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?"

Comments

Monopoly?

[Anonymous Coward]

"monopoly over their own titles" That word does not mean what you think it means...

Re:Monopoly?

[sopssa]

Yeah that sounds a little bit stupid. Of course they have "monopoly" over their own titles. Duh.

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

You can say anything you want about the internet as a marketing channel and cheap personal computers being capable of producing albums, but they really aren't. You need a good studio. I'm not going to listen to something that sound like demo tracks. They're horrible if you've ever listened to any other than your favorite band's. They also filter out the crap.

This might be a little bit different with books, but you still need those distribution channels and marketing. Books don't just magically show up in book stores, libraries or have articles in magazines, nor do people just accidentally hear about it. And eBooks aren't going to replace paperback books yet.

Re:Monopoly?

[InsaneProcessor]

1) Provide money and pay the big costs while artists are producing their album

I have heard many quality recordings from basement studios built on a shoestring budget. This cost has dropped significantly.

2) Provide marketing

This can be done cheaply on the internet. It is done all of the time.

3) Find the promising artists and writers

They know who they are.

4) Have the distribution channels

Yea, like the internet doesn't work.

Re:Monopoly?

[eudaemon]

Agreed about decent production values on an album and the need for a studio. *BUT* let's face it
the compression that happens in post-production these days makes modern music just as unlistenable
as if it were recorded in a truck stop bathroom. As a volunteer front of the house (read: live music)
and studio (broadcast) board monkey, I can't claim to have experience cranking out studio albums.
But the theory's widely known, and despite the black art elements of getting all the performers and instruments
properly mic'd and isolated in a studio setting, maybe it's time for StudioWiki? Great things have come out
of the collective wisdom and efforts of those passionate enough to contribute their time and knowledge.

You won't see a major label backing things cranked out in someone's garage studio, but it's about the music
and not about the money, I think your average band is just fine with Myspace, iTunes and the other internet-based
distribution channels. And frankly I'd rather listen a McGyvered album with no COMPRESSION FUCKING UP ALL THE MUSIC
taped in a stupid garage than a perfectly recorded / mastered / mixed AND THEN COMPRESSED TO FUCKING SHIT ANYWAY
taped at Abbey Road. Wouldn't you?

Re:Monopoly?

[Chrisq]

3) Find the promising artists and writers

They know who they are.

The problem is sorting them out from the 10,000 other useless artists and writers who "know for certain" that they are the next big thing and are waiting to be discovered.

Re:Monopoly?

[psychodelicacy]

Agreed - and it's the same in publishing.

The question of reputation is central in academic publishing. The same book will be at an advantage if it is published by Macmillan rather than brought out by an unknown press, or published online. The large and respected presses carry an automatic sense that their books are likely to be well-written and worth reading. Once an author has a good reputation, maybe they can start publishing under Creative Commons licences or the like. Lawrence Lessig and Jonathan Zittrain have both done this - but only after spending a long time building up their reputations and writing a lot of other books under - presumably - the usual contracts. And their books come out with "big-name" publishers like Penguin and Yale alongside being freely available to download.

You just can't ignore the cachet of the publisher when it comes to books. It's one of the factors that academics use to evaluate whether a new book is worth their time or not, and that in itself often reflects the fact that the good publishers provide invaluable services in reviewing and editing.

I'm not defending Macmillan's move, btw - just pointing out that it's not quite as easy as it might seem to write the publishers out of the process.

Re:Monopoly?

[mmarlett]

Yeah, cause that can't be done by a widely accessable moderation system. Just imagine the anarchy that would happen if anyone could create anything and the only way people would know if it was any good is to look at how other people just like them ranked the work. Terrible.

Re:Monopoly?

[ajs]

Agreed about decent production values on an album and the need for a studio. *BUT* let's face it the compression that happens in post-production these days makes modern music just as unlistenable as if it were recorded in a truck stop bathroom.

I disagree in the strongest possible terms. When I was young we listened to media that had far, far less fidelity than the music that I have access to today. There are lyrics that I can make out that I never could when I was young (and my hearing was better then).

This is the age-old debate that springs up whenever something new comes along. There's always the crowd that will claim they can "tell the difference" and then proceed to confuse that with the new product being inferior. As I pointed out to a friend who was arguing that vinyl was superior to digital music: of course you can tell the difference. The digital music doesn't skip or hiss. Everything else is colored by the fact that you know which one you're "supposed to like." It's like having a blind taste test between coke and orange juice.

Re:Monopoly?

[kimvette]

You need a good studio.

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.

Because they
(bullshit list followed, no need to copy & paste)

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.

Re:Monopoly?

[Sockatume]

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.

Re:Monopoly?

[raddan]

(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.

Re:Monopoly?

[flitty]

We have to make these things,

From someone outside the industry, Macmillan's job needs to be educating the public on why a book, that no longer needs to be printed, and distribution costs have been cut 10-50 fold, why are these books still as expensive?

