Friday, September 04, 2015

Shocking WSJ Discovery: Higher Prices=Lower Volume!

Barry Eisler here. Joe, thanks as always for the guest slot. I was going to mock this Wall Street Journal article somewhere, and there’s no better place than A Newbie’s Guide for that…

So okay, today the Wall Street Journal ran a piece headlined, E-Book Sales Fall After New Amazon Contracts: Prices Rise, but Revenue Takes a Hit.” The article is behind a paywall, but you can access it by cutting and pasting the headline into your browser and clicking on the result of the search.

I just want to make sure I’m the first to congratulate the Wall Street Journal on its shocking discovery of a correlation between higher prices and lower demand. And, while I’m no economist, I’d like to humbly propose that the WSJ call its discovery something like, “The Demand Curve.” If this doesn’t win the newspaper a Pulitzer, I have one more suggestion: an even more radically new article on how a round object fastened to an axle can work as something called… a wheel.

Apologies for the snark, but where else but in publishing could a notion like “higher prices lead to lower revenues” even be controversial, let alone newsworthy? But the publishing industry is notoriously special, and Joe has been beating this drum for years. Five years ago, he wrote:

Naturally, people would rather pay less for something than more. And in a digital world, like we’re rapidly becoming, consumers have shown consistently in other forms of media that they place less value on downloads than on physical products.

When companies price digital content too high, consumers respond by pirating that content. That’s the ultimate in “devaluing.”

So what is truly the value of ebooks? Is it free? Or is it the publisher’s price, which seems inflated, and which in the agency model gives them 52.5% of the list price of an ebook for doing nothing more than providing a cover, editing, and putting it up on Amazon?

If an ebook is free, the author gets screwed.

If an ebook is priced high, it won’t sell a lot of copies, and the author gets screwed.

If an ebook sells for a small amount of money, the author makes 17.5% of the list price. That also seems like the author is getting screwed.

Publishers are currently talking about going 50/50 with authors [BE note: hah, this was five years ago, the talk never ends does it?], so an author will make 35% of the list price. But it’s still the price the publisher sets, which is inflated, which will lead to piracy.

By setting the price, the publisher is pricing ebooks so they won’t sell well, and then taking 35% of what little money will come in.

Joe has also pointed out many times that authors will be the ones who kill legacy publishing, because they’ll go elsewhere as they figure out the New York Big Five’s pricing strategy is costing them money. Though whether this is Big-Five-Death-By-Authors or Big-Five-Death-By-Suicide is an interesting philosophical question.

Anyway, back to the Wall Street Journal’s big discovery. The headline itself—again, E-Book Sales Fall After New Amazon Contracts: Prices Rise, but Revenue Takes a Hit—is interesting. The way it’s written, you might think it was Amazon that caused the high prices that produced that shocking revenue hit. In fact, Amazon has consistently tried to price ebook prices lower, even publicly explaining last year why everyone—authors, publishers, and retailers—makes more money from lower ebook prices. Higher so-called “agency” prices have been forced on Amazon by the Big Five, and were at the heart of the price-fixing conspiracy New York and Apple engaged in to keep ebook prices high.

And that subtitle is amusing, too. Prices rise, BUT revenue takes a hit? How about AND takes a hit? Or THEREFORE takes a hit?

I can’t help it. It’s too much. The Wall Street Journal—one of the world’s leading business newspapers—doesn’t seem to understand, or even know the existence of, an Econ 101 concept as basic as this:

In economics, the demand curve is the graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price.

What is it about publishing that makes otherwise intelligent, educated people lose sight of even the most axiomatic things? One day, someone’s going to write a dissertation on that topic.

Publishing industry analyst Mike Shatzkin provides this helpful quote: “Unfortunately, it may be that consumers aren’t happy with the higher prices.” Okay, I admit that my first thought was, “Those pesky consumers, always insisting on decent value for their money! If we could just figure out a way to keep ‘em happy about coughing up $25 a book, we’d all be in clover!”

And then I thought, “Unfortunate for whom?” Because there’s demonstrably more money for everyone in lower priced ebooks. But wait, here’s a clue:

“Publishers said the current pricing model involves some sacrifice but they felt it was worth it to keep Amazon in check.”

Always interesting when someone casually reveals his true motives. Though this one might have been stated more clearly as, “Publishers said sodomizing readers was worth it to keep Amazon in check. A Big Five spokesman added, ‘Sorry, readers, we know it hurts but it’s for the greater good. And by ‘greater good,’ I mean the good of the Big Five, who are above all else intent on preserving the problem for which we are the solution.’”

And here’s another clue: “What’s more, they have noticed a bump in sales of physical books that is possibly related to the higher price of digital books.”

I’ve been saying for years: the prime imperative of the Big Five is to preserve the position of paper and retard the growth of digital. They’re willing to lose money to accomplish this. They even just described it as good news.

I also love how the cripplingly high prices the Big Five has fought for are now described as “the Amazon deals” and “the Amazon pacts” (“pact” is such a great word. The west has a North Atlantic Treaty Organization. Only Communists have things like a Warsaw Pact. We have factions, they have tribes; we have detention centers, they have gulags; we might build a security fence but never a Berlin Wall...wait, sorry, I know I’m digressing but propagandistic language is endlessly fascinating to me. Remember, It’s Just a Leak!).

