Amazon’s Latest Volley

Another day, another volley in the Amazon-Hachette battle, this time from Amazon, in which it explains what it wants (all ebooks to be $9.99 or less, for starters) and lays out some math that it alleges shows that everyone wins when Amazon gets its way.

Some thoughts:

1. I think Amazon’s math checks out quite well, as long as you have the ground assumption that Amazon is the only distributor of books that publishers or authors (or consumers, for that matter) should ever have to consider. If you entertain the notion that Amazon is just 30% of the market and that publishers have other retailers to consider — and that authors have other income streams than Amazon — then the math falls apart. 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.

2. Amazon’s math of “you will sell 1.74 times as many books at $9.99 than at $14.99″ is also suspect, because it appears to come with the ground assumption that books are interchangable units of entertainment, each equally as salable as the next, and that pricing is the only thing consumers react to. They’re not, and it’s not. Someone who wants the latest John Ringo novel on the day of release will not likely find the latest Jodi Picoult book a satisfactory replacement, or vice versa; likewise, someone who wants a eBook now may be perfectly happy to pay $14.99 to get it now, in which case the publisher and author should be able to charge what the market will bear, and adjust the prices down (or up! But most likely down) as demand moves about.

(This is where many people decide to opine that the cost of eBooks should reflect the cost of production in some way that allows them to say that whatever price point they prefer is the naturally correct one. This is where I say: You know what, if you’ve ever paid more than twenty cents for a soda at a fast food restaurant, or have ever bought bottled water at a store, then I feel perfectly justified in considering your cost of production position vis a vis publishing as entirely hypocritical. Please stop making the cost of production argument for books and apparently nothing else in your daily consumer life. I think less of you when you do.)

Bear in mind it’s entirely possible that Amazon sells 1.74 times as many books at $9.99 than at $14.99, but then Amazon deals with gross numbers of product, while publishers deal with somewhat smaller numbers, and the author, of course, deals with only her own list of books. As the focus tightens, the general rules stop being as applicable. What’s good for Amazon isn’t necessarily good for publishers, or authors.

3. I’ve said this before and I’ll say it again: I think it’s very likely that if $9.99 becomes the upper bound for pricing on eBooks, then you are going to find $9.99 becomes the standard price for eBooks, period, because publishers who lose money up at the top of the pricing scale will need to recoup that money somewhere else, and the bottom of the pricing scale is a fine place to do it. Yes, the mass of self-published authors out there will create a tier of value-priced books (this has already been done), and I’m sure in a couple of years Amazon will release another spate of numbers that will show how much more profitable $6.99 eBooks are as compared to $9.99 eBooks, and so on. But at the end of the day there will be authors and publishers who can charge $9.99, forever, and they will. If you destroy the top end of the market, the chances you destroy the bottom end go up, fast.

4. I think Amazon taking a moment to opine that authors should get 35% of revenues for their eBooks is a nice bit of trying to rally authors to their point of view by drawing their attention away from Amazon’s attempt to standardize all eBook pricing at a price point that benefits Amazon’s business goals first and authors secondarily, if at all. The translation here is “Look, if only your publisher would do this thing that we have absolutely no control over, then your own income wouldn’t suffer in the slightest!” Which again, is not necessarily true in the long run.

To be clear, I think authors should get more of the revenue of each electronic sale, although I’m not necessarily sanguine about letting Amazon also attempt to set what that percentage should be. Increasing authors’ percentages of revenue on electronic sales is an exciting new frontier in contract negotiations, he said, having walked to that frontier himself several times now. That said, I also think I should be able to get more of the revenue of each sale and have the ability to have my work priced at whatever the market will bear, without a multibillion-dollar company artifically capping the price I or my publisher can set on my work for its own business goals, which may or may not be in line with my own.

5. While this is not going to happen because this is not the way PR works, I really really really wish Amazon would stop pretending that anything it does it does for the benefit of authors. It does not. It does it for the benefit of Amazon, and then finds a way to spin it to authors, with the help of a coterie of supporters to carry that message forward, more or less uncritically.