I'm still confused on why I can get a CD at my local music store for $10, when online it's the same price. I know there's a bunch of front end costs in there, but you've cut out almost all of the physical costs, why isn't the book cheaper? Especially when you're locked into a proprietary DRM laiden format, and cannot pass the book off to anyone else? Electronic books are Less valuable, and should be priced as such.

Re:Monopoly?

[Reason58]

Amazon is hard to say no to, because they move a lot of books. But they are cutting profit margins dangerously low for us.

Let me make sure I'm understanding you correctly. If the original price of $9.99 was "cutting profit margins dangerously low", then that means you were barely breaking even. An increase to $14.99 would mean that your company is now reaping a profit margin of more than 33%. Is that what you intended to say? In what way should we feel badly for your company?

Re:Monopoly?

[mmarlett]

Tru dat.

Re:Monopoly?

[mmarlett]

Yes, that's why iTunes is such an epic fail, costing Apple billions. Oh, wait...

Radio's strength is that DJs can repeatedly play crappy songs until you think you like them. Repetition, repetition, repetition. Ask any radio DJ. It's why payola is illegal in the U.S. -- record companies would pay radio stations to play the music which would in turn sell the albums. There was no gate keeper going on. There was no quality control, unless you consider "quality" to be the milquetoast slop that record companies want to sell.

If record companies built houses, they would build beige houses. Is beige a bad color for a house? No, it's neutral. It's not good and it's not bad. It's not challenging or interesting -- it's safe.

People are smart enough to look to a genre they like and start asking the crowds of people in that genre what is good.

Of course, how you're going to stop record companies from creating thousands of dummy accounts and flooding the ranking systems with bogus recommendations is a whole different problem.

Re:Monopoly?

[raddan]

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.

Re:Monopoly?

[raddan]

I am not one of the bean counters, but I do know that trade publishing is highly volatile. Some books make tons of money; some make none or lose money. Publishing is largely a gamble on what you think people might like.

The price in any market is not set on what the consumer thinks is fair, it's based on what they'll pay. If it makes you mad, don't buy it. When the manufacturer sees that they could be making more money by charging a lower price, they'll lower the price.

Re:Monopoly?

[mmarlett]

Uh, yeah. So. How did you hear about that music that you want to buy? Pick it up from signals hitting your teeth? You heard about it from your friends, probably. Which is really all we're talking about. A ranking system is just a way to get information from people whom you may or may not know, but it's not that different than word-of-mouth.

Record companies do not own radio stations. Not in America, anyway. For a while they got around the law by paying third party companies ("independent music promoters") to create playlists for radio stations, and the radio stations then don't have to have a program manager. After a few multi-million dollar lawsuits in New York, the record labels stopped doing that and the radio stations stopped buying playlists from independent music promoters.

But what you have now is seriously homogenized music choices that lean towards hits of the past (safe bets to keep listeners) instead of challenging listeners with new music. So radio does very, very little to introduce new music. Less than it used to under the payola system, which was ridiculously weighted towards the established record labels instead of independent record labels or the actual musicians.

Re:Monopoly?

[c_jonescc]

You cannot simultaneously claim that ebooks should not be cheaper than physical books because they cost just as much to produce as paper books, AND that ebooks should not be cheaper because there is value added convenience. That simply reeks of arguing that ebooks should cost the same not matter how you have to frame the argument, ie. desperate. You would be better off arguing that your net profit should be the same in both worlds.

Convenience is not what your job is. Your job is to find authors, hone works, publish them, distribute them. Not trying to charge me more at the bookstore next to my house because it took less of my time to get there than the bookstore across town. That's a self-serving and absurd argument that you're making. Amazon found a way to make it convenient for me to read your books - YOU did not. But you want extra money for that convenience?

And I don't believe you one bit about ebooks costing so much to publish. You're not paying a whole line of people from lumberjack to printer to truck driver all of the sudden. There may be a larger upfront cost, due to whatever hardware/software growth, but suddenly your books are available indefinitely and don't need second printings. You can profit off of small sales books forever without risk of excess overhead and storage. And you NEVER sell out and miss on sales. Frankly, you are lying.

And it's ridiculous to classify text books in with all literature. Yes, what you work on requires fact checking, layout, et cetera for small numbers of sales. That's why textbooks cost $100 instead of $10, like the paperback novel. The latest airport novel needs none of that extra effort that is specific to your particular division.

Re:Monopoly?

[PopeRatzo]

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

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.

You need a good studio.

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".

Re:Monopoly?

[mmarlett]

No, it works on everybody. Scientific fact. Even misanthropes are a market. A niche market, but a market. You may not respond well to mass marketing, but you do respond to some sort of marketing.

We learn language and life skills through repetition. Advertising and marketing just build on those hooks in the human psyche.

You may use the brand of deodorant that your mother bought for you when you were a kid, but some day that brand won't be made anymore. Then you're going to have to make a choice. When you go to make that choice, you'll be open to advertising. You'll be assessing brands on how you feel about them based on their past advertisements. Oh, you might go to Consumer Reports or do weeks of comparisons from trial-size samples, but even in doing those things you've still been exposed to and influenced by advertising.