Why is the Wall Street Journal trying to hang around Amazon’s neck a money-losing price structure dictated by the Big Five? Because it’s bad. And if it’s bad, and it’s happening in publishing, it must be Amazon’s fault. Quod erat demonstrandum.

A paragraph later: “Publishers succeeded in preventing Amazon from lowballing prices…”

Lowballing: “a per unit price that maximizes overall revenue.” I guess it’s time to update the dictionary.

“Hachette cited fewer hot titles and the implementation of its Amazon deal as reasons that e-books fell to 24% of its U.S. net trade sales in the first half of 2015, from 29% a year earlier.”

I think this would read a little more clearly as “Hachette cited fewer hot titles and the implementation of THE PRICING STRUCTURE THE BIG FIVE INSISTED ON as reasons that e-books fell to 24% of its U.S. net trade sales in the first half of 2015, from 29% a year earlier.”

Nah, that’s crazy talk. If there’s a problem, it must be The Amazon Deal Pact that caused it.

And this: “Pricing e-books is a Goldilocks problem for the book giants: For years they worried that consumer prices were too low, and now they are seeing the disadvantages of bumped-up prices.”


“To figure out how to set prices, a team of data specialists at Macmillan’s Manhattan offices in the Flat Iron building sifts through a database of 74 million transactions looking for trends.”

Oooh, sounds impressive. But it occurs to me the crack Macmillan Team of Data Specialists could have saved themselves some time, and Macmillan some badly needed revenue lost due to high ebook prices, if they had just read Amazon’s announcement about this a year or so ago, or Joe’s post from five years ago, or if they had at any point just used the Google to search for something called the Demand Curve

“Amazon was willing to buy a title for $14.99 and sell it for $9.99, taking a loss to grab market share and encourage adoption of its Kindle e-reader.”

It’s amazing that someone could write this article and describe the strategy as “grab” market share, rather than as, I don’t know, “grow” market share. Is Jeff Trachtenberg psychic? Was he in the meeting rooms where Amazon devised its “grab” strategy? Serious question, Jeff: on what are you basing this assertion? And why do you not at least consider the entirely logical—and substantially better supported by common sense and data—possibility that lower prices don’t necessarily cannibalize a market for the benefit of one, but might instead grow that market to the benefit of all?

“Publishers worried that such discounting kept Apple Inc. and Google Inc. from emerging as competitors, as those companies might not want to lose money on e-books.”

This would read better as “The Big Five didn’t think everyone would agree to subsidize the Big Five’s high-price, low-volume, paper-first strategy.”

“Apple, which denies wrongdoing, was found liable in a civil case and subsequently lost an appeal in June.”

Ah, the little professional courtesies oligarchs extend each other. After all, it’s always relevant to note that the convicted defendant continues to deny wrongdoing. Plus it was just a “civil” case (I’m not even sure this terminology is accurate. Does the government bring civil cases prosecuted under US criminal laws?), which doesn’t sound all that bad.

In other Wall Street Journal news, “Chester Frot, who denies wrongdoing, was found guilty of burglary and arson and subsequently lost an appeal in June. You can reach him by mail for the next twenty years at San Quentin Correctional Facility.”

“Publisher e-book sales have been stagnating since 2013, when they fell 2.5%…”

It’s journalistically negligent, or willfully propagandistic, to say this without clarifying that you’re talking specifically about legacy publishers. And without pointing out that in the same timeframe self-published ebook sales have been exploding. If you don’t understand this point, you can’t understand what’s really going on in publishing. Which means either that Trachtenberg himself—the guy who writes these articles—doesn’t understand what’s going on in publishing, or that he doesn’t want his readers to.

“One high-level publishing executive disputed that the Amazon pacts are behind the e-book sales decline. ‘This is a title-driven business,’ he added. ‘If you have a good book, price isn’t an issue.’”

Did Trachtenberg grant this publishing exec pernicious anonymity because the executive didn’t want to be ridiculed for saying something so stupid? Did Trachtenberg ask for anything like, I don’t know, supporting data before agreeing to publish an anonymous quote that violates the laws of Econ 101, all available data, and even common sense?

If a book is “good,” whatever that means, price isn’t an issue? Okay, anonymous publishing executive, why aren’t you charging a hundred dollars for your “good” books? You’d be making bank! Could it be that books are a little more fungible than all that? That consumers find books fungible not just with each other, but with other forms of entertainment, as well, meaning that you can very easily suppress sales of a book with a non-issue high price? In fact, it seems you can even suppress sales of an entire market. Bravo!

And then, almost as an aside, in the second-to-last paragraph: “Amazon says e-book sales in its Kindle store—which encompasses a host of titles that aren’t published by the five major houses—are up in 2015 in both units and revenue.”

A tiny note of insight and relevance! But no analysis of why that is and what it means. Wait a minute, are you saying lower priced book sales are growing in both volume and revenue, while higher priced ones are shrinking by both measures? Is something going on here? What might it mean for the industry?

Nah, why discuss any of that? We know legacy publishes are having a hard time because of the Amazon reason. Anything else goes in the second-to-last paragraph and merits no discussion at all.

