Slashdot Mirror
Amazon's eBook Math
An anonymous reader writes: Amazon has waged a constant battle with publishers over the price of ebooks. They've now publicly laid out their argument and the business math behind it. "We've quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000." They argue that capping most ebooks at $9.99 would be better for everyone, with the money split out 35% to the author, 35% to the publisher, and 30% to Amazon.
Author John Scalzi says Amazon's reasoning and assumptions are a bit suspect. He disagrees that "books are interchangeable units of entertainment, each equally as salable as the next, and that pricing is the only thing consumers react to." Scalzi also points out that Amazon asserts itself as the only revenue stream for authors, which is not remotely true. "Amazon's assumptions don't include, for example, that publishers and authors might have a legitimate reason for not wanting the gulf between eBook and physical hardcover pricing to be so large that brick and mortar retailers suffer, narrowing the number of venues into which books can sell. Killing off Amazon's competitors is good for Amazon; there's rather less of an argument that it's good for anyone else."
Author John Scalzi says Amazon's reasoning and assumptions are a bit suspect. He disagrees that "books are interchangeable units of entertainment, each equally as salable as the next, and that pricing is the only thing consumers react to." Scalzi also points out that Amazon asserts itself as the only revenue stream for authors, which is not remotely true. "Amazon's assumptions don't include, for example, that publishers and authors might have a legitimate reason for not wanting the gulf between eBook and physical hardcover pricing to be so large that brick and mortar retailers suffer, narrowing the number of venues into which books can sell. Killing off Amazon's competitors is good for Amazon; there's rather less of an argument that it's good for anyone else."
It would be nice if some of the more expensive textbooks were priced at 9.99. They would probably end up growing the market and making more money.
When I read through Amazon's logic, they wanted to single-handedly re-write the relationship that already exists between the author and the publisher. It is a very thinly veiled move to try and cutout the publisher. While I abhor middlemen, it really struck me as not being Amazon's place to stick their nose into. I have less and less sympathy for Amazon. It is clear they want to be the 800 lb gorilla on too many fronts for my comfort.
A distribution of the expected returns would be more useful than the mean expected return, which can be dominated by a handful of best-selling titles.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
No dude, your books are not so incredible that people will buy them no matter what the price. There may be a few people who are like that, but most aren't. Price matters in entertainment. Turns out, when you make something cheap enough so that people don't need to think about spending the money and even more so they feel like they are getting a "Great deal" they'll spend very freely.
Steam has figured this out with videogames and siphons tons of money out of people's pockets, and has people thank them for doing it. People get drawn in by the "savings" of the sales and spend tons. I should know, I'm one of them. Not only do I have games I haven't played, I have games I haven't installed. I see something that I'm interested in that is a good price and I say "Oh man, I should get that," and I do. If they are more expensive, I think about it more, I wait until I really want a new game, I go and replay something I already enjoy.
Cheaper books will lead to bibliophiles just collecting the things. I know my mom would. You get them cheap enough and she'll drop hundreds a month on stuff she'll never read, just because she wants to have it.
Authors/publishers/developers/etc need to get over this idea of their digital goods being "worth" a certain amount. No, you need to figure out what you need to do to maximize your profits since there is zero per unit cost. Usually, that is going to mean selling cheap, but selling lots.
In particular, I won't pay more for an ebook than the price of a paperback, but I also generally have $10 as the cutoff point - if it's more than that, I'll read something else until the price comes down. I really think ebooks ought to be $5 but that ship has sailed.
Even if you don't have a background in economics, nothing in Amazon's statement should be particularly controversial. Price elasticity isn't something they pulled out of their ass, and the idea that lowering prices could make you more money (by selling even more units) is something the thinking slashdotter should be able to intuit form first principles. "Books aren't perfectly interchangeable units of entertainment" is a nice straw man, but it doesn't change the fact that entertainment spending is highly discretionary, or that his $20 e-book has an entire universe of competing alternatives vying for your attention.
Yes, publishers and middlemen have all kinds of rationalizations for trying to kill e-books, but calling any of them "legitimate" is shilling so hard you could pence a crown.
DATABASE WOW WOW
Why is Scalzi only bringing up hardcover prices when at $9.99 the ebook is HIGHER than the paperback release, which will sell more copies than the hardcover as well. How can he argue that there is "a legitimate reason for not wanting the gulf between eBook and physical hardcover pricing to be so large that brick and mortar retailers suffer" when paperbacks sell for $6.99-$7.99?? If brick and mortar retailers can survive cheap paperbacks, why can't they survive eBooks priced $2-$3 higher? For that matter, I have never heard anyone in the publishing industry who can explain why eBooks should be priced higher than paperbacks.
It's almost like Amazon is aware of that:
DATABASE WOW WOW
Even if Amazon's argument is flawed, their attempt to persuade by using reason and presenting facts is nonetheless admirable. As opposed to the feces hurling which accompanies most public disputes these days.
It builds a solid foundation for a researched and reasoned response in opposition. As opposed to picking up the monkey dung and throwing back.
Ceci n'est pas une signature.
Brick and mortar bookstore doesn't sell books with DRM so you can sell it or donate it at your pleasure?
That was the agreement - 30% to Amazon, and right now, 35%-35% split for authors/publishers.
And no, publishers do a lot - the author's main job is to deliver a manuscript. Just a block of text.
it's the publishers job to take that block of text, add the necessary front and back matter (Tables of Contents, Indices, cover art, author bio, etc), then also format that block of text for print and electronic publishing (not as easy as it seems - authors can often have their own interpretations of how to format text), and also link in images and such. Oh yeah, and market it - because otherwise your book is just one amongst the thousands appearing daily. And maybe do a bit of editing on the side.
