite a lot of evidence, that skilled tech workers just don’t want to work for the publishing industry. Their first choice is to work for tech companies; their second choice, to work for companies in other businesses that have a heavy need for technology and a strong understanding of it; third choice, companies that use some tech and are not actively hostile to it. Book publishers are at the bottom of the list, and tend to get the kind of tech people that can’t find a job anywhere better.
You can see this in the shoddy and old-fashioned websites that so many publishers have. A lot of them can’t even implement a decent search function. I have often been told that Publisher X’s website is so badly organized that it is quicker to find the page you want via Google than to try to navigate through the website itself. (True for various values of X, but not for all.)
Then consider that consumers don’t know which publisher works with which author, and don’t want to go to the trouble of finding out. Unless a publisher has a very strong brand identity of its own (like Baen, for instance), a store carrying only that one publisher’s books is likely to be a huge flop.
In all of the discussion about pricing for ebooks, I wonder if there is a source for data on non-fiction books.
I write non-fiction and am a bit frustrated by the idea that I have to sell my books for $2.99 to $4.99 to maximize my revenue.
I understand that for fiction, but in the case of non-fiction, there is a "cost" in time and money in acquiring the information. In the case of a couple of my books, 30 years worth of time and experience and I don't want to try to calculate the cost.
It would seem $9.99 is not too much to charge for those 30 years since it dramatically shortens the learning curve for the reader.
I realize this is a bit off topic for this thread, but it is related to the broader general topic of pricing for ebooks.
Kevin:
The thing to remember is that you don’t want to price with your emotions. What you’re saying, basically, is that you feel hurt that someone doesn’t value your hard work at $9.99 of his own money, and you don’t want to sell to a customer that only values it at $4.99.
But you can’t take it personally. Maybe what you wrote is only tangentially related to what that reader is looking for, like the professor who only assigns one chapter of a textbook to her class. Maybe the same reader would be willing to pay $10 or more if your whole book was addressed to his particular needs; but you don’t have the time to write a different book for every reader, and the reader has to buy a bunch of different books to inform him about his particular topic.
Now, it’s my suspicion – based only on anecdotal evidence, because people like Hugh Howey and Data Guy haven’t broken out nonfiction data for separate analysis, and Amazon isn’t talking – that nonfiction books will bear a somewhat higher price than fiction. How much higher, I couldn’t tell you. So I certainly understand your frustration at not being able to find the answers. I can only say that you’re more likely to discover the answers if you conduct all your investigations in a scientific spirit, with a cool head, forgetting for the moment that the work under the microscope represents your own time and effort.
@kevin
You may want to rethink your thinking process. Your time and cost for research is an upfront cost that you have already paid when the book is launched. The very best way to recoup your investment at this point is to simply maximize the revenue from the sales of your ebook. If you can make more money from selling your book for $2.99 or $4.99, then that is more money in your pocket. Just as an illustration, and to use an extreme example, if you could sell a million copies at $.99, then most likely it would probably be well worth it. The best approach is to experiment with prices and see for yourself what price actually works best to maximize your revenue. Again, think in terms of what will bring you the most total dollars, as at this point, that is all that matters....not how much you have invested.
Study the charts on this post, until the concept that you can make more by selling for less sinks in:
http://www.hughhowey.com/data-guy-on-price-points/
My wife and I sell non-fiction books and we are still experimenting with prices, but in the range of $.99 to $4.99. If you are not a well known author, then it helps to have a lower hurdle to someone trying your book. And of course, if your book(s) take off, you can always raise the prices then. That kind of control of pricing is one of the many joys of self-publishing.
WOOHOO! I just got an email from Amazon that KDP authors will now have pre-order buttons! Here is the email:
Hello,
We're excited to announce that you can now make your new books available for pre-order in Kindle Stores worldwide.
With a few quick and easy steps you can create a pre-order page up to 90 days in advance of your book's release date--your pre-order product page will be created within 24 hours. When you make your book available for pre-order, customers can order the book anytime leading up to the release date you set. We will deliver it to them on that date.
One advantage of using pre-order is that you can start promoting your Kindle book pre-order page on Author Central, Goodreads, your personal website, and other places ahead of its release to help build excitement for your book.
Also, pre-orders will contribute toward sales rank and other Kindle Store merchandising ahead of release, which can help more readers discover your book.
Visit your KDP Bookshelf to set up your new book for pre-order.
Best regards,
The Kindle Direct Publishing Team
David Gaughram had stated it wouldn't be such a good think for indies to have preorder buttons with Amazon.
But I guess, if only for the sake of experimenting, it's nice to have this new possibility.
Hey Joe - sorry for the out-of-place question here, but I was talking to Rob Siders on FB about something.
Was wondering if you've attended one of the annual all-expense paid retreat things hosted by Amazon with Jeff Bezos and his family?
I know Hugh went to the last one and talked about building model rockets with Bezos, etc.
Another friend went a few years back.
Thanks,
Jamie
@Joseph Ratliff I wonder if everyone who emails him gets that. Like even his friends.
@Kevin Do you really need to be on Amazon? Check out Gumroad or think about being a third party seller.
For those of you asking "Why doesn't "Publisher" just open their own online store, go check out Harpercollins.com
That is a major publishers foray into the world on online selling. Keep in mind the prices they have there, and just imagine what they could be without competition.
Anyone think they'd be lower without competition?
I have never pre-ordered a book or an ebook.
The only times I preordered books were accidental -- I didn't look carefully enough before clicking buy, and then felt ripped off because I wanted a book to read now and had to spend yet more.
I think Amazon should not take 2/3 of a 99 cent E-book. A 99 cent promotion at the beginning of a series benefits everyone, so the author should not be penalized for trying to promote.
Walter Knight:
At that level, you can partly blame the credit-card companies. Their transaction fees eat up a considerable percentage of a 99-cent sale; not sure how much, but even Amazon will be paying a considerably higher percentage on a 99-cent transaction than on a $9.99 or $99 transaction.
Visa and MC didn’t really want to do micro-transactions at all until the iTunes Store basically forced their hand. Apple had a knack for doing that. And even Apple, as I’ve read, barely broke even on a 99-cent song, after paying 70% to the label and then covering bandwidth, storage, and credit card fees. The bandwidth and storage are much cheaper now; not sure about the fees.
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terima kasih atas informasinya,sukses selalu.
He reminds me of every politician in Washington. And his letter makes me think of George Orwell's essay, Politics and the English Language.
The industry has developed an entire way of speaking and thinking that has killed their ability to consider new problems.
It's almost to the point that it's like some sad former hero who no longer understands the world he lives in.
Makes me kind of just want to shake my head and move on.
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