I’m not sure why Amazon declined to comment on the article. They could have just said, “Um, we told you so.

As a commenter over at The Passive Voice puts it:

The Big Five really painted themselves and their authors into a corner with agency. They’ve screwed their authors royally for at least the next two years, just like they’ve screwed themselves.

1) If they keep their ebook prices high:

– Their ebook revenues (and market share) continue to shrink fast.
– Unable to discount Big Five ebooks, Amazon discounts Big Five print books even more steeply (as they are now), hastening the demise of chain brick-and-mortar bookstores that can’t compete at those prices. The Big Five ends up more reliant on Amazon for the Big Five’s (less-profitable) paper sales, while the far more profitable ebook market passes them by.

2) But if they lower ebook prices back to where they were in 2014, during the pre-agency days:

– Maybe the erosion of their ebook sales slows. But NOW, under agency, those discounts come out of their own pockets (and those of their authors), instead of Amazon’s. The average discount Amazon was underwriting on Big Five books was 20-25% pre-agency—that’s a hell of a subsidy, and it’s gone now. So under agency, the same discounted 2014 ebook consumer prices and sales will mean 20-25% less revenue for the Big Five than it did in 2015.

– And those lowered consumer ebook prices will once again accelerate the nationwide reader migration from print to ebooks, hastening the demise of chain brick-and-mortar bookstores.

What did Schopenhauer say? “All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”

Although if the Big Five continues to adhere to a high-priced ebook strategy, and continues to rely on insights as fresh and useful as those in this Wall Street Journal article, the more relevant rubric might be Elisabeth Kübler-Ross’s anger, denial, bargaining, depression, acceptance.

45 comments:

Joe Konrath said...

That was brutal and hilarious, Barry. I'm sad I couldn't join you for it.

If a book is “good,” whatever that means, price isn’t an issue? Okay, anonymous publishing executive, why aren’t you charging a hundred dollars for your “good” books?

I think he might have been anonymous because he doesn't want to publicly admit that the publisher he works for apparently can't pick a good book to publish. This pinhead just stated that his company is losing money because it isn't publishing good books.

Fail.

Mark Terry said...

I'm struck by a couple things. First, even publishers should understand (note I didn't say do) that if they have a brand name author many readers will be willing to drop $25 on a hardcover (or maybe even $14.95 on an ebook, maybe). But not a hell of a lot of readers will pay $25 for someone they've never heard of. But $3.99 or $4.99 or $1.99? Sure. Pocket change. I've noted a number of trends in my ebook buying, and one is my willingness to try a new author if the price is low enough.

Another thing is it reminds me a bit of the booze industry. You can sell your cheap booze cheap and you can sell your expensive booze expensive, but the majority of people aren't buying $200 bottles of wine, they're picking them up for $6 or $7 bucks at their local grocery store. Traditional publishing in many ways seem to want to view their industry as a "prestige industry" where no book is sold before it's time and they only sell the very, very best Literature, preferably printed on the boiled skin of newborns and bound in fine Corinthian Leather.

They'd rather sell 100 Ferraris than 10,000 Buicks, regardless of the profits.

Yes, mixed metaphors.

Alan Spade said...

What Mark Terry is describing is a fascinating thing to witness: the book and ebook industry faculty to be able to resist the law of offer and demand, and the "demand curve" Barry is speaking about.

In theory, a good book, or an enjoyable one, should be replaceable by another. As it turns out, not so much.

I almost couldn't believe my eyes when I looked at the prices of the bestselling ebooks of 2014. http://www.amazon.com/gp/bestsellers/2014/digital-text/154606011/ref=zg_bsar_nav_b_0_b/184-0552134-0318950

What? Five years after the beginning of the ebook revolution, the big publishers are still able to sell so much ebooks at such a price?! And they are all listed in the best spots of the list?

When there are enough free ebooks to spend many lifetimes reading them?

Don't make me wrong: I've not slipped into admiration of big publishing. Far from it. What I admire is the love of readers for they favorite authors whoever these authors are. It's that love that defy the economic logic, and it's that love that makes books and ebooks different from other products. Hats off to that.

Eden Sharp said...

Up until five years ago there were certain authors who could rely on me buying each and every new title they published and I did so for a decade or more. That is until I started buying ebooks. Now I no longer buy the latest titles upon publication from the likes of Michael Connolly or Lee Child and I'm sure I'm not alone in this. Not because I no longer enjoy their work but because I'm sure as hell not going to pay £10 for an ebook especially when the hardback or paperback is only a couple of pounds more.

Alan Spade said...

And I think, Eden, that more and more people will agree with you in the future. The victory of indie publishing versus trad publishing is ineluctable. Still, as an author who rely on the love of the reading public to make a living, I had to salute the fans and book lovers (even if the ones I was speaking are not my fans, lol!).

Bob said...

Three years ago at Cool Gus we were expecting a migration of bestselling authors from traditional publishing to a form of indie publishing. It didn't happen. Because we were dealing in reality and most authors are in denial.

But it will happen in the next couple of years. Indie does have a steep learning curve and there are plenty out there with boilerplate answers. But every author is in a unique position, especially those want to (and can if their trad contracts allow) go hybrid. I blogged about that in 2011, when the word wasn't even on the publishing table. Now everyone is hybrid, as if the Borg have invaded. I wish I had trademarked the term.