I'm not saying that we're all unthinking blobs who gesticulate to the biggest billboard. I am saying that advertising (or marketing) influences everyone. I don't care if you're buying a banana, a song or health insurance -- advertising influences people. (Do you like bananas? They only exist in American markets because of heavy advertising.)

Re:Monopoly?

[raddan]

"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.

Re:Monopoly?

[7Prime]

Sorry, but the poster is right. Humans and animals alike are hard-wired to enjoy things that are familliar to them. There may be the paripheral fascination with exploring new territory, but by-and-large, humans are very slow to accept new things, and are much more likely to choose the familliar over the unfamilliar. In the right setting, with the right mindset, people can be willing to branch out a little, but for the most part, it's contrary to our nature. Playing a song over and over again, in the background (as radio usually is), is a good way to build familliarity, and thus, a comfortable center for individuals. So, when people go down to the record store to buy some music to listen to on a regular basis, they buy the things they've heard, that being the stuff that DJs have shoved down their throats.

Even those of us who claim to enjoy exploration only do so because the act of exploration itself has become familliar and comfortable with us, but we all have our self-imposed limits.

Ugh.

[Pojut]

$14.99 for a freaking E-BOOK?!?!?!? No. No no no, and no.

Why would I pay twice the cost of a paperback version just so I could have a digital version? I realize there are costs associated with OCR services, but most writers use computers now anyways. What gives with the exorbitant prices?

Re:Ugh.

[netsavior]

riiiight, because they are going to charge $14.99 for an eBook that has a 4 year old discount paperback out..:eyeroll:

They want the option for the new $36 hardcover big author titles to at least make half the money on an eBook format.

If they want to control their pricing then they should be able to... If that prices them out of the market then that is their business.

Re:Ugh.

[SatanicPuppy]

They're greedy. Even more than with CDs, the bulk of the costs with books are primarily in the printing/distribution model. The writer doesn't get that kind of money per book, I promise you that.

I think it's only a very short matter of time before independent authors skip the traditional publishing approach altogether. Once a viable digital book format takes off, the only thing they have left is an editing staff, and I'd happily split some of my book profits with a quality editor (they really do help) as opposed to a bunch of worthless executives.

Re:Ugh.

[JohnFluxx]

Did you get your books from Gutenberg? They have lots of H. Beam Piper: http://www.gutenberg.org/browse/authors/p#a8301

Re:Ugh.

[sopssa]

First of all, we don't spam our links in the post here on slashdot. Anyone can click your Homepage button.

Secondly, where did you get the idea that eBooks are supposed to be cheaper so the publishing industry goes to the "right" direction? Frankly if I buy a book, I want it as hardcover/paperback. Sure, music I want to download digitally, but books just aren't the same thing.

Thirdly, this thing most likely isn't about eBooks being $14.99 while paperbacks are $5. The $14.99 eBooks are for books that cost $30 or more as a hardcover.

Re:Ugh.

[jellomizer]

That and they want to kill the technology without looking like they are trying to kill the technology. They always save they will pass the savings onto the consumer but what usually is the case is that they wont raise prices for a longer period of time. And take in the extra profit as long as they can.

Re:Ugh.

[Pojut]

Exactly. I could understand if they had to OCR and then verify the books they sell, but most if not all writers use a computer nowadays...their shit is already digital!

Re:Ugh.

[MuChild]

Exactly. I don't see how publishers are the bad guy here. Everyone seems to think that every form of intellectual property should be free or what they perceive as low-cost regardless of the costs to produce it. That's why the music industry shrank by 2/3 in the wake of the MP3 "revolution." What people don't see is all the amazing music that they could be enjoying but there's no one to sign the band, record and promote them so they languish in their hometown and you never know they exist.

If it's too expensive, don't buy it. Just like any other product. I could buy $150 balsamic vinegar, but I don't think it's worth it even though it is tasty.

As far as the textbook industry is concerned, I know a thing or two about it's inner workings and, let me tell you, there is a big difference between a free textbook and a $80-$130. There are a lot of people working behind the scenes to make sure that it's useful to you, well written, up-to-date and error-free.

Re:Ugh.

[Lord Ender]

I would pay extra for ebooks if I have to. I want all my books on one device. I want to be able to search. I want all the other advantages of ebooks.

The pricing of media has nothing to do with distribution costs, and everything to do with "how much will people pay?"

Re:Ugh.

[Dare nMc]

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%.

Re:Ugh.

[digitig]

riiiight, because they are going to charge $14.99 for an eBook that has a 4 year old discount paperback out..:eyeroll:

Based on current pricing, yes they are. I have a Sony eReader, and all the books I've actually wanted so far have either not been available at all or have been more expensive than dead tree versions, even after P&P. Sometimes a lot more expensive. Publisher's are already charging $14.99 and more for eBooks that have 4-year old discount paperbacks out. It seems that they figure that people who buy eReaders have more money than sense, and they can sting us again. Well, it looks like I'm caught bang to rights on the first point, but I'm not getting caught on the second. The eReader is languishing in a drawer until it becomes cost effective to buy eBooks.