Look: As Walter Jon Williams recently pointed out, if Amazon is on the side of authors, why does their Kindle Direct boilerplate have language in it that says that Amazon may unilaterally change the parameters of their agreement with authors? I don’t consider my publishers “on my side” any more than I consider Amazon “on my side” — they’re both entities I do business with — but at least my publisher cannot change my deal without my consent. Which is to say that between my publisher and Amazon, one of them gets to utter the immortal Darth Vader line “I am altering the deal. Pray I do not alter it further” to authors doing business with it and one does not.

(I notice in the WJW comment thread someone opines along the lines of “Oh, that’s like EULA boilerplate and it would probably not be enforceable in court,” which I think is a really charming example of naivete, not in the least because, as I suspected, the boilerplate also specifies (in section 10.1) that disputes between Kindle Direct users and Amazon will be settled through arbitration rather than the courts.)

Authors: Amazon is not your friend. Neither is any other publisher or retailer. They are all business entities with their own goals, only some of which may benefit you. When any of them starts invoking your own interest, while promoting their own, look to your wallet.

Update, 8/9/14: Amazon tries a new tactic, addressing readers (and authors who use Kindle Direct Publishing). I comment on it. Spoiler: Still not especially impressed with the logic; Amazon still not your friend.

331 thoughts on “Amazon’s Latest Volley

  1. Disclosure: I deal with Amazon’s subsidiary Audible for several of my audiobooks, including the upcoming Lock In. I am delighted to say that Audible has always treated me wonderfully and I am thrilled to be working with them (I will also note that I have contracts with them that they cannot alter without my consent).

    This is your reminder that it is possible to do business with a company, happily, and yet be critical of other aspects of their business. Amazon does things I like, and things I don’t like — just like any other publisher of mine, or business I work with.

  2. I’ve come to regard Amazon as the internet Wal-Mart: a bloated, vicious corporate entity that has gone from using scale as a means to deliver product well, to using it to damage everything that isn’t itself. I will no longer willingly buy anything there if I can get it somewhere else.

  3. Why are those binding arbitration clauses EVEN LEGAL?

    It’s a contract, drafted within the context of the law, that states that any disputes as to its terms must be settled WITHOUT access to a court of law?

    (Shakes head.)

    As for break-shrinkwrap-to-accept-terms licenses, IIRC an English court (hint: jurisdiction uncomfortably close to home for me) ruled in the early 00s that because they’d been around since the 1970s they were “customary” and hence had become binding by default. Despite them being strictly anything but, prior to their sneaking in through the back door …

  4. I find it remarkable that a corporation would so blatantly advertise something reeking so substantially of anti-trust. Sure, on its face, it’s not price-fixing that hurts the consumer directly (i.e., fixed *higher* prices), but it’s still price-fixing. Presumably, as you note, John, it’s price-fixing that would help them push out competition.

    Hopefully everyone will (metaphorically) stare at Amazon calmly for a minute, mentally say, “Enh, to hell with you,” and go about their business.

  5. I think everyone will agree, that the market will undergo a massive transformation in the future.

    Amazon wants the change to happen fast. Due to their agile structure, they would profit from fast changes where it’s competitors are lagging behind.

    For exactly the same reasons, the traditional book market wishes the change to happen as slowly as possible. They want time to adapt.

    The authors and consumers are the battleground (consumers more, authors less) on which the fight occurs. Any approach towards them is tactically motivated. I agree completely with John here.

    I am primarily a consumer and leaning heavily towards Amazon. But that is mostly due to my experiences with the German SF&F book market, which can only improve by being torched and rebuilt ;-).

  6. @Charlie, I suspect it’s an effort to limit all the class-action-happiness going around these days. Stopgap thing until some rational tort reform happens.

  7. I worked with Amazon on something non-book related in my former day job. They are very, very smart and on top of revenue, and I would trust their numbers more than I would trust those from other corporations. I get the sense that publishing houses have no idea how price affects sales.

    That said, I think general book buyers are much more price sensitive than many of the people posting here. I have a good disposable income and I spend a lot on books, but I’m willing to bet I’m an outlier, especially in this economy. I am price-sensitive with indie books where I don’t know the author, though. I just don’t want to pay $10 for an ebook that might be a total flop. If I read someone’s first book and like it, I’d pay $10 for the next ones, though.