I always find it amazing that so many people are saying "Everything is fine" and it's business as usual.

Also amusing is the constant reminders that eBooks sales have plateaued. As far as I can tell, I'm not reporting my sales numbers to any of those who bleat those reminders. They've "plateaued" because more eBooks sales are going to the indie side of the house. I submit they are growing.

The are so many keys to being in control of one's career, besides much, much higher royalty rates. The creative control is unbelievably freeing.

Anonymous said...

Re the booze analogy yes there is cheap booze and there is the higher priced market. Whisky and champagne are not cheap. But they are hugely successful. Could they be sold cheaply. No, it'd destroy their market. Their customers are happy to pay what is asked.

Is fashion cheap to produce? Yes. But the luxury brands will not be lowering their prices to reflect production costs.

Maybe traditional publishers don't want their best selling authors churning out a book every month as is the case with many self published authors. A book by a famous author is eagerly anticipated. It's not a magazine dropping through your post box. And if they are only going to market one book a year, then it may as well be for the highest, not the lowest, price the market can stand.

Most self published authors cater to a different market. It's closer to the magazine or serial market. Lots of books, delivered at regular intervals to please their fans and grow their audience.

As Bob said there hasn't been the predicted migration of best selling authors to the indie sector and this is for very good reason, they have deals that serve them well. They write a book a year, if that, and the publishers take care of the rest.

There have, however, been self published authors who now have traditional deals. And sometimes hybrid deals.

And why not? You've written a dozen or fifty books. You deserve a rest. You'll be glad not to be blogging and marketing and figuring out ways to make the most of Amazon's ever changing algorithms.

The great thing about self publishing is that every book is a pitch. If a book succeeds extremely well there are traditional publishers offering deals.

The low price you set might have helped make that book a success.

One such deal being talked about in publishing circles will probably hit the press very soon. A self published author who has been the subject of a bidding war for their new book. It's non fiction. And the price achieved will boggle the imagination. But one thing is for sure, that book won't cost 99 cents.




Jill James said...

There are so many "name" authors I used to buy. But I can't force myself to spend $14.95 for an ebook when I can spend a few dollars more for trade or hard cover. The publishers have pushed those authors right off my "auto-buy" list.

Barry Eisler said...

I should have thought to mention earlier that Mike Shatzkin wrote a much more thoughtful piece on this phenomenon about a month ago:

"What we’re also seeing and hearing is that publishers might have boxed themselves in with their return to agency pricing. When publishers first “raised prices” by instituting agency pricing for ebooks in 2010, they saw no reduction in ebook sales, which continued to grow. Michael Cader’s analysis (can’t find it in print, but he told it to me) was that publishers may have misread the real impact of price increases because they raised them in a growing market. The number of ebook readers was increasing every day, so those who were put off by the high prices were outnumbered by the new entrants who just wanted to read their books digitally on their shiny new devices.

"Whatever is the reason, the anecdotal reports I’m getting suggest that the price increases aren’t being so easily swallowed in the current round of Agency pricing. Amazon may not care about ending discounting from those prices because they don’t need to or want to, but it would appear that the new deals won’t let them. They certainly don’t have the flexibility to do so that they did before Agency came to the marketplace. So the sometimes startlingly high publisher-set prices are prevailing. And, aside from the Hachette numbers that were reported, we’re hearing widespread but totally unofficial reports that big publisher ebook sales are dropping noticeably when their new higher agency prices are activated.

"Hugh Howey told me this was happening in a private exchange three months ago. I didn’t believe him. I do now..."

http://www.idealog.com/blog/the-publishing-world-is-changing-but-there-is-one-big-dog-that-has-not-yet-barked/

Given that Trachtenberg reached out to Shatzkin for a quote for his own article, it's hard to imagine Trachtenberg isn't aware that Shatzkin has already discussed shrinking legacy ebook revenues within the critical context of growing indie ebook revenues. In other words, the real story here isn't that legacy publisher ebook revenues are shrinking; it's that legacy publishers' digital lunch is being eaten by indie upstarts--but apparently that's a story Trachtenberg doesn't grasp or for some reason doesn't want to tell.

H L LeRoy said...

Higher prices = lower volume, what a shock. Fox Butterfield call your office.

Smart Debut Author said...

"If the Big Five continues to adhere to a high-priced ebook strategy, and continues to rely on insights as fresh and useful as those in this Wall Street Journal article, the more relevant rubric might be Elisabeth Kübler-Ross’s anger, denial, bargaining, depression, acceptance."

When it comes to the Big Five's apparent level of understanding of their own industry, Barry, I'd say the Dunning Kruger effect might be a rather applicable rubric, too. :)

Joe Konrath said...

You'll be glad not to be blogging and marketing and figuring out ways to make the most of Amazon's ever changing algorithms.

Instead you'll hire lawyers and spend a year of your life courting the media and the DOJ to go after Amazon, because you're afraid of losing your large advances.

No thanks. I've been at the mercy of publishers before. I'd much rather keep my rights and try to figure out Amazon than sell my rights and try to fight Amazon because my publisher is a fucking moron.

Joe Konrath said...



You've got a large blind spot in this case, Alan.

