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Amazon Surrenders To Macmillan On eBook Pricing
CuteSteveJobs writes with a followup to news we discussed on Saturday of a disagreement between Amazon and Macmillan Publishers over ebook pricing: "Amazon has thrown in the towel and announced it will now sell books at Macmillan's increased prices; up to $14.99 from $9.99. Said Amazon in a statement: 'We will have to capitulate and accept Macmillan's terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books.' Macmillan has sensed Apple's iBooks opens the way for higher prices. Perhaps the question should be: do we even need publishers like Macmillian? Publishers have long managed to keep their old business model chugging along nicely despite the Internet; Academics are still forced to give up copyright (PDF) of their work in exchange for publication. Textbook publishers have a history of unethical practices like frequent edition changes, unjustifiable price increases and bribing teachers. For that matter, why do the RIAA's members still control the music business? Why do these dinosaur publishing businesses still manage to thrive despite the Internet?"
Oh that's right, zero.
You are under the false assumption that items are priced based on marginal cost. They aren't in practically any market, they are priced at what consumers will pay and what the competition is selling at. Fortunately for them consumers are still willing to pay extra for the digital "convenience" and the competition doesn't sell the same books.
Did you get your books from Gutenberg? They have lots of H. Beam Piper: http://www.gutenberg.org/browse/authors/p#a8301
Salon.com
Best Slashdot Co
For that matter, why do the RIAA's members still control the music business? Why do these dinosaur publishing businesses still manage to thrive despite the Internet?"
Because they
1) Provide money and pay the big costs while artists are producing their album
2) Provide marketing
3) Find the promising artists and writers
4) Have the distribution channels
Actually, from what I hear of the music business, they don't really do any of these for new artists (unless, maybe, you just won American Idol or something).
The reason RIAA is still thriving is because they have a huge backlist of stuff that people still listen to, from artists who had signed contracts back when big studios really were the only way you could get airplay or distribution.
http://www.geoffreylandis.com
This kind of vertical price setting was illegal in the U.S. for about 100 years, considered a form of price-fixing under the Sherman Act. Macmillan was free to choose whatever wholesale price they wanted to sell books and ebooks to Amazon for, but once they sold them, they had no control over what retail price Amazon set. Unfortunately, that was overturned in 2007 in a 5-4 U.S. Supreme Court decision.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
The marginal cost of printing a book is pretty close to zero too. That isn't why they cost as much as they do.
I've worked in publishing as an accountant and this statement is completely wrong. The marginal cost of production of even the highest volume books or newspapers is no where near zero. It's not the dominant cost (those would be marketing and distribution in most cases) but the marginal cost isn't zero or anywhere near zero.
No mod points at the moment, but can those with some mod this guy up to +5 insightful?
Also, see loudness war for a better description.
Story at 11.
Cory Doctorow talking about cloud computing makes as much sense as George W Bush talking about electrical engineering.
Comment removed based on user account deletion
Well, the equipment is the easy part nowadays. Mics are cheap, multitrack recorders (be it appliance or PC/Mac card) is cheap, and multitrack recording software is even free. You don't need to worry about saturating tape or wearing it out any more. Need another track? You don't have to downmix. Just record the new tracks and add them to your sound editing suite.
What is not so easy is knowing how to mic a drum kit, the singer, and so forth. Recording at a decent level without clipping, and without losing dynamic range. Engineering the record so it sounds good (if you've blown your inner ears out with your iPod, you won't get the highs right, and no, distorted bass does NOT sound good!). Of course, talent is a requirement as well. It helps if you can actually compose a piece, and actually play an instrument or two.
Now, let's counter the points one by one:
1) You mean LEND money to the artist (the big advance check) the money they need for your in-house studio, where you pay almost nothing for studio and sound engineer time while overbilling your signed artist. Your artist is better off doing a few gigs or working at Starbucks to save up a couple grand and going to the studio on their own. Studio time is NOT all that expensive now.