  8. Love the post. Plan on tweeting the crap out of it.

    One thought on Production costs (which include the entire supply chain costs). Not sure what the cost is to print & ship a hardback. Let’s say $7.50. There is likely a slight mark-up to account for anticipated unsold books (a cost that is averaged out over all books sold.) Let’s say that is $2.00. So $9.50 is the extra cost for a hardback. It would be less for a paperback as they cost less to make ship & their unsold bit would be less.

    The point would be to subtract that from the average hardback sale price. That is usually $25-30 or more. That leaves us around $15. All in all, not that bad. The author’s share should go up though as the value from the words and ideas in each book sold does not change.

    And of course, what the market bears matters. Classic economic theory.

    Keep writing good sir.

    @piewords

  9. @onibabamama, this is one reason why I think Scalzi is so smart for having arranged with Tor (by whose ever initiative or idea) to publish the first five chapters of Locked In for free: the risk of buying a flop goes way down if you can get your teeth into a solid sample of the goods.

  10. @Laurence: My wife and I have talked about the curious thing that is the used book market. A hardback that’s $30 new can be had for $1-$15 used, depending on demand. The real costs of making the physical book object are borne by the first-purchasers; the value of the contents is then to some extent seen in the resale price.

  11. Onibabamama:

    There is no doubt many readers are price sensitive, for various reasons, and publishers know it — this is why books come in multiple formats, to address various levels of the market.

    One of the great things about eBooks is that it can allow a greater amount of price fluidity to attract readers and to serve various market segments — a book of mine was dropped to $2.99 just yesterday for a day to attract readers, for example. Which is why I do worry about the higher end price cap — it will greatly diminish the desirability of flexible pricing for publishers by eliminating one tier of possible income.

  12. In Holland any bits in a contract you sign that are against the law are invalid. I’m not even remotely trying to suggest our laws are superior on the whole (we have many stupid laws) but this one seems sensible. Not that it would help any Dutch author signing a contract with Amazon but as a matter of civilised principle it seems logical that the law of the land should trump anything an individual or company tries to force on those dependent on their custom or favour.

    I know we don’t live in a logical or even sane world but one can dream…

  13. It surprises me still that content providers do not learn napster lesson. If you price things beyond what your consumers find acceptable, they will find a way to steal it from you. They will wait for the library to get the book, a friend to be done with it, or just download it from one of a million sites offering it free.

    Publishers have every right to charge what they want for something. But it’s a different world now, people see corporations swindle the average joe everyday with impunity, so they have little empathy for “lost revenues” when they copy a song, movie, or book. You can fight that reality with little success (RIAA) or you can provide something the consumers will buy at a price they consider reasonable.

    Personally I won’t buy any book priced over $10, and I buy ALOT of books. I am old enough to know that supporting my favorite authors (usually) keeps them writing the fiction I want to read. Buying used books or waiting for it to show up at the library does not support my favorite author. So as noble as folks want to sound for taking that route, it’s not much different from the publishers perspective then downloading it.

    I’m also a big fan of Amazon and their Kindle App. I know they are the big bad corporation everyone loves to hate, but they bring me what I want at a good price with good service. The Kindle app is simply the best reading app I’ve used on my iPad.

  14. Above, you say that Amazon is suggesting “35% of net” when you probably meant to say 35% of gross. You can also say 50% of net, which is double what most publishers pay. There’s quite a difference.

  15. On a lighter note, I got a shiny, real-world copy of “The Last Colony” last week, and discovered that I had failed to read an ENTIRE CHAPTER the last time I read it. Just a really, really important chapter at the end. Since I discovered what a doofus I am, I thought I should share it, and take the opportunity to thank the author one more time. Thank you, Mr Scalzi, it’s a great series of novels.

  16. John, youhave been forthcoming of financial details in the past; what are *your* experiences with ebook pricing vis a vis sales, earnings, and the effect on print sales?

    I am, as a consumer, heavily influenced by ebook prices. I never buy hard covers, but am willing to dish out $12.99 for a new book I really want to read, $14.99 is too much. If I’m not so keen on the content, I’ll wait until the price goes down to $9.99 or less. I have actually purchased way more new books as ebooks than I ever did for print.

    But, that’s just me.

    -Matt

  17. Hugh:

    Fixed! Note the argument before and after the fixing is essentially the same.

