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Publishers Warned On Ebook Prices

Posted by timothy on from the some-people-hate-free-markets dept.

An anonymous reader writes "The DoJ says Simon and Schuster, Hachette, Penguin, Macmillan and HarperCollins conspired to raise the prices of ebooks. The report originates from the WSJ, but the BBC adds comments from an analyst bizarrely claiming increased prices are somehow a good thing and thinking otherwise is the result of 'confusion'. I'd like to see an explanation of why the wholesale model, while continuing to work fine (presumably) for physical books, somehow didn't work for ebooks and why the agency model is better despite increasing costs for consumers."

27 of 352 comments (clear)

  1. Market Analysis by slashgrim · · Score: 5, Insightful

    Sounds like these publishers don't know their market. I only buy ebooks because they are inexpensive. At relatively close prices I'd prefer a physical book (where at least I won't be restricted by the publisher's "loan" policy!).

    1. Re:Market Analysis by MightyMartian · · Score: 4, Insightful

      And what they'll get is a high level of piracy of eBooks. Fucking idiots.

      --
      The world's burning. Moped Jesus spotted on I50. Details at 11.
    2. Re:Market Analysis by clodney · · Score: 5, Insightful

      One time bought I book on my Kindle that I had sitting on my bookshelf, just because I wanted to reread it before starting on the sequel, and didn't want to carry the physical hardcover with me on a trip.

      So I paid for the extra copy purely for my convenience. Given a choice between a physical book and an ebook at the same price, in most cases I will buy the ebook, because that is the format I prefer.

    3. Re:Market Analysis by ColdWetDog · · Score: 5, Insightful

      Oh, and forgot my current major beef. If you're going to charge nearly as much for an eBook as a physical copy, please pay for a copy editor to review the damn thing. I'm tired of gratuitous typos and pagination errors. Yeah, you, Amazon.

      --
      Faster! Faster! Faster would be better!
    4. Re:Market Analysis by meerling · · Score: 4, Insightful

      If you reduce the price of an ebook by the cost of the printing and shipping of a dead-tree book, you still have the same profit margin.
      Also, a much lower cost for consumers, which will allow them to buy more books, which increases your profit.
      Books are a luxury, not a necessity, as such, increasing or decreasing the price has a more drastic effect on sales than it does for a staple like food.

    5. Re:Market Analysis by clodney · · Score: 4, Insightful

      But then the price of the eBook would be about 1/16th the price of a paperback. Publishers can't have that, because then they'd have no PROFITS! with which to buy more books/publish (read, give to shareholders)

      Paperbacks are cheap to produce - this site (http://michaelhyatt.com/why-do-ebooks-cost-so-much.html) says production and distribution accounts for 12% of the price. Even if he is cherrypicking data and it is 25%, you aren't going to see huge price breaks.

      And pricing doesn't have to be reflective of costs. I might pay more for an ebook based on the fact that I can start reading it right now, vs. getting it shipped or going to a store. Or I might pay more because I have bad eyesight and like the fact that I can make the type bigger.

      The rule for rational actors is that they set the price so as to maximize their total profit - production costs only enter into it as a constraint upon profitability.

    6. Re:Market Analysis by ultranova · · Score: 5, Insightful

      Given a choice between a physical book and an ebook at the same price, in most cases I will buy the ebook, because that is the format I prefer.

      I would too, if that was actually possible. Unfortunately it isn't. Nobody sells e-goods, they're "licensed", which means that I may use them as long as the publisher lets me in ways they like (which they may change at any time they like), or as long as the publisher or some unrelated third party who happens to own them at the time doesn't mismanage its finances and disappear. Assuming, of course, that some other entity doesn't assert that they own the e-good instead, in which case it gets un-published and disappears like it never was.

      But yeah, it would sure be nice to be able to buy e-books.

      --

      Forget magic. Any technology distinguishable from divine power is insufficiently advanced.

    7. Re:Market Analysis by NatasRevol · · Score: 4, Insightful

      Not the same profit margin (percentage), but the same profit. And with a lower cost, it's a much higher margin. Your numbers will actually look better without a huge printing facility in your costs.

      --
      There are two types of people in the world: Those who crave closure
    8. Re:Market Analysis by Obfuscant · · Score: 4, Insightful

      What could more ephemeral than a thin layer of rust with some magnetic fields recorded on it?

      A thin layer of organic material with small amounts of organic material deposited on the surface.

      I don't see any "thin layer of rust" in the flash chip that is currently storing one copy of Foundation I own, nor the USB stick that has another copy. There might be a "thin layer of rust" in the hard disk that stores a couple more copies, and the backups.