Some bestsellers sell well at that price The other 99% of the titles the big publishers offer don't sell nearly as well at that price. Those authors--99% of them--would be much better off on their own, self-publishing.

Also keep in mind that the current bestseller concept--expensive hardcovers--has been fostered by near universal availability. James Patters can sell a million high priced hardcovers because there are a million of them for sale, everywhere. And because of this saturation, he can root out and cultivate a fanbase.

When those sales venues--the ubiquitous bricks and mortar stores--disappear, watch how quickly the old white men on the NYT list lose fans. They won't be able to maintain unit sales numbers, or gross profit. Their sales, and gross, will drop dramatically.

There aren't that many authors with so strong a brand that fans not only seek them out, but are willing to drop $15 an ebook. If Patterson self pubbed at $15, his lack of brick and mortar presence would no longer buoy his high priced ebook sales, and those ebook sales would dwindle. Maybe not at first, but time erodes all peaks.

w. adam mandelbaum esq. said...

Whatever could reduce the sales and availability of the books by the authors formerly known as James Patterson would be a literary triumph and a boon to mankind. If he has braille editions they should hand out gloves with them.

Ceri Clark said...

Price is a thorny issue. I write how-to guides and I really believe in giving a low price but because i sell illustrated guides i have to charge slightly more. This isn't because I've spent hours on graphic programs making the images easier to see and understand but because of Amazon download fees. I do this because some people understand better with seeing images rather than text.

I charge 6.99 for my Gmail guide. I get the 35% rate because that way i get slightly more royalties than if I went with the 70%. I think this means i get roughly the same as someone who sells a $2.99 novel.

I also distribute with Draft2Digital and get 70% with their retailers to get 3 times the royalty because they don't penalise graphical books like Amazon does.

I've responded by making the books in writing now with fewer and 'smaller' images. Not so he great for the customer experience but I have to balance price against what the customer will pay and what amazon will allow with their fees. The other retailers dint have this download fee, I wish Amaxon didn't. I don't have anything against Amazon by the way. I just get frustrated with how they deal with this issue, oh, and that exclusivity clause in Select!

Ceri Clark said...
This comment has been removed by the author.
Ceri Clark said...

I would like to apologise for the autocorrected words on my comment. Luckily i don't write books on my phone!

John Ellsworth said...

Barry,thanks for a witty and wonderful piece.

Mark Asher said...

Are the brick and mortar bookstores failing? I know Borders is gone but B&N is still around. The big box stores (Sam's, Target, etc.) all carry books. Aren't paper sales significantly higher than ebook sales? I don't think it's hard for casual readers, the people who read 4-5 books a year, to find books.

I also wonder how many people have had my experience? I was excited about ebooks and read them exclusively for several years, but I find myself reading more paper books again. The experiences are different and I enjoy the paper experience a bit more now.

Joshua Simcox said...

"When those sales venues--the ubiquitous bricks and mortar stores--disappear, watch how quickly the old white men on the NYT list lose fans. They won't be able to maintain unit sales numbers, or gross profit. Their sales, and gross, will drop dramatically."

So reader loyalty means nothing? The massive sales of the same handful of "old white men" who have dominated the bestseller lists for decades is based entirely on indiscriminate readers who are looking for a book--any book--and thus purchase a Koontz, King, Patterson, etc, because those just happen to be the books most readily available? I don't doubt that wide distribution has contributed to those successes, but millions of readers wouldn't keep coming back for the product if they didn't enjoy the product, regardless of how ubiquitous the product is.

In the realm of fast food, I prefer Arby's to McDonald's, even though McDonald's is less expensive and has many, many more locations--and is thus the more accessible option. So given a choice between the McDonald's across the street or the Arby's eight miles away, I'll do what's more expensive and less convenient to get what I want. Most people will. Is it really different for readers?

For example, I've been reading Dean Koontz since I was 19, a little over a decade ago, and I imagine I'll just as eagerly pay his publisher's inflated prices for each new title a decade from now as I do today. If his books suddenly disappeared from Amazon, Wal-Mart, Target, CVS, major grocery store chains, and the few remaining brick-and-mortar bookstores, I'd happily pay Koontz to mail me the books himself, even if they were scribbled in crayon and distributed from his attic. Sure, you can buy Koontz anywhere and everywhere these days, just as you could ten years ago, but ease of access didn't earn my loyalty--it was the product. A product that can be duplicated to some degree, yes--but who wants to buy an off-brand that kinda/sorta tastes like what they're looking for when they can have exactly what they want for a few bucks more?

Joe keeps the pushing the notion that readers who would typically pay $12.99 for a brand-name author's ebook will soon instead take that $12.99 and buy four cheap indie ebooks that resemble the name-brand author's product--and I just can't see that happening. With only the most casual, undiscerning readers, maybe, but not real fans. Maybe you have a Koontz-like $2.99 indie that's a great read in its own right, and maybe I'll buy it and enjoy it. But will I choose you over Koontz just because your product is less expensive? Absolutely not. In the end, maybe I buy both books. But Bantam Books still gets my $12.99. Every time.