    Jeff:

    There was more to the music industries’ problems at the turn of the century than simply price.

  18. Dang. Posting on FACEBOOK is not searchable In The Cloud. I’m scrolling and searching foir what I posted just 2 weeks ago, #4 of the below:

    My 5,000 Facebook friends have now seen these world-in-a nutshell from me, in chronological order:

    (1) FIRST THING TO KNOW, in Mathematical view of Reality… WHAT IS A DYNAMICAL SYSTEM? [18 hours ago]

    (2) FIRST THING TO KNOW, in Literary view of Reality… WHAT IS A NOVEL GOOD FOR? [15 hours ago]

    (3) FIRST THING TO KNOW, in BIOLOGICAL view of Reality… HOW DO DIFFERENT SPECIES COMPLETE IN A NICHE? [15 hours ago]

    (4) FIRST THING TO KNOW, in ECONOMICS view of Reality… HOW DO CORPORATIONS INTERACT WHEN COMPETING FOR A MARKET? [14 hours ago]

    (5) FIRST THING TO KNOW, in SOCIOLOGICAL view of Reality… When is a cognitive agent justified or warranted in accepting the statements and opinions of others? [14 minutes ago]

    There will be more of these, in subjects where I am peer-review published.

  19. The Napster lesson is that there are a lot of people who feel entitled to things other people create for free. First it was, songs are only sold on expensive CDs and you only want a couple. Then, it’s laden with DRM. Now, songs sold individually without DRM, “record labels abuse their artists so I’m not going to help fund them”. Each of these excuses does have some validity, but fixing them doesn’t seem to stop people from pirating, they just go to the next excuse. If record labels suddenly became all socialistic saints and gave the big bulk of all income to the artists – the excuse would probably be that the artists are too rich.

  20. @ Jeff

    The Napster lesson, indeed the lesson that piracy sites keep demonstrating over and over again, wasn’t that record companies were charging too much, it was that if you make something people like and make it limitless and free no one’s going to give a shit about how much money the industry loses as a side effect.

    The lesson isn’t “publishers should mark down their prices.” The lesson is “people are freeloading jerks.” Fears about piracy shouldn’t affect publisher’s decisions. If people want to steal stuff off the internet, they’ll do it. It seems (to me, at any rate) that content providers just need to factor it in as a part of the cost of doing business in the digital age.

  21. This has been a fantastic read for me, because this is one of those (rare) topics where I haven’t made up my mind and I’m still collecting a lot of info.

    There are a lot of points being made on both sides of Amazon v Hachette, and I’ve had resonance with some from both. Amazon is probably right in a lot of ways to stand up to Hachette on some issues – I leaned toward their position early when the talk was purely about the agency model and the various collusion that set book prices in a frankly non-competitive way. I was frankly disappointed that there wasn’t a bigger legal and settlement fallout from some of the revelations about price fixing.

    On the other hand, I’m still greatly bothered by the most current, and Amazon’s in particular, eBook models and ecosystems.

    Mr. Scalzi says:
    “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. ”

    In my opinion, there SHOULD be a massive gulf between eBook and physical book pricing, but not for anything to do with “costs” of the two media types, but because of the VALUE. Most popular eBook ecosystems offer what I consider to be a poor value proposition when you consider that you’re really just licensing content. The fracases in recent years with Amazon revoking user’s Kindle copies of various works where copyright or ownership was in dispute put a pretty harsh light on what you’re really getting in most eBook transactions – a license to view, provided that the ecosystem survives. More directly without right of loan or transfer to another party, you down really own it, even if the “software” is still available. If I don’t own it, it should be a damn sight cheaper for me to “rent it” that to actually own it, so even $9.99 feels like too much for an eBook. For this reason alone, I’ll stick to physical books for the time being. I’m sure this won’t break hearts, but I think it would be a mistake for authors, publishers, or sellers to gloss over this aspect of the industry and chalk it up to a quiet victory for the “old way” instead of understanding the weakness in the new model.

  22. I’m going to disagree somewhat with the group here but let me say that I am open to hearing evidence to back up the supposition (even if it’s well-reasoned) that makes up this post.