What's the marginal cost of production on an ebook

[Phyrexicaid]

Oh that's right, zero.

One word

[MadHakish]

Why do the RIAA's members still control the music business? Why do these dinosaur publishing businesses still manage to thrive despite the Internet?

Lawyers..

Re:One word

[visualight]

What about 'Lobbyists' or 'Bribes'?

Why?

[foo fighter]

"Why do these dinosaur publishing businesses still manage to thrive despite the Internet?"

Because development, editing, and marketing--and even distribution--have value and take skill to do well.

Less than the publishers believe or would like, perhaps, but more than the /. crowd gives them credit.

Re:Why?

[2obvious4u]

They are just using supply and demand to set the optimum price. To the publishers (if they did their research properly) they may have found that $15 will give them the largest ROI. A book may only have a limited audience and that audience would be willing to pay $15, the audience may not grow even if the price were $0 because nobody else is interested in the topic. What this means is that publishers are just getting more bang for their buck.

What is wrong with the way they are doing it is that consumers feel like they are getting screwed. They see the costs of manufacturing plummeting yet prices are rising. From the business side they are seeing costs of manufacturing going down and an opportunity to increase profit margins. They aren't passing on cost savings to the consumers, they are instead lining their pockets; which they are in their right to do. It just isn't going to endear them to me and I won't be buying any books any time soon - paper, digital, or otherwise.

Amazon bows, I won't. Boycott greedy publishers.

[GuerreroDelInterfaz]

The solution is easy: don't buy ebooks from extremely greedy publisher like this one. Even if you can afford it. Just say no. I don't.

--
El Guerrero del Interfaz

Macmillan has a monopoly over their own titles?

[Anonymous Coward]

Seriously. It's their product. Waah, Coke won't let me make Coca Cola.

Re:What's the marginal cost of production on an eb

[keithpreston]

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.

There's a difference between books and music...

[Fished]

At least for me... I invest a lot more in the books I read than in the music I listen to, and I care very much about reading *one* *particular* book. This means that there's not a lot of competition. I think part of the reason is that, for all the categories of books, the purchase price is the smallest part of the investment I make in the book. My major investment in the book is the time and energy I spend reading it. Ideas are not really fungible when they're new--and even when they're old, there's a lot to be said for getting the ideas from the source instead of from the imitators. In fiction, I'd much rather read Heinlein than an imitator of Heinlein. And if it costs a couple of bukcs more? Oh well.

I certainly recognize that some might be just as passionate about one particular song or one particular album. But it still seems to me, intuitively, that the music market is a little bit more competitive and dynamic than the book market is.

Re:Amazon bows, I won't. Boycott greedy publishers

[sopssa]

Why? If they have a book I want and I think the $14.99 price is worth it, why wouldn't I buy it?

It's a little more complicated

[BigSlowTarget]

Do we still need publishers? The question should really be 'what function that publishers perform do we still need and how should those functions be provided?' Perhaps also 'Can a startup provide these functions and replace the entrenched companies?' We still need someone to plan the path from manuscript to finished book including content editing, grammar editing, artwork (inside figures and on the cover), legal issues (in every country where it's released), promotion/advertising, marketing (advising when a release will be available, how it will be different from last edition, etc). Should the publishers profit from owning relationships with the distributors, bookshops and retailers even when they're selling electronically? No, they shouldn't be able to gain from a monopoly in what should be a competitive market, but we still need some functions.

When a internet enabled solution for those issues starts to take off the publishers will start to lose their grasp on the book market and we all will be better off for it.

Why Publishers Exist

[bsDaemon]

Publishers still exist largely because of their editorial and "filtering" services. Editorially, they help to ensure that the best possible version of a text makes it to market -- that it is as technically (grammar, spelling, etc) correct and engaging as possible. As for filtering, they are meant to ensure that only works that have a reasonable degree of merit actually make it to market -- this is why people tend to believe printed word over that which they find on the internet, and why for those who create content, being accepted by a publisher for print production is highly valued. Anyone can put whatever crap they like on the internet, but the publishing industry exists to make sure that random crap doesn't flood the actual shelves.

For certain types of content, such as text books and works of history, philosophy, and journalism the effect this has can go either way in how people, including myself, are willing to weigh benefits vs detractions. Certainly, it would be better if this content was more democratically available -- however, facts still need to be checked for correctness, copy edited etc. For works of literature, the potentially stifling affect on discourse is much more limited and even though I've almost always been on the losing side of the submission, I'm willing to accept the judgement of poetry and fiction editors as far as to what's actually worth something and what isn't, as they deal in literature every day and see submissions from all kinds of sources -- and when you finally do get a piece accepted then the fact that you had to try so hard to get through the filter makes the joy of it all the greater. That's not really a feeling one can get on the internet where the cost of reproduction approaches zero and so there is no real reason not accept a piece, or when one can stick whatever crap they would like on their own site and eventually someone will see it.