2. You bill your artist for the marketing of the material, and over-bill the artist for for the service. Your artist is better off marketing through local clubs and battle of the band contests and the like, or approaching college station DJs to get airtime. Oh, and why do you still charge your artists for breakage? First of all, breakage pretty much became a non-issue when acetate discs went the way of the dodo, and secondly, why should the artist be billed for any single thing when the way your standard contracts work, their work becomes work for hire and owned in entirety by you, and they get MAYBE 3 points (minus the bullshit "breakage" charge) on their second or third album? Hey, maybe you can even bankrupt them in the process through creative accounting and call it a loss, and keep them touring forever to work off the debt! It's a bullshit deal.
3. "Find the promising artists and writers" - oh you mean every little skank and ho who will wear a thong and little else on stage, and knows how to sort of dance and sing through voice processors (or willing to lip sync) to make her voice not sound like nails screeching across a blackboard, while singing (or lip syncing to) stuff written by Neil Diamond and other actual song writers? Gotcha. Well, I'd rather hear a band that made it the hard way through gaining popularity playing gigs. Pink Floyd, The Who, or if you want someone more recent, Phish (you wouldn't believe the places they played at when they started out), No Doubt, and so forth.
4. Distribution channels: why, so all of the members of the band can be in debt and be forced to go on long gruelling tours to pay off that debt, when they could instead slowly but steadily build a following, be debt-free and hopefully gain air time on independent and college radio stations and distribute recordings on their own, or use channels such as the iTunes store? Then, they remain debt free, and not only do they get 75+% (basically the entire sale price minus actual cost of media or hosting and merchant account fees) for their recordings, but they retain full ownership of their work.
The Christian Right is Neither (Christian nor right). See: Matthew 23, Matthew 25, Ezekiel 16:48-50
You seem to be confusing data compression with audio compression. For years now, going back to the analogue days but increasingly over the past decade, audio has been "dynanic-range compressed" to increase the loudness of the song. Imagine you have a song which goes from "0" to "10" in loudness over the track. In aggregate the song's going to be about 5. That's no good at turning heads on a jukebox or on the radio, so you bump up the quiet parts so the song goes from "4" to "10" in loudness. That means that the song, as a whole, is now about "7". It's louder, it's more noticable, it sells the brand more.*
However it has nowhere to go from there before it hits the loudness limit of the audio format. If you turn down the dial so that thequiet parts are at their original, low level of "0", then the loud parts of the song are actually down at "6", far quieter than it was before you compressed it.
*The technique is widely used by advertisers to make their particular ad louder without breaking volume level regulations or normalisation.
No kidding!!! What do you say at this point?
(I work for Macmillan, so I am not a disinterested party)
Macmillan's president held our annual company meeting just the other day (before the Amazon dispute) and he explained that the pricing for e-books was probably about to get a little rough. Apple had been courting the publishers for several weeks. Apple carries a lot of clout, and was offering terms that were very attractive to publishers, as it lets them set their own prices, within a flexible window. Amazon, on the other hand, was pushing publishers to sell books at a flat rate: $9.99.
Amazon has been angling to set themselves up as the "Wal-Mart of the web", and with that comes a lot of what Wal-Mart is know for: good and bad. Steep discounts are good for the customer, but generally, not so good for the manufacturer. Now, as someone who writes software to help ensure the quality of our books, I am a bit biased, but books are not the same things as widgets. You can't just churn them out. Even good, reputable authors give you something that needs a lot of polishing. We publish textbooks in my division, so this means that in addition to the standard copy-editing, you also need to do fact-checking, course integration, and lots of design work. It is a labor-intensive process, and each book requires the attention of dozens of people, and tens of thousands of man-hours. Often, these books also come with software. I don't think I need to explain to people here how hard it is to write good software.
Amazon is hard to say no to, because they move a lot of books. But they are cutting profit margins dangerously low for us. At what point do you say no? People like to do their work, but they also like to be paid. Macmillan, so far, has balked at Amazon's price-fixing, and (if I understand correctly) Amazon has been selling e-book versions of Macmillan titles at a loss. Amazon, however, sees the iPad terms as very dangerous, because publishers can sell some books higher, but more importantly, they can sell some lower. Apple can do this, because they're not taking as big a cut as Amazon does. Unlike Amazon, Apple's goal is to sell the platform; Amazon wants to sell the books. So Amazon makes a ton on books, but loses a little on hardware. Apple makes money on hardware, but not much else.