    The thing is that authors should absolutely look out for themselves first, as you say, and the evidence that has been presented (as in numbers and figures, which admittedly could be suspect but it’s what we have) suggests that Amazon looking out for itself is better for most authors than Hachette looking out for itself. Unless of course you are one of a handful of mega bestselling authors. Also, the John Scalzis of the world might be able to negotiate things like posting free chapters of his books (or better contracts in general), but the vast majority of authors can’t get those kinds of concessions, even though at this point it seems almost unarguable that they help sales and name recognition.

    You claim publishers would make up for ebook price caps at the expense of the midlisters or new authors, but I’ve personally already seen plenty of unknown authors with ebooks priced quite high, which I would argue hurt both their immediate sales and their career trajectory. I know I’ve read blog posts making precisely that assertion from some of them.

    If nothing else, it seems like higher prices disproportionately reward the most popular authors at the expense of everyone else. This is a bit simplistic, but I think it’s fair to say your average person has some kind of limit on how much they want to spend on books in a given month or year. If they are huge fans of Patterson and Baldacci but don’t mind gobbling down a few Russell Blakes as well (granted, he is self published), they may shut Blake out if they have to spend their budget on $15+ ebooks from their very favorites. Of course, now I’m supposing too.

  23. When I read the latest info on the whole Amazon/Hachette dealy, I was struck very powerfully by the fact that what Amazon seems to be trying to negotiate is something that’s not actually within their purview. They come across as all nice and kind and concerned by saying that they think authors should get x-percentage, but to me, that seemed a lot like a retail store telling Kellogg’s that unless they pay their factory workers more, the stores will no longer stock Corn Flakes. And only their factory workers, because of course it’s not like anyone else is involved along the product chain (editors and artists don’t exist, of course, and thus don’t need to be paid…) It’s not the distributor’s job to tell one of their clients how much said client should be paying their own clients!

  24. While I accept your viewpoint, I think there is a fundamental flaw that print-to-electronic people (books & comics) have that really is a blindspot.

    When you get an e-version of a book or comic book, all you get is the story. You don’t get a hard object that can be sold, given, cherished, etc. So by very definition it is a LESSER PRODUCT.

    So is it not fair to say that reading a book or comic on an electronic medium is a lesser experience? Convenient, yes. But e-readers still seem lacking to most. That having an actual hard copy in your hand is the better experience? A hard copy has value, where an electronic copy is just bits in the ether?

    Then why should an electronic copy be the same price? Especially in comics, where resale value is actually a thing (not like it was, but it’s there). After an e-version is read, it has ZERO value.

    That’s why it is viewed to need to cost less.

    And while you already dismissed the “Electronic versions cost nothing because it isn’t trees-shipped-to-bookstores” theory, and I defer to your better knowledge of the medium on why that doesn’t hold water… you can’t argue that at face value the perception is there and rampant.

    Plus, you can’t argue that in the comic industry, it is nothing but price fixing to protect comic stores. Could there be a similar thinking in book publishing to help sustain brick-and-mortar bookstores to a certain degree?

    Yes, it is clear that Amazon is using its muscle to price fix… but isn’t there a bit of wiggle room here? More of a reasonable cap on e-book pricing, and to have e-books discounted over a real copy?

  25. MIke H, that’s a really good point. I think along those same lines when I contemplate ‘buying’ something on Amazon Streaming Video.

    Re piracy, the main challenge of content producers is pricing it such that the cost represented by the effort of pirating it (for the majority of customers) is greater than the cost paid in money. Identifying a good price point and developing a good delivery mechanism are two big challenges of the business sector.

    Also re piracy: no DRM will *EVER* work. For every DRM developer slaving away at content producers the world ’round, there are hundreds or thousands of DRM hackers who love the challenge of breaking new DRM as soon as it’s released. Hopeless. Endeavor.

  26. I don’t want any one corporate entity setting the top limit on a book, period – because no two books have the same amount of time and effort put into them, or the same amount of talent or audience appeal. Unfortunately Amazon makes lock-in easy, so a lot of people don’t avail themselves of other options, even other eBook options which are easy if you use a tablet or phone to read on – that’s why I purchase both Nook and Kindle books, and a lot of my SF directly from Baen eBooks where I can sideload them to my iPad.