Is the average reader as loyal as me? I'm not sure. But the idea that readers will abandon their favorite authors just because someone else does something similar cheaper is laughable. Is the real Koontz, King, Patterson, Preston/Child, etc, losing fans because fraudulent indie authors are attempting to cash in on those large readerships with deceptive pen names? Of course not. The "old white men" aren't going anywhere, and where their books are sold and how much their publishers charge for the product isn't going to change that. After all, there's has to be a reason why these guys continue to flourish even with hefty price points while the John Lockes and Amanda Hockings (no disrespect intended to either) have mostly faded from the conversation.

Rob Gregory Browne said...

But not a hell of a lot of readers will pay $25 for someone they've never heard of. But $3.99 or $4.99 or $1.99? Sure. Pocket change. I've noted a number of trends in my ebook buying, and one is my willingness to try a new author if the price is low enough.

I had this argument with a publisher when one of my books was released. I told them, even if you only reduce the price of the ebook for a couple weeks, that will make readers more willing to try lesser known name. But no, they said, that would be against corporate policy.

Sigh.

Rob Gregory Browne said...

Joe keeps the pushing the notion that readers who would typically pay $12.99 for a brand-name author's ebook will soon instead take that $12.99 and buy four cheap indie ebooks that resemble the name-brand author's product--and I just can't see that happening.

Based on the conversations I've had with readers, it already is happening.

Rob Gregory Browne said...

I know Borders is gone but B&N is still around. The big box stores (Sam's, Target, etc.) all carry books.

It's my observation that B&N is starting to look more like a gift store and the book sections of the big box stores I've visited (including target) has shrunk considerably.

Alan Spade said...

"Some bestsellers sell well at that price The other 99% of the titles the big publishers offer don't sell nearly as well at that price. Those authors--99% of them--would be much better off on their own, self-publishing."

I didn't say that these trad pub ebooks that are on the best-selling list didn't come without a sacrifice.

Of course you're right Joe, many many bestsellers would be better off on their own.

Still, we could be fair players. In 2010 even you, I think, wouldn't have believed that the bestseller list of 2014 would be filled with trad published ebooks at such a price.

"When those sales venues--the ubiquitous bricks and mortar stores--disappear, watch how quickly the old white men on the NYT list lose fans."

Joe, the bestseller list I linked to is an ebook list. I'm not so much convinced paper books are so important to the people who buy on these lists. Yes, paper books in bricks and mortar store act as a permanent advertisement for these books. They also reinforce the "legitimacy" of the books. But the people who have the motivation to buy at those prices are more often than not fans. They will find a way to find the ebooks of their favorite authors.

Like Joshua, I think readers' loyalty shouldn't be underestimated.

Besides, should we really hope that B&N goes under? Amazon's competition must survive. It's our only option as independant authors if we want to keep some freedom.

If I think that indie authors will prevail in the end, it's because of the passing of generations and the rise of the ebook. More and more authors will become hybrid authors, and the publishers won't be able to build such strong brands in the future as the ones who populate the 2014 bestseller list.

It will be for the better, because I believe a bestseller list with a high turnover is a more natural and healthy one than what we have today, which resembles to a pyramid built over the corpses of many authors.

Ellen O'Connell said...

I think "new author" is the key phrase. Like most voracious readers, I have a handful of favorite authors whose annual offerings I want badly enough to pay the outrageous price the publishers stick on the books. Trying a new author, no matter who publishes her, regardless of rave reviews, is a whole different matter.

Also, am I the only one? I don't want paper at any price. After living for years inundated by piles of books, I've finally cleaned out my library to a few bookcases with reference books and favorites I reread. I don't want more paper. If I can't get the book at a price I think is reasonable, I can get traditionally published books from the library - and do.

Athena Grayson said...

No, Joshua, the average reader is not as loyal as you. The "true fans" don't make up the bulk of any bestseller's sales. It's the thousands of people rushing through an airport who needed something to read on the 8:50 to Dallas/Ft. Worth. They grabbed the Koontz off the display and threw money at the clerk because it was there. But they could have easily picked up the Oprah magazine because it was closer. Or bought gum and paid the flight attendant to watch two episodes of "Everybody Loves Raymond." The next time Koontz releases a book, these people are not going to go looking for it.

Koontz fans will have already bought the book on their tablet the night before, but there are far fewer of them than the ones who picked him because he was available.

Mark Asher said...

It's my observation that B&N is starting to look more like a gift store and the book sections of the big box stores I've visited (including target) has shrunk considerably.

But for people who buy 5-6 books a year, this is still adequate. Even for more avid readers who prefer paper, B&N is likely adequate. They still carry a lot of books.

Anyway, I really don't know what's going on with the brick and mortar bookstores. Are they dying? It seems like the initial introduction of ebooks killed some, but now things seem to have stabilized.

I hope they don't die. I've spent many enjoyable hours in a bookstore, chatting with the employees and often chatting with strangers about books. I'd hate to see them vanish.

I just realized another reason why I've gravitated back to paper books. I spend all day at my job looking at a computer screen. It's refreshing to block out all electronic devices and read the old-fashioned way.

Eden Sharp said...

I haven't stopped buying Connolly and Child books and the like despite the eye-wateringly high ebook prices the publishers set. I just wait for however long it takes to either borrow from a friend or library or until they're in the charity shop for £2. Which essentially means, unless it's a library loan, that the publisher and therefore author are getting diddly squat in terms of royalty.