However, for music -- where the bands mostly exist to play live and have fun, where the record itself is really just a form of marketing of their live performance, and where the technical ability to produce recordings of quality and distribute them directly to fans who will then come to their shows is now within the reach of just about everyone, then direct distribution without much filter makes more sense. However, poets and authors tend not make their money from live recitation but from the printed book itself, and the services of the publishers and distributers there are therefor more necessary and valuable. As someone who writes a lot, submits a lot, gets accepted rarely, and who has been in a few bands, played shows and cut a couple of demos I can see the difference, it is what it is, and I'm totally cool with it.

Re:Why Publishers Exist

[Trepidity]

In the fields I'm familiar with at least, my impression is that large publishers like Macmillan filter for expected popularity rather than quality; they're in the book-selling business after all, not academics. As a result, an appalling proportion of Macmillan books on academic subjects contain factual errors, gross exaggerations, popular myths presented as fact, sloppy conflations, etc. It's one reason many academic departments give little career credit for publishing popular press books: if you got your history book placed with a respected academic press, people are willing to believe you made a contribution, but if you got it placed with Macmillan, who knows what nonsense history you wrote.

Re:Why Publishers Exist

[jollyreaper]

Publishers still exist largely because of their editorial and "filtering" services. Editorially, they help to ensure that the best possible version of a text makes it to market -- that it is as technically (grammar, spelling, etc) correct and engaging as possible. As for filtering, they are meant to ensure that only works that have a reasonable degree of merit actually make it to market -- this is why people tend to believe printed word over that which they find on the internet, and why for those who create content, being accepted by a publisher for print production is highly valued. Anyone can put whatever crap they like on the internet, but the publishing industry exists to make sure that random crap doesn't flood the actual shelves.

WRONG. The publishers are in it for the money. They are no different from anyone else in this regard. The editors and literary professionals may see their mission as you describe it but if a publisher thinks they can make a buck off a Sarah Palin biography, it'll be ghoswritten and printed faster than you can say "remainder."

I do like your ideal world, though. Publishers are in the printing and book distribution business only because that's a necessary step towards getting paid. But if they can handle most of the distribution electronically, all of those costs go down and the books should be cheaper.

If California wine had to be shipped cross-country by wagon or mule, it would be thousands of dollars a bottle. That sort of shipping is costly and inefficient Shipping by train and truck reduces the cost a great deal. Any winery that tries to charge mule-shipped prices for something that came by train is just trying to scam us.

It's all about setting ridiculous price points. Netflix can blow Blockbuster away with depth of selection and avoiding the cost of physical stores. Renting from blockbuster is I think still $4 a movie. (haven't been in years.) They have dollar dvd kiosks in the grocery store now. Buck a day for a first-run movie. Meanwhile, Microsoft is still charging $4 for the same movies on Xbox. That has to be even cheaper than the kiosk stores and there's far less physical infrastructure compared with Netflix and their shipping facilities. Microsoft prices at what they think they can get away with, not cost plus 30. I think it's too much and thus have never rented from them.

Re:What's the marginal cost of production on an eb

[netsavior]

That's right, because nobody markets books, or pays authors, or runs press tours, or edits books...

It seems to me that was what Amazon was saying.

[Shivetya]

as in, we want to still offer their products even though we know they are overpriced. We give you the choice, choose correctly.

Honestly, the iPad was designed to bring Apple and their publishing buddies more money. After Steve got us off the 99cent model anything was possible. There was too much money on the table. Books presented a new avenue for increasing revenue as their is no such thing as "per chapter". They can charge you more and make you feel as if your getting something special in the experience.

Kudo's to Amazon for calling it like it is. I understand why they gave in, it really does come down to the public making the choice. Unfortunately far too many will make the wrong choice

Re: No More!

[netsavior]

I have a new idea: Copyright is a lousy idea and we need to banish the notion of copyright completely. Patents need a kick in the head as well. I am probably the first person ever to say that. My opinions are so valuable.

Surrenders?

[proxima]

While I certainly think that $15 is overpriced for an ebook, I say let Macmillan potentially shoot themselves in the foot with their pricing. Amazon should be focused on making everything possible available in ebook form and letting the consumer decide what's a good deal. Amazon can always go back to Macmillan with sales stats to show them what they're losing (or not...perhaps $15 really does maximize profit for them). With sample chapters and the possibility of very low prices from smaller publishers, ebooks provide a great way for lesser-known stuff to be widely available. The same thing happened in music; it's far easier to get fairly obscure stuff via the internet than in CD form at a store.

What's a little strange about the ebook market is the fixed breakdown for the retailer (seems to be moving to 70 publisher 30 retailer), while in the hardcover world Walmart, Target, and Amazon are falling over each other to bring you the books with little or no markup over wholesale. Still, Amazon is offering the 70-30 split only if you priced your book under $10 (otherwise it seems to be 65-35).

Re:Amazon bows, I won't. Boycott greedy publishers

[Nerdfest]

Just say no. I don't.

You're not female, are you?

Re:Amazon bows, I won't. Boycott greedy publishers

[jedidiah]

If I am going to waste money paying far too much for a book than I really need to, then I'm going to at least get a version that I can pass on to someone else.