I don't know exactly how it will shake out, but it looks like the Macmillan deal will probably be a turning point for e-books. Amazon is now a sub-licensor of those books, and that means that the quality and success of those books is going to be important to them. We'll see how this turns out. For more on this, I recommend this and this.
I hear that Amazon's customers are "boycotting" books priced higher than $9.99. Ok, I hate "teh big bad corp" as much as anyone else, but come on-- it's not like we find these things laying around and just dust them off and hand them to you. There's no magic. Get real. We have to make these things, and that takes time and money, and hey, we like to get paid, too. I suspect the "$9.99 boycott" is Amazon astroturfing.
FWIW, Macmillan is a privately-held company, so that's why you see them taking a stand, and not one of our competitors. I'm fortunate to work for a private company, because we can actually focus on doing a good job. From my perspective, working here has been far from being a cog in some evil empire.
I owned a small self-publishing company for 3 years and sold it. When I started the company I made a firm decision that the company would NOT obtain or transfer copyright ownership from anyone we published for. I knew there were a few publishers that we competed against that had "questionable" contracts that appeared to transfer copyright ownership and/or enforcement from the creator of the work. I thought that by using a more honorable business model we could attract writers and offer another method to get works distributed.
Oh, wow, let me tell you how this industry is...
My company started almost from day one to be hit with a series of slanders and false statements from a number of "anonomous" sources. I was put through the grinder, but did manage to build a good reputation with the people we published and distributed for. I talked to a lot of other people who used various other companies, and got the chance to see some of the contracts that the competition used. I can tell you that most, if not all, either outright transferred the majority of ownership from the original creator or had terms that were so vague that it would take a team of lawyers to figure it out.
My biggest wakeup call was when we had to stop printing a series of art books because the artist signed a contract with another company, not for the works WE printed, but for another totally unrelated work. He didn't see the little part of the contract which gave the company he signed up with TOTAL rights to ALL his works, even those that they had never printed or were never planning to print, created since the day he was born. WOW!
When you control the distribution of a product, you can write your own terms to those who need their product sold. It's as simple as that. For years the publishing companies controlled all the methods to get books into the stores, and it continues to this day. Writers often find that they have to either sign on the dotted line or simply forget about ever having their works seen by the public. I also discovered that a lot of writers and creators had no idea that they had signed away their rights until I pointed out the terms in their contracts.
I once thought that companies such as Amazon could change the landscape for the independant writer/creator. But what I have been noticing is that even with Amazon most people are "locked" in to some sort of system that simply will not let go. A year or so ago I think that even Amazon tried (and may have succeded) into having all works printed through their own company, thereby eliminating small printing companies out of the loop. It's interesting to see that even Amazon must bend to the will of another company when it comes to distribution pricing.
And lets not even begin to think about what Google's book scanning system is doing to the copyright landscape. "Do no evil"? Bite me on that one.
I am glad to be out of the publishing business, and feel greatly sorry for the future generations that will have content locked, forced upon them, distributed through systems they have to participate in, and prices dictated not my market forces but by lack of competition.
Nuff said.
Eric Freyhart
The marginal cost of production for books is already about as low as it will go. e-books make this almost zero, but it wasn't a huge factor to begin with.
e-books have additional production costs associated with them (formatting for screen, electronic distribution, electronic storage, and yes, DRM), and these are new things that don't have to happen for paper books. The production process for paper books has been refined over many, many years (at least a hundred in the case of Macmillan US), and so costs are pretty low. e-books are new ground, and so right now, publishers are spending money to break into this market. We'll see how costs shake out in the long run.
To give you an idea of the cost breakdown, look here. Diagram is for textbooks; trade publishing is a bit different, but not wildly so. As you can see, freight is a very small part of the cost, and (it's not clear from the diagram) but printing is not a huge contributor, either. It's mostly editorial and administrative fees, author royalties, sub-licensing, and taxes.
(I work in publishing)
I doubt they care about the technology, they care about who is controlling the technology. IE Amazon is taking control of the technology and is to offer a 70 percent royalty rate for books while the current publishers give out less than a $1 a book (more like 3-6%) if they are allowed to cut out the publishers. I am sure the publishers would be willing to pass on the savings, they don't want to pass on the control. B&N is doing similar at 35% payout rate and with google's book settlement google will scan you book, format it as a e-book, and sell it while giving authors 63%.