It's very rare that a self-published book is actually any good - most are just crap (because the author kept getting rejected), and spelling mistakes galore. You really wonder if the author is even literate at all.
Sure there are a few good examples and there are publishers that do get out of the way and let you do it all (and some very good examples), but those are the exception, not the rule.
Hell, you could even consider a publisher's job to help wade through the millions of crap manuscripts submitted daily to find the good works and reduce it down to thousands that have a chance of making money.
Its likely best to start a book at 15 and slowly drop it down, just like like every other entertainment medium.... and like they already do by releasing hard backs first. The price thing is true though. I read a lot, I probably buy 2 or 3 books a week and when I am digging for books to buy I give a lot more consideration to cheap books. More expensive books are given much lower priority when I am considering what to buy. I wouldnt even consider a $15 book and a $10 is barely within consideration. $3 is more like it and $6 being a stretch.
I'm sick of paying $16 for eBooks when the hardcover version sells for $12... I'm with Amazon on this one.
There a plenty of great self published author on Amazon.
Laurence Dahners
Nathan Lowell
Elliott Kay
Christopher Nuttall
that's just off the top of my head.
People who actually work in the industry, including award winning authors will point out that as much work goes in to turning a manuscript in to a book as goes in to writing the manuscript. That's today, with the crappy level of editing and proofreading.
What you want is no editing, no proofreading, and overall shit quality. You can get, literally, millions of books like that for free all over the internet. Enjoy.
Seems like Amazon might be fishing for authors to self publish and take the 70% of the $9.99. I'm sure Amazon would be glad to take a few extra percent to proof, layout and market the ebook for an author.
Where all think alike, no one thinks very much.
Amazon's pricing argument is one instance of the same general phenomenon that gross expenditures, under some conditions, increase in response to price decreases. The effect has different names in different contexts:
With taxation, people sometimes refer to the Laffer Curve, which for levels of taxation to the right of the peak of the curve, reducing tax rates increases tax revenues.
For technology, Jevons Paradox explains why, as the efficiency of home appliances increases, so does energy consumption.
My grandfather, an economist, had an amusing story about a toll bridge authority attempting to taper down revenues as the bond which funded the bridge was paid off. They lowered the toll price to reduce revenues and revenues shot up as customers responded to the lower toll price by crossing the bridge more frequently. So they lowered the toll price again and revenues shot up further. As I recall the story goes that it worked the third time.
Ceci n'est pas une signature.
I for one flat refuse to pay more than $9.99 for an ebook and I will never forgive Steve Jobs for causing this mess in the first place.
Amazon works very well for self-published authors. A lot of them went the traditional route and went self-published and made a crap-ton more money as self-published as they ever did, plus they retain the ownership of their own works. http://www.hughhowey.com/
If only "common" sense was actually that common...
In fact, everyone acts in their own best interest.
True on average I suppose, but not in general. Morality and/or integrity frequently trumps self-interest... at least this is true for people with morals and/or integrity.
"His name was James Damore."
Cut out the useless publisher, and the author gets 70%.
Why do you need a publisher to sell an ebook?
Idunno. Maybe a publisher does have some use. But does an ebook publisher deserve a whopping 30% ?
First off, the higher priced ebooks are not meant to be competitive with paperbacks, but with hardcover releases. Generally, the hardcover and the ebook will come out at about the same time with the ebook being cheaper. I would also note (anecdotally) that most ebooks seem to come down in price in sync with the release of a paperback edition.
Second, according to a commenter on Scalzi's website who claims to have experience in the industry (going by the nym --E), it costs about one to two bucks to print and ship a paperback. Given that mass market paperbacks tend to run about $6-10, a price point of $4-9 would be in keeping with the notion of not paying the cost of printing and shipping a physical book. Oddly enough, a lot of ebooks seem to get sold in that range of prices. If your entire justification for not buying an ebook for more than $2 is that this represents the cost of a paperback minus the cost of paper, then you might want to reassess what you are willing to pay for an ebook.
Rhapsody in Numbers
Whenever this topic comes up, we end up discussing what publishers really do.
Every time, someone with some knowledge of how the publishing industry works turns up and explains how there is this long road between the author's draft and the book in your hands, made of editing, copy-editing, typesetting, cover design, marketing and more, and the publisher is the truck driver that sees the draft to the end of that road. That's correct.
But I've come to the conclusion that none of that is the one irreplaceable service publishers perform in the system.
All of the above can, to some extent, and for a fee, be performed just as well by independent contractors. (There are great independent editors out there, and aren't we all glad for that.)
The one important thing publishers do is: they take the loss on books that don't earn out.
Now hear me out.
I know how we, Slashdot readers, tend to think about those things. In our minds, if the book doesn't earn out (that is, it brings in less money than the publisher gave the author as an advance), then it's got to be someone's fault, right? Bad writer, bad publisher. Something.
Wrong.
The thing is, a successful book requires a lot of factors. Great writing doesn't suffice. The public is fickle. Yesterday, supernatural romance sold by the truckload, now it doesn't. GRRM was a great writer for decades before you even heard of him. Harry Potter didn't start hitting it big until three or four books into the series. Word of mouth matters, but only after the readership has exceeded a certain critical mass. And until then... someone has to take the loss.
Because, here's the thing. GRRM, Rowling, they're outliers. Many books -- most books, AFAIK -- don't quite earn out. Many deserve to, but don't, because that's not how the world works.
But they still got written, you still read some of them, you still loved some of them, and that only happened because someone, somewhere, was willing to pay an author to keep writing, and take the risk that the great book in their hands may not earn that money back.
And that, friends, is what publishers really do.
-- B.
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