Amazon attempts to use their monopoly power

[Geoffrey.landis]

In fact, Amazon was the one who was trying to use their market dominance as a tool to set prices, which is what we call monopolistic behavior. Note that what they did was not merely decide not to sell those books that they thought were overpriced-- they attempted to force the publisher by pulling all Macmillan titles from their store, including the physical (paper) ones-- saying "either you accept our prices for e-books, or else we will not sell any of your books." (And, of course, also all the imprints of Macmillan, such as Tor.)

That only works, though, if Amazon were enough of a monopoly that people wouldn't just go elsewhere... and it turns out that Amazon isn't. Yet.

In the long run, it benefits consumers that Amazon backed down-- it's never good for one vendor to have the power to set prices, even if (initially) they claim that they are only using that power to lower prices to the consumer.

As Charlie Stoss commented, Amazon was fighting this one because if the publisher wins, it hurts their profitability because it pushes prices down.

Re:Amazon attempts to use their monopoly power

[DebianDog]

Right... Get a huge potion of business for a large established company. Cultivate this over a few years. Then, tell them what their prices are going to be. When they refuse to budge. Stop selling their products. I mean it is almost the Wal-Mart business model what was hell was Amazon thinking? Oh yeah... It works! Remember Rubbermaid?

Perception of unreliability in self-publishing

[tepples]

The question should really be 'what function that publishers perform do we still need and how should those functions be provided?'

One function of a publisher, as opposed to a vanity press, is to have a reputation for checking the facts in what it publishes. There's a perception that works self-published through a vanity press can't be counted on as reliable sources of information.

From that bastion of Right Wing Capitalism

[wiredog]

Salon.com

Most consumers believe that e-books should be a lot cheaper than print books because the publisher has been spared the expense of paper, printing, binding and shipping/distribution. However, only about 20 percent of the cover price of a new hardcover goes to those costs: about $5 out of $25. Retailers take from 40 to 50 percent, and after that, the majority of the cost of a new book goes to author royalties, editing, design, marketing, publicity, overhead and so on.

Re:What's the marginal cost of production on an eb

[chord.wav]

Is that your definition of "marginal cost of production"?

Re:What's the marginal cost of production on an eb

[vxice]

Ok very important, price to produce has very little to do with final price to consumer, it will influence the minimum price the publisher will accept but that is about it. Books are valuable and thus can be sold as if they are valuable because well they are. With low barrier to entry costs more publishers should enter the market but that is a slightly different issue. If the publisher has no right to unreasonable profit from his work why do you? Imagine a book is free to produce, no cost what so ever, does that mean the publisher should give you the book? Even if you gain say $20 from the book either directly or indirectly your enjoyment etc? If he should then you are making $20 with no effort and if the book is sold for $20 you make no profit and the publisher makes $20 of profit you get the book for what you valued it at. The real problem here is that amazon is a nationwide retailer allowing for everyone to go there and get the book for bare minimum price lowering the price and profit to publisher, who does do some work and same goes for movie and music industry, and in the end more people buy the product for less than what they value it at.

Why RIAA? [Re:Monopoly?]

[Geoffrey.landis]

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.

unfortunately, recently permitted in the U.S.

[Trepidity]

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.

Re:unfortunately, recently permitted in the U.S.

[dummondwhu]

That is rather unfortunate (I wasn't even aware of that decision) because the way you describe is the way it should work. Amazon should pay a publisher whatever they ask as the wholesale price. But they should, in turn, be free to turn around and sell the books at whatever price they wish. Prices would be kept in check by market competition. And Amazon should also be able to sell at a loss if they wish. It might seem nuts to do that, but one place where it makes sense is if they want to subsidize lower priced e-books to spur growth of the Kindle.

Re:unfortunately, recently permitted in the U.S.

[Trepidity]

The latter is what they're doing. Macmillan previously sold ebooks wholesale to Amazon for $9.99, and Amazon chose to sell them with no markup to promote the Kindle platform. Macmillan demanded a move to "agency pricing", where Macmillan sets the price, and Macmillan and Amazon split the revenue according to a fixed percentage. It's not really about money per book for Macmillan---they'll get about the same $9.99 per book either way---but about control over pricing.

Paper and Ink are not free

[sjbe]

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.

Re:What's the marginal cost of production on an eb

[dummondwhu]

Ah, yes, the old "I saw it in a TV show, so it must be true" routine. In fairness, I have no idea how the system works, but citing a TV show as proof of fact is a little thin.

Users surrender to Pirate Bay for ebooks

[harmonise]

Story at 11.

Re:What's the marginal cost of production on an eb

[Phyrexicaid]

That's right, because nobody markets books, or pays authors, or runs press tours, or edits books...

... and none of that has any bearing on the marginal cost of production of an ebook. The fixed costs are just that, fixed. The marginal cost associated with selling an ebook is *zero* (Amazon covers the cost of sending you the ones and zeroes)

Comment removed

[account_deleted]

Comment removed based on user account deletion

What do I get?