Well, "value" is a funny thing. It really depends on who you're talking to. For you, yes, it is less valuable. Maybe we lose you as a customer. But for every one of you, there may be two other people who are willing to pay more, for the convenience. I don't handle any of the financial stuff, but I can tell which customers our financial people will be paying attention to. Suffice it to say, paper books aren't going away anytime soon. Maybe in 15-20 years that will be different. But convenience is really the driver here, as with many other markets.
Have a look at this post. There's a nice PDF there that will break down costs for you. The short answer to your question is that printing and distribution aren't a large part of the cost of a book to begin with, and e-books have new costs associated with them. Also given that e-books don't gain us any market-share (rather, it displaces market share we already had), and that we still have to do all of the traditional production alongside the new stuff, e-books really cost us more to make, at least at the moment. Oh, and it should be reiterated-- Amazon takes a huge cut. That ads a lot of cost to a book. To make a $20 paper book into a $9.99 e-book isn't so simple as cutting out the printing and distribution part and then selling the book without those costs. Maybe if we had our own platform.
Moving into e-books is risky at the moment, but the higher-ups tell me that they're looking very carefully at the failure of both the music and movie industries to get digital distribution done the right way. The reason why we got this short respite was that, until very recently, turning a paper book into an e-book at home was a gigantic pain in the ass, and not very useful. That's changing fast.
Well, I own and run a small publishing company. And one of the things that I always find very amusing is when people call the print book outdated, and those of us who focus on them "dinosaurs." It's not, and we're not.
What I am, however, is connected to reality.
There is a basic business truth: your customer base dictates to you - not the other way around. If your customer base demands e-books, you give them e-books. If they demand printed books, you give them printed books.
So, what does the customer base demand here? Well, the Association of American Publishers tracks the book market based on net sales, and on a month-to-month basis, we can thus tell just what formats the market is demanding. The most recent month's figures available is November 2009.
In November 2009, the total net book market was $808.5 million. Of that, the e-book occupied $18.3 million ($.1 million below the audiobook). This makes the e-book a grand total of 2.26% of the entire book market.
That's right - 2.26%. Any general publisher who abandoned the printed book in favour of the e-book at this time would be endangering their business' survival. Should the e-book one day represent 65% of the market, then anybody not supporting it would indeed be a dinosaur. But, right now, putting the printed book ahead of the e-book simply means that one has a realistic view of the market.
Source: http://www.publishers.org/main/PressCenter/Archicves/2010_January/November10StatsRelease.htm
Robert B. Marks
Author, Demonsbane in Diablo Archive
Not a single one of those things is necessary any more.
The cost of producing albums is only artificially inflated by the labels themselves. The only music that requires the kind of "marketing" that major labels do is crappy, "industry-created hype-machine" music like Lady Gaga or the 2010 equivalent of Pat Boone known as "American Idol". How many of you have found your favorite artists through "marketing"? The mechanisms that the labels used in the past to find promising artists and writers just isn't required any more. There are still record execs out there soaking up fat expense accounts going around to L.A. clubs listening to bands, but they don't really find anybody that way any more.
The last item, the "distribution channels" are the biggest lie of all. The most effective model for a "distribution channel" for music is TPB. If it were up to the music industry, we'd all still have to line up in the old "superstore" record departments and be paying $25 for records that cost about $3.00 to make (including the $1.50 for the artists, songwriter, engineers and producer). Only shitty music sold to the rubes requires a "distribution channel", which basically means having the radio stations (which are owned by the same conglomerate) play it over and over and over and having the television networks (which are owned by the same conglomerate) put the shitty artists on at every opportunity and having an army of P.R. flaks working round the clock to get bullshit "news stories" about the shitty artist into the newspapers and magazines (owned by the same conglomerate) until the general public just starts to assume that this must be a successful and wonderful artist because they've heard her fucking name a thousand times just this week. A great rule of thumb is this: if the music requires press releases and a huge marketing machine to sell, it almost certainly sucks. I'm trying to think of an exception to this rule, but can't come up with any. I'll leave the door open to the possibility though. This is how the miserable drek from "American Idol" ends up on the Billboard charts. It's music for people who don't care about music.