G. B. Miller said...

It's funny how 99% of the big corporations become members of the Captain Obvious fan club when it comes to basic economics 101, when they express shock (SHOCK!) over the fact that high prices mean low volume.

Then you have the 1% and every smart member of the general public who realizes that low prices means more product bought. Just like if you go to a grocery store. If you have choice between a well known chain that has all the amenities (like Shaw's and Stop & Shop here in New England), and a chain that is pretty much stripped down (like Aldi's or Price Rite here in New England) and whose prices are often 33% less than the commercial chains, where would shop?

Same concept applies to books. If you had a choice between good quality/low end (Amazon/Smashwords) or good quality/ridiculously high end (everyone else), where would you shop?

Father Nature's Corner

Joe Konrath said...

that the publisher and therefore author are getting diddly squat in terms of royalty.

That's something I don't think I've ever brought up on this blog. How much does the used market take away from the new market? Obviously the higher the initial cost, the more the second hand market thrives because it offers the same book for less. In finding that sweet spot for book pricing, how much money is the Big 5 giving up because some diehard fans wait to buy used copies?

Rob Gregory Browne said...
This comment has been removed by the author.
Rob Gregory Browne said...

I just realized another reason why I've gravitated back to paper books. I spend all day at my job looking at a computer screen. It's refreshing to block out all electronic devices and read the old-fashioned way.

I stare at a computer screen all day as well. Go to sleep each night reading my Kindle, which is nothing like a computer screen to me but more like a paperback book on steroids. Convenient because I don't need a light on to read and because I have hundreds of books stored on the Kindle, so lots of choices.

I don't think I've cracked open a paper book since getting a Paperwhite, unless the book wasn't available digitally. To each his own.

Rob Gregory Browne said...

Dear Blogger. Please provide an edit function for comments. Most of your competitors do...

James F. Brown said...

"Although if the Big Five continues to adhere to a high-priced ebook strategy, and continues to rely on insights as fresh and useful as those in this Wall Street Journal article, the more relevant rubric might be Elisabeth Kübler-Ross’s anger, denial, bargaining, depression, acceptance."

Barry,

You left out the final stage: Death. :)

Mark Edward Hall said...

I almost always buy used copies of my favorite 1% authors. Always have. I get them at used books stores, Goodwill, yard sales, etc. I don't need the book as soon as it hits the shelves. I'm a patient guy.

By the way, my list of favorite big 5 authors is diminishing as indies come to the forefront. So many books, so little time.

I do the same with most movies. I wait for them to come out on video or netflix.

I absolutely will not pay extortion prices for ebooks, and I know a lot of people who feel the same.

I'm no expert, but I can't help but feel that eventually high ebook prices will put the hurt on some of those big 5 authors.

Mark Asher said...

I almost always buy used copies of my favorite 1% authors. Always have. I get them at used books stores, Goodwill, yard sales, etc. I don't need the book as soon as it hits the shelves. I'm a patient guy.

I do this a lot too, but in the end we're an insignificant market force beyond helping out the used bookstores and fueling sales to libraries.

I stare at a computer screen all day as well. Go to sleep each night reading my Kindle, which is nothing like a computer screen to me but more like a paperback book on steroids. Convenient because I don't need a light on to read and because I have hundreds of books stored on the Kindle, so lots of choices.

I've tried to read at bed in night with the lights out, but I get sleepy right away. That's probably a good thing. The last thing I need to do is train my body to stay awake at night while in bed in the dark.

I've talked to people who are all-in with their e-readers and have switched completely, but I also know people who have an e-reader and still mostly read paper books. It will be interesting to see what happens, but I suspect there's still a strong market for paper books.

And for whatever reason, ebooks seem more like throwaway items. I take no pleasure in owning an ebook -- I'm like that with many physical books, too. I use Scribd and read most of my ebooks there. Scribd has a very nice selection.

Joe Konrath said...

Dear Blogger. Please provide an edit function for comments. Most of your competitors do...

No shit. I've been tempted to switch to Wordpress, but I've got 1000 posts here, and god knows how many comments and links to those posts, and I don't want to split up my readers with a new URL. As advanced as Google is, you think they'd pimp out their blog options.

Joe Konrath said...

I'm no expert, but I can't help but feel that eventually high ebook prices will put the hurt on some of those big 5 authors.

Here's something I mentioned before, that deserves it's own blog post: big authors can publicly bitch about Amazon because Amazon sales don't matter to them.

When you get an advance so large you'll never earn it back, sales don't matter to you. They matter to your publisher, who can make money on a title long before the author advance is paid back. So they whine about Amazon on behalf of their publisher, because Amazon doesn't pay them giant advances that won't ever earn them a cent in royalties.

High ebook prices protect sales. When paper sales dwindle, ebook prices will come down for big bestsellers, because they don't have that prime paper distribution real estate driving sales, and don't have any coop advantage. Consider the movies. A hot IP like Star Wars doesn't charge three times the amount for a ticket because it's a popular brand. Star Wars tix cost the same as the latest cheapy indie horror film, because the playing field is level.

The big problem is: when publishers cease making big money on paper sales, they'll need to continue to cover overhead somehow. Ebook prices may go up. But bestsellers will see a sharp decline in sales when they aren't in every Walmart. So their advances will come down. If that happens, they'll pay more attention to earning out, and giving a publisher 50% to 75% of net for ebook sales makes no sense anymore.