      Tried making a backup of a physical book lately? I can back my "ephemeral rust" copies of books up at about 100 per minute (not 100 pages per minute, 100 books per) on a whim and without getting out of my chair.

      Paper can last thousands of years if cared for.

      "If cared for", when talking about paper, means initial printing on acid-free paper, and then storage of the material in an environmentally controlled facility. It does not include "reading", and certainly not "carry on the train to read while commuting".

      Let me know when e-anything looks like it will archive that well.

      Every ebook that I carry on a daily basis has survived for the last several years of doing so, while there are few, if any, paper books that have survived that kind of use. I'd say e-anything looks pretty good compared to paper when one is actually using the products and not just trying to keep an archive of comic books for one's great grandchildren to look at through the plastic bags.

    9. Re:Market Analysis by CastrTroy · · Score: 4, Insightful

      You could probably build the technology right into the kindle. Highlight a word, and have an option to send it for review. Some real person looks over the problem, and corrects as necessary. Fixes are automatically distributed to people who have the book.

      --

      Anthropic principle: We see the universe the way it is because if it were different we would not be here to see it.
    10. Re:Market Analysis by mcgrew · · Score: 5, Insightful

      Given a choice between a physical book and an ebook at the same price, in most cases I will buy the ebook, because that is the format I prefer.

      Not me, I try to avoid being stolen from.

      With a physical book they have the cost of materials, printing costs, warehousing costs, shipping costs, retail space costs. An ebook has none of those costs, to charge the same price for something physical that costs money to get into your hands as something that is essentially free once they've paid the editing, proofreading, and other pre-production costs is nothing short of highway robbery.

      And as another poster said, you own a physical book. You don't own an ebook.

      Were it not for collusion, the competetion would ensure that ebook prices were far loawer than the price of a physical book.

      I think they should give the ebooks away when you buy a copy of the physical book. I mean, a CD might add a nickle to the cost of the physical book. A code on the paper book's index page could lead to a download of the ebook and wouldn't cost them a penny.

      --
      Free Martian Whores!
    11. Re:Market Analysis by MickyTheIdiot · · Score: 4, Insightful

      They are allowed to "charge what they want" for ebooks.

      What they aren't allowed to do by law is get together with competitors and all agree to the same prices.

    12. Re:Market Analysis by Caerdwyn · · Score: 4, Insightful

      With a physical book they have the cost of materials, printing costs, warehousing costs, shipping costs, retail space costs. An ebook has none of those costs.

      But an e-book still has the costs of editing, marketing, royalties, a legal department to track copyright issues, a business development department to manage relationships with e-publishers, accountants, payroll... and for the e-publisher you can add data center costs, bandwidth bills, IT personnel costs, etc.

      The physical part of a book is actually not the majority of the price of a book, and e-books have some costs that physical books do not. However, people tend not to value something they can't physically hold in their hands, regardless of how much the intangibles actually cost.

      --
      Everybody gets what the majority deserves.
    13. Re:Market Analysis by BLKMGK · · Score: 3, Insightful

      Profit is one thing, a monopoly is another. When Amazon resisted agreeing to this Agency model proposed by Apple the book publishers threatened to window titles and not distribute to Amazon.

      --
      Build it, Drive it, Improve it! Hybridz.org
    14. Re:Market Analysis by Anonymous Coward · · Score: 1, Insightful

      An ebook has none of those costs, to charge the same price for something physical that costs money to get into your hands as something that is essentially free once they've paid the editing, proofreading, and other pre-production costs is nothing short of highway robbery.

      That and the author's advance are about 99% of the cost of the physical book. Given the economies of scale that the big publishers work on, the cost of the paper and ink are virtually negligible. Seriously, of all the stuff you listed, the only real cost savings that publishers derive from e-books come from not having to pay shipping.

      Everyone thinks that going from paper to e-book means that books should suddenly cost $5 a pop. Not so. The cost savings aren't that big. The problem is that for years Amazon was selling books at a loss, subsidized by other product sales, so they could build market share; but they ended up convincing everyone that physical books should cost far less than the true fair market costs.

    15. Re:Market Analysis by steveha · · Score: 4, Insightful

      But an e-book still has the costs of editing, marketing, royalties, a legal department to track copyright issues, a business development department to manage relationships with e-publishers, accountants, payroll... and for the e-publisher you can add data center costs, bandwidth bills, IT personnel costs, etc.

      Absolutely correct. I agree 100%.