Another whopper. Maybe the big mega-hype artists do all their work in high-priced studios, but you'd be surprised how many really successful artists do the bulk of their work in project studios and other small, inexpensive facilities. Look at the top-ten lists of really good music critics from 2009, and you'll see lots of great records that were produced in home or project studios. Groups like Air's Love 2, Wolfgang Amadeus Phoenix, St.Vincent's Actor and Moby's Wait for Me were made at home yet made a lot of top 10 lists.
Don't get suckered by the propaganda put out by the music industry. They're a hugely top-heavy industry that is way past its expiration date. Don't trust the entertainment/industrial complex to "guide" your musical tastes. The people they put forth as "artists" aren't even real people, but rather vat-grown mutants. Everything you need to find and hear great music is at your fingertips. Have a little respect for yourself and for the art form known as "Music".
You are welcome on my lawn.
"all manufacturing costs from editing to paper costs to distribution, as well as storage, record keeping, billing, publisher's offices, employee's salaries and benefits."
You're right, I don't have access to all the cost information. It's not my job. But let's break it down:
editing cost-- still there
paper cost-- gone
distribution cost-- smaller, but still there (oh wait, servers run on teh magic of the Internets! I forgot!)
storage-- mostly gone (no returns anymore), but still no magic Internet dust to run your data center
record keeping-- still there
billing-- still there, and more complex; books are often a large collection of sub-licensed works (this is the part that I write software to manage); you have to have permissions agreements for those copyrights, separate from print agreements, which means you need to pay people to negotiate those agreements
publisher's offices-- yes, we still have offices employee's salary and benefits-- yes, we still pay our employees, and we need to pay the people who pay the employees (HR, A/P, and HR systems we subcontract) You can see that there isn't much to trim.
the books you are publishing are edited electronically and sent to the printing machines electronically; the "new stuff" consists of a single conversion program that takes the electronic format you use for editing and proofing and converts it to the e-book format you're going to be distributing
It is much more complicated than this. The author hands us a manuscript in something (anything really). Editorial works on this in a word processor, usually Word. This is handed to Production, which typesets using page-layout software. This could be anything from LaTeX to Quark or InDesign, depending on the title. Mostly, this part is making the book readable, inserting art, etc. This produces print-ready PDFs that go to the printer. Digital typesetting is faster than moveable type, sure, but it still takes weeks to months. Don't think about the $4.99 paperback at Wal-Mart; think about the 4-color coffee table book, or the 4-color chemistry textbook. Making these things is hard.
The e-book process goes all the way back to the handoff between Editorial and Production. Why? Because the output of a traditional Production department is a PDF for print. e-readers are a completely different beast. For one, artwork is tricky. Does it look good? Do we have rights to distribute it electronically? Same goes for other poems, short stories, essays, maps, etc, that we sub-license. Every single page of every single e-book must run past at least one production person. The end-result is an e-book that is mostly similar, but almost always different than the printed version. And we'll have to do that for every platform the e-book goes to, dealing with all the little quirks of each one. Production is QA. We still have to do QA, regardless of the medium.
All your costs for returns disappear for e-books; since the seller only gets one 'master', and that's electronic, there is nothing to return
This is true, and getting returns right is very difficult. I don't know what our actual return rate is, but we're always trying to keep it low. FWIW, the guys operating the shredders make minimum wage. Processing is not the huge cost-- it's taking unsold books back and having to recalculate our earnings.
I think that you're greatly mistaken; e-books is perhaps the biggest opportunity for publishers that has come along in decades
I completely agree with you here. By "risky" I mean: it takes a lot of startup capital to move into e-books. In order to make money, the process has to be efficient. If we make a mistake, we end up wasting a lot of money. And, I know Slashdotters hate to hear this, but, if people are sharing our books via Bittorrent, that can have a huge negative effect on our bottom line. How much? We don't know yet, because this industry is new. Digital versions are easy to copy; if we don't get the incentives right, people pirate our books instead of buying them. That may be great for you, but it ain't good for a publisher.