[cervo]

If you are going to sell your books more expensive than everyone else, what do I as a consumer get out of the deal?

Honestly I would be willing to pay the same as a paperback as long as it was DRM free. Even though an EBook costs way less than a Paperback (because in theory a paperback should include binding/printing charges as should a hard cover), there is a convenience to not filling up a library.

But I'll be damned if I'm going to pay 14.99 every time I switch e-readers for the same book.

Some publishers are holding e-books back long after release. First they release the hard cover, then a few months later they release the e-book with the paperback. For me that's stupid and it would be better to charge more for the e-book. But still I would expect some savings over a full hardcover, after all there are no binding/printing/additional costs. I would expect those savings to be passed onto me. Also if you are going to charge me $20 for a book where the paperback is $10 and the hardcover is $30 then it damn well better be DRM free.

The reality is many of the DRM formats have been cracked and people often buy e-readers expecting to use the DRM cracks to export the title to however they want. But this is stupid because it just keeps funding the companies so they can constantly create new DRM and new nuisances for the customer. It's time to stop rewarding DRM makers. I don't want to have to be a "criminal" (see DMCA) in order to shift books to whatever format I want. I want that as part of the deal. Why people are such idiots and open to being ripped off I have no idea.

And on the e-book prices, if the price is too high then people won't buy. I'm surprised apple is letting publishers set prices. I guess they aren't going to fight the fight to eliminate DRM from books for us like they did on music.

Re:Amazon bows, I won't. Boycott greedy publishers

[sopssa]

You're doing something wrong if you're buying an eBook/game/whatever for it's bits. I'm buying it for the value it gives me - be that information, entertainment or something else.

Yawn

[Cro Magnon]

If Macmillan want to charge $14.99 for ebooks, fine. If I decide $14.99 is too expensive, I'll just tell them to fsck themselves. Free Market.

Re:confused..

[Remus Shepherd]

They're allowing Macmillan (and apparently only Macmillan, for now) to set their prices on their own books. This allows Macmillan to do things like release new books for $15 and slowly drop the price over time until the best price point is found. You know, just like every other consumer good. Amazon also agreed to reduce their outrageous 70% markup to 30%, the standard for a retail distributor.

This is a *good* thing. It allows more market flexibility and keeps Macmillan from going bankrupt or screwing their authors.

My own personal experience...

[Eric Freyhart]

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

Re:What's the marginal cost of production on an eb

[raddan]

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 work at a University Press

[twidarkling]

and I have to say, our director would have an aneurysm at the prospect of "stealing" the copyright from our authors. The deal is we have copyright as long as the book is in print, but that's necessary to actually do business. Multiple editions are at the author's discretion, but it's generally in their best interests, and are usually the ones pushing for it so they can get more royalties.

We're not a textbook publisher, though (we've published textbooks, but it isn't our business model), so most of the charges levelled by the summary don't apply to us, and we're Canadian, so the others aren't directly analogous either.

The one thing I can speak to though, is the issue of people thinking e-books should be so much cheaper than print books. That's bullshit. The cost of physically printing books is generally about 30% of the cover price, even less for larger print runs. The biggest chunk of the price is retailers. They buy our books at a 40% discount, meaning they pay $6 for a $10 book. If Amazon wants to make books cheaper so desperately, they can take a fucking smaller profit margin (especially since they like to push for even *larger* discounts, so they can offer the book cheaper). The market for e-books is still quite small compared to paper books, mostly because of how much uncertainty there is in the format (it's worse than Betamax vs. VHS right now) and selling them for so cheap makes it incredibly difficult to recoup costs for small publishers like us (we put out about 15 new books a year, and have 9 permanent employees). Most of our scholarly works retail for between $30-$50. Without printing costs, we could probably move that to $25-40 (keeping in mind we get a little over half that amount, including what we need to pay to the author in royalties-generally another 10%). How many people are going to pay that for an e-book, when there's no guarantee a new reader will actually read it 3 years from now? Maybe with the iPad we'll see some standardization in the e-book format, and then we can drop the price to something lower, and make it up in volume, because right now, it's just not feasible.

Re:I work at a University Press

[twidarkling]

That sounds like a bit of a scam to me because you're making a much larger profit for much less work.

I know you won't actually distribute an infinite number of books because there aren't an infinite number of people to buy them, but the point I'm trying to make is the market is much wider.

As cdguru pointed out, the ebook market right now is *very* small, especially for a publisher like ours. Yes, over time we might make more money selling ebooks for $10 a shot instead of $40 for a physical copy, but the timeline stretches out a lot further, and we pay for everything upfront, so that means rather than say, recouping costs in 2 years, it might take 5, or 10. And with ebook publication comes that overhyped spectre of piracy. I won't say we'd lose a lot to it, but when you're selling only 200 copies a year, even a few people pirating makes an impact. Yes, 200 copies. An initial print run on our books goes to about 1000 copies for something we think will sell well.

Another thing about books is their a lot like games, sales-wise. Unless they're adopted in to a classroom, sales are mostly done in the first year, and drop off after that, fairly steadily.