That's why Authors United wants the DOJ to step in. They need to protect their advances, or risk huge cuts in income.

Jonah Gibson said...

Snark aside, sales volume is linked to unit price by an elasticity curve, but revenue is not, or at least not to the same degree. You can raise a price and still see revenue go up while unit volume goes down. Business analysts look for the sweet spot where the curves cross to maximize their profits. All your points are valid vis-a-vis the publishing industry, but WSJ article was not an exercise in reporting the obvious. The writer simply understood the difference between unit sale volume and total revenue.

Steven M. Moore said...

@ Rob Browne (first comment),
I'm an avid reader as well as indie author, and I would rather buy three or four indie ebooks instead of one trad-pubbed at $10 or more. In fact, I won't pay more than $5 for an ebook now.
That said, you can find trad-pubbed ebooks on sale (Amazon's doing or the trad-pubber?). I found a recent Connelly book for under $5 and Weir's The Martian for $2 recently. Readers have to be smart consumers. (I was disappointed in both ebooks, by the way, but I'd be more so if I'd spent $12.99.)
As a writer, my goal is to provide quality entertainment at a reasonable price. My first three novels were PODs; they're not competitive now either. I published a second edition ebook of my first book and am working on one for the third. My goal is to have all my ebooks priced at $4 or less--that works for readers and hopefully for me in the long run. Right now I'm pumping all royalties back into producing the next ebook, and I'm running in the red, but my situation is still optimal because I'm not a slave to trad-pubbers or POD people, just entertaining readers.
r/Steve
PS to Barry, what you didn't treat (neither did WSJ, for that matter) is the phenomenon that an increasing supply and a diminishing demand is bad for market growth. More good authors and ebooks are being produced, period, and the number of avid readers is diminishing (are readers a vanishing species?) for many reasons. I'm guessing there are other factors determining optimum pricing and the latter is dynamical. (I'm no economist either, but WSJ and the NY Times often amaze me about their lack of common sense.)

Bill Peschel said...

Remember that the Demand Curve is just that ... a curve. It doesn't have to have half your readers fleeing your ebook version to have an effect.

It can be 1 in 10 who decide, meh, I'll wait for the paperback version. Or they'll be curious enough to visit the library.

And that 1 in 10 will likely be not the trufans who buy everything on publishing day, but the sort-of fan who likes the guy.

But sometimes, it'll be the fan who has decided that enough's enough.

Meanwhile, for those of us not published by New York, the picture's better. Even for my low-demand niche books, I reached 2014's sales on July 30. And last month, my book sales are neck and neck with my ebook sales. Plus, I've gotten my books into three book stores, including one in New York City. So, yeah, I'm doing better. Not self-supporting, but better.

Scott Marmorstein said...

Sometimes it seems like all you'd really need to change the landscape of Indie Publishing is to hire two fictional characters: Olivia Pope (from Scandal) and Alan Shore (Crane, Poole and Schmidt) from Boston Legal. You might only need Olivia.

Then the public would have a brand new image in their minds about the power indie writers have, the downturn of the big 5 (or is it less now?), the mindless and grasping news-articles that try to scapegoat Amazon over and over again.

But then I'd have a new worry. What would Joe and Barry be writing blogs about? No...wait, I think they'd go back to writing more fun fiction books for us fans to read. Hmmm....

Werner said...

Sheesh Barry, last week you told me I was goin' "all Godwin", but here you are all metaphorically propagandist with lines referring to sodomy, Gulags, and the Berlin Wall ;)

But seriously you were on a roll with this post, and I thoroughly enjoyed it.

The thing I really liked about the WSJ article was the comments. Most of them seemed to come from readers/consumer's voicing their displeasure with the traditional publishing pricing model for ebooks. The consumers have spoken.

Anonymous said...

So interesting. I have my own theories but kindle unlimited may be part of the decline. I can set the search for books on my kindle only for ku titles and sometimes when browsing that's what I do. Prior to joining ku early this year I rarely bought indie but ku exposed me to so many great indie authors. Also I shop regularly on Amazon and I use slow shipping credits. Last year I was able to use credits on any physical books which was what I did. Then Amazon changed it to only e-books (or video or music but I mainly use for my kindle). Then earlier this year I noticed with one publisher I couldn't use my credits on. I didn't think much of it. Then in July I noticed all mainstream publishers I couldn't use my credits on. Maybe it all ended earlier but I had pre-ordered books way in advance and my shipping credits still worked on those mainstream publishers titles in late July but not since. Now I think I understand why. I was looking at a book by a new author 5.99 and then I saw it was an s&s book and I thought drat. If not it would've been free because I have enough credits. I still bought though. But at 9.99 and 12.99 books I consider buying a used paperwork. Sometimes the new paperback is cheaper or the same price. Even as I preordered a fav author's 12.99 release I thought it would've been nice to even get 5 or 6 dollars off in kindle credits but now that doesn't work. Don't get me wrong. I'm very happy with amazon and my shipping credits. I think it actually makes me buy a lot more on Amazon.

Exotic Beauty said...

i love your blog
keep up the good work:)