      The physical part of a book is actually not the majority of the price of a book

      I don't think you are correct here, at least not for all cases. This may be true for mass-produced paperbacks, but what about textbooks on non-mainstream subjects, where there may be hundreds of pages with equations and graphs, and not very many copies of the book are ever bought?

      Also, what about the cases where a publisher thinks that a book will be a hit, prints ten billion copies, and then the book fails and all those copies get landfilled?

      So, I think cost of materials is still a significant factor in the cost of books. In turn, I believe that ebooks ought to cost less than paper books: they shouldn't be free, because as you correctly noted they still have significant costs. But the cost of goods is zero, and the financial risk is greatly reduced, and those things do matter.

      Even taking the above into account, obscure textbooks will still be expensive as ebooks, because they are expected to sell only a few copies, so the overhead is paid by fewer sales.

      Of course, ebooks based on public domain materials really ought to be very inexpensive: extremely low production costs, no cost of materials, and no risk.

      However, people tend not to value something they can't physically hold in their hands, regardless of how much the intangibles actually cost.

      Hmm, I'm not sure on this one. iTunes music downloads are very popular, apps downloads are very popular, and ebooks are actually very popular.

      If you are saying that people don't want to spend a whole lot on a software good, you are probably correct.

      steveha

      --
      lf(1): it's like ls(1) but sorts filenames by extension, tersely
  2. Why does an e-book need a publisher? by TheMathemagician · · Score: 4, Insightful

    Well he got one thing right: "All the costs are the people in the publisher's HQ..." Exactly. So why don't authors just upload their e-books and cut out publishers all together?

    1. Re:Why does an e-book need a publisher? by Registered+Coward+v2 · · Score: 5, Insightful

      Well he got one thing right: "All the costs are the people in the publisher's HQ..." Exactly. So why don't authors just upload their e-books and cut out publishers all together?

      Probably because some of those cost are for editors, proof readers, illustrators, cover designers; all of whom play a crucial role in producing an outstanding or even good, for that matter, book. There may be a lot of extra costs that can be cut, but a writer alone, except in rare cases, can't produce a work nearly as good, or even good, without the help of others. Witness the proliferation of garbage titles now that the cost of entry is nearly zero.

      --
      I'm a consultant - I convert gibberish into cash-flow.
    2. Re:Why does an e-book need a publisher? by the+eric+conspiracy · · Score: 4, Insightful

      Knowing the book industry, the people you have listed are paid a pittance. I used to work with Steven Hawking's ghost writer, and for him it was strictly part time pay for a lot of work.

      Where the money goes is to management and marketing.

    3. Re:Why does an e-book need a publisher? by nathan+s · · Score: 5, Insightful

      This. The writing and editing parts are trivial in comparison with getting people to know your books exist. I can see the appeal of a publisher if you're writing in hopes of actually being read -- not because the publisher does any work for you, but because the fact that your book is associated with a publisher means that more people are willing to risk reading it. If you self-publish, and even if you paid to have your book edited, you're still going to have huge amounts of trouble attracting the first tiny bit of an audience unless you are writing some obscure non-fictional stuff that can be judged at a glance as useful or not, and maybe even then you'll still have trouble. I only have experience with self-publishing fiction, so I can't really say for sure on the latter.

      That said, people severely underestimate the gatekeeper effect that these traditional publishers play, not just for books but for music as well. It's not that I think that publishers are actually _good_ arbiters of taste or quality, but I can't deny that people would prefer to take a chance on a crappy song that is getting radio play after being pushed by labels than they are to waste 5 minutes listening to random MP3s on some guy's website. Truthfully, it's hard to blame them. I'm a writer and I make electronica, and I still find myself hesitant to waste time on random stuff I find online, simply because of a few bad early experiences doing that. So I'm sure that I'm missing great content in the same way that some people would probably really enjoy the things I create but skip it rather than take the risk.

      The short of it is, human nature is to blame here. People usually (and fairly rationally, I think) prefer the guaranteed payout in entertainment that they expect from a curated source, one that they are familiar with, to the real risk of wasting their time listening to or reading horribly flawed creations that they randomly stumble across online. The only way around this, from a creator's point of view, is to either delegate the marketing jobs to a publisher or to spend a lot of time doing it yourself. For the average writer/artist/programmer/musician/etc, I think that's something that is not really much fun when you'd rather just be making more stuff.

      --
      picpix image polls. create - share - vote. fun!
  3. Re:Send the publishers a message by Anonymous Coward · · Score: 2, Insightful

    You do realize more goes into make a book then just the author typing it up. Assuming it's just a novel, you have the editor, proofreader, designer. Then there is the marketing of the book which requires more people still.