So, to put this in a more concrete format, we'll take a hypothetical book and take two scenarios, 1 will be physical-only distribution, 2 will be online-only distribution, and we'll assume that interest in the online-only is stronger, and longer lasting.

1. Book is printed for 1000 copies. Publisher receives $10 per copy, let's say. Book sells strongly, and 500 copies move the first year. That's $5,000. The next year, sells 250, getting $2,500, bringing us to a 2-year total of $7,500, with another 250 copies to sell over time.

2. Book is placed for sale online, and publisher receives $2 per copy, due to lowered prices for online copies. First year, book sells like wildfire, 1,000 copies! Amazing! But that's only $2,000. Second year remains strong, another 1,000 copies! But we're only at $4,000 after two years. That's only $4,000 to put towards new projects' costs. Okay, let's extend the timeline. Third year, interest dips. 500 copies. $1,000, for a total of $5,000. Three years to reach the sales total of situation 1 after one year, and that's with an extra 1,500 copies sold. And then oops, the technology changes, so the old version doesn't work on new readers. And paying to get something converted is nearly as expensive as getting a new print run.

And as I said, we're a fairly niche publisher. Selling 2,500 copies of something is insanely optimistic for us, especially since it's targeted to academics and scholars--a group known to be classically technophobic.

So, as I said, the market isn't there, and a $10 price point for an ebook when the physical copy goes for $50 is not a sustainable business model yet.

We _are_ looking at publishing ebooks, and we've got some of our older, out-of-print titles scanned and converted, and listed in e-library services, but until the technology's solidified so that the market's less divided, we likely won't do much. And even after it's solidified, we're likely to do dual runs, both hard copy and physical. And it's very unlikely we'd run at a $10 price point for new books.

Re:I work at a University Press

[Vanderhoth]

Sorry, but if you have been paying attention the eBook market is much, much smaller than the market for printed books.

If you have been paying attention you'd know that E-Readers are a relatively (compared to books) new product, and that the market for e-books is growing. Hence the reason for this discussion.

Most people want a physical book.

That's a very good point, and the main reason my wife doesn't want an e-reader. I do think that will change with time, but it's hard to say. Having a physical object in hand that can be given to anyone and only requires the skill of reading to use vs. an electronic device that requires power, can only access books in certain formats and have a plethora of other restrictions on what can be done with them.

The price point is the reason I haven't bought an e-reader. I can't see a reason to go an purchase an e-reader when the price of the books is virtually the same. So instead of getting a good discount on the books because the publisher saves money on the physical distribution aspect. I pay the same for the books plus have to buy the reader, I can only access books of specific formats and the formats might change in the future.

Of course, you will sell almost none of them - no editing and no promotion. That's where the publisher comes in.

Another good point. I agree with you that a publishing company would make these things easier. However, I think someone with similar skills to myself could do this on their own and with digital distribution there's no need for them to pay $3 a copy and by 1000 copies. I have to admit I'm ignorant about how digital distribution works and I don't know how you'd go about getting a entity such as Amazon to distribute a book for you, but I'm sure all it would take is an initial lump-sum fee plus a smaller fee (probably in the less than a dollar range) for each downloaded copy. Seems much more like the JITI method of distribution, much more efficient then printing, transporting, storing thousands of copies that you might never end up selling.

Re:Data centers and bandwidth aren't free either

[dhovis]

Well, if the only cost that goes away when you go to an eBook is printing, then how much should the cost drop? I'm genuinely curious. My guess would be maybe 10%. I'd be shocked if more than 20%. In which case you could lower the cost of the eBook proportionally.

But if the eBook is only 10% cheaper to produce, then a $15 printed book would become a $13.50 eBook. Unfortunately, that isn't going to satisfy the type of people who think that eBooks should be substantially cheaper than printed books. To the end user, that marginal cost is within the noise. People around here seem to expect that a $15 printed book should be $5 as an eBook.

Now, I'm not accounting for distribution costs, which you mention as being higher than the printing cost. So maybe you could give us an estimate of the savings to the publisher by going to eBooks. How much of a discount do people expect when the marginal cost of reproduction drops actually to zero? I suspect that most people would be disappointed.

"Dinosaur," my ass...

[Garwulf]

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

Re:What's the marginal cost of production on an eb

[jollyreaper]

Perhaps I am unusual (I suspect not), but I often chase authors, not genres, and therefore the book market is not one controlled by substitution, and we see that in it's price inelasticity. I do not see how this would be different if we had even a significantly larger number of publishers with smaller pieces of the pie.

Piracy provides the elasticity. I'll give you the old college student/anime example. As a low-income college student, it was worth my time to track down episodes on emule. You had many people doing encodes, variable quality, and it was pretty laborious to find everything and burn CD's. And hard drive capacities were not as insane as today. If a series costs $200, it's worth my time. But when you can get a full season for $20 or $30, depending on the show, who has the time to muck with downloading? Especially as disposable income rises as disposable time decreases, people want to maximize their enjoyment. If there's ten hours a week for goofing off, people want to be watching the show, not trying to watch it.