  4. Re:Send the publishers a message by Cinder6 · · Score: 3, Insightful

    Problem is, that doesn't pay the editors, copy editors, typesetters, etc. that all played a part in getting that book in your hands (or on your device). The author doesn't live in a vacuum.

    --
    If you can't convince them, convict them.
  5. Advertising by mx+b · · Score: 3, Insightful

    You can have the best book in existence, but if no one hears about it, no one will ever buy it. It's entirely possible to publish on your own, on a personal website, with a paypal or visa shopping cart or something attached to take orders. What publishers do is get exposure. Even just on amazon.com, maybe they don't directly advertise you, but if someone searches for books, yours will pop up in there somewhere. How do people know to go to your personal website if you are a new unknown author?

    It is feasible to do entirely on your own when you are a popular author, but someone starting out new still needs an advertising boost of some sort, or at least listed in a catalog most people know about to make it somewhat easier to discover. However, ebooks should be incredibly cheaper, given that as you pointed out, "publishers" don't really have to publish (or even edit, in some cases) anything. They simply add you to the catalog and handle the sales, and send you royalties. Their cut for something that is essentially automatic (handled by servers) should be much lower than the companies seem to think they deserve.

  6. The publishers would appear to have fucked up... by fuzzyfuzzyfungus · · Score: 4, Insightful

    According to TFA, the publishers went 'agency' in order to try to stop Amazon from 'cornering the market' by selling books cheaply. Now they are under DoJ fire for what was essentially an attempt to set an artificial price floor across the industry.

    Squeeze. Crunch.

    Y'know what might have been a better plan? Not Insisting on the DRM that makes it possible, and easy, for an incumbent seller to lock in large numbers of buyers and obtain the market power needed to then put the publishers on the rack... It's not as though the story of iTunes went exactly that way with team RIAA or anything...

    If DRM actually magically worked, there might be some business case for accepting a smaller slice of an impregnable walled garden; but the present state of it is trivially weak for all the common book formats. Good work on stopping no pirates and giving large retailers the power to cut your throat, guys...

  7. If I'm typical... by Oswald+McWeany · · Score: 5, Insightful

    If I'm typical, (and I probaly am not) Amazon, et al, would get more money from me by LOWERING the price.

    90% of the ebooks I "buy" are free- either from Amazon, or Gutenberg, or elsewhere. The other 10% I will only buy if they are cheap. If eBooks were in the $2.99/3.99 range (for books I wanted) - I wouldn't hesitate- and the vast majority of books I read would be eBooks.

    Instead of making $7 profit on me once or twice a year- they could be getting $1 profit from me 20 or so times a year. Multiply me by a few hundred thousand and that profit margain goes up.

    I don't know that I am typical though- in fact I probably am not- because I actually enjoy reading HG Wells, Oscar Wilde, etc- and I don't consider it too much a hassel to not be buying the latest-pop ficiton mega-release.

    --
    "That's the way to do it" - Punch
  8. Oh HELL NO!! by pablo_max · · Score: 3, Insightful

    "Fixes are automatically distributed to people who have the book."

    Absolutely NOT! That is a terrible idea. Can you not see how that would be just ripe for abuse and censorship?

    Typos and all, when I buy a book, I can read what the author had intended for me to read. Not something which was later changed because someone didnt like the message.
    Yes, I know you are only talking about corrections, but my point is, who gets to decide what a "correction" is?

  9. Re:The publishers would appear to have fucked up.. by Anonymous Coward · · Score: 2, Insightful

    According to TFA, the publishers went 'agency' in order to try to stop Amazon from 'cornering the market' by selling books cheaply. Now they are under DoJ fire for what was essentially an attempt to set an artificial price floor across the industry.

    Not just "cheaply." Amazon was selling books at a loss to corner the market and Jeff Bezos didn't care if it bankrupted most of the publishers in the process. He wanted total control over the book market and, until Apple stepped in, he had it for all practical purposes. So the publishers weren't trying to set an artificial price floor to sustain high profits. They were trying to force Bezos to sell books for something approaching fair market value so they wouldn't go bankrupt. The fact that Amazon had to raise prices so quickly once the publishers had another outlet ought to tell you something about how anti-competitive Jeff Bezos's practices and pricing were in the first place.

    I'm always amazed that so many of the same crowd that decried Microsoft's monopolistic practices has no problem cheering on Bezos and his attempts to achieve a stranglehold over the US book market. But I guess they're not afraid to cheer for a ruthless monopolist as long as it saves them a few bucks.