    Is this the wrong place to grouse about eBook DRM? Because one thing I love about Baen’s eBooks is that there’s no copy protection, so if I decide to switch eReaders I can do so easily….

  27. I’m not sure about $9.99 becoming the standard price and cheaper ebooks falling away (point 3).

    Of course, if prices pushed down, for any reason, publishers and authors will want to maximise their profits. But surely that’s true anyway?

    I’ve always assumed that cheap ebooks are priced that way because publishers and authors figure that’s how they’ll make most money. They hope they’ll sell enough extra books to make more profit on volume. Or they’re trying to indirectly sell more expensive books (e.g. selling an author’s older work cheaply so we go on to buy their newer — and more expensive — titles).

    I’m not sure why pressure at the higher end of the market would change that.

  28. “This is where many people decide to opine that the cost of eBooks should reflect the cost of production in some way that allows them to say that whatever price point they prefer is the naturally correct one.”

    Sure, agreed. I will still argue that ebooks should cost less than physical books *because you get less.* I can’t lend my ebook to a friend. I can’t sell it, or donate it to the church bazaar. I can’t even transfer it from my kindle to my nook, so buying a new reader can orphan my complete collection.

    Rethinking eBook DRM could help with some of these problems, but in the meantime, these limitations are why I feel like I’m being gouged when a retailer inflates the price of an eBook.

  29. Mike H. also makes a great point about the value of an ebook vis a vis a physical book. They are pretty obviously worth a lot less as a product for the reasons he states. As for the Napster argument, it has been shown in many cases that while the record labels lost a lot of money, most musicians are doing just fine, ESPECIALLY the midlisters and unknowns, who from what I can tell are doing better than ever. Multiple studies have even indicated that piracy can even have a net positive effect on the sales of music or movies. Even some heavy hitters (Trent Reznor comes to mind) have self-published albums and made tons of money off of them. I don’t hate the big publishers, but white knighting them is at least as silly as blind adulation of Amazon.

  30. As Scalzi pointed out, there are different kinds of price sensitivity. I’ll pay more to immediately read a book I’ve been eagerly awaiting than I will to try an unknown author. If an author and publisher have worked together through prior writing, marketing and publicity to get me really excited about a particular book then more power to them if I’m willing to pay more for the privilege of reading that book than I would for a book by a less-successful author-publisher team.

    That being said, I’m less concerned about “OMG Amazon’s going to ruin books” because I remember being scolded decades ago for briefly working for and thereby enabling Barnes & Noble, which was at that point the heartless colossus bestriding the publishing industry. If history teaches us anything, it’s that arrogant “We own this market and can dictate terms” companies will have their lunch eaten while they’re not looking. (Remember being worried that Microsoft had an unassailable market share for Internet Explorer?) Amazon’s powerful and all, but there’s a strong whiff of Lannister to their reign.

  31. Both sides use economic theory to try and predict the various benefits, and frankly, I tend to look at all economic predictions with a very skeptical eye because it is almost always blinded by political or self interest, or tries to argue “pure” economics that looks real good on paper, but doesn’t take into account that humans rarely act completely in their actual best interest since emotions, ignorance, etc all get in the way.

    That being said, as a reader, I know I can’t trust the publishers to act in my best interest: they did collude with Apple to successfully raise eBook prices and were slapped down for it.

    However, one can’t really trust Amazon to continue to act in the reader’s best interest: when they’re the only player left in the game, the game is going to become rigged both for the authors and the readers – someone is going to get squeezed. Here’s to hoping the government would not allow such a monopoly, and like the publishers got slapped, so should Amazon should it abuse the market share.

    I do find the arguments that somewhat cheaper books will hurt creative output of said books to be shaky – if that held up, music output would have shrunk as album sales declined. The opposite has happened – we have more music today, from a variety of sources, than we ever did before. Its also cheaper and much easier to access. Its not a one to one comparison (as John has argued) album sales aren’t the only income source for musicians. I don’t know if anyone has done a study on whether the overall income of musicians has decreased/increased over time. I think that’d be an interesting one to see and be much more relevant that the current focus on album sales.

    I’m of the opinion that taking sides in the matter is pretty difficult to do for a reader: we can’t honestly predict the outcome long-term for us. We’re going to have to wait for hindsight to really tell us if we won or lost in this battle.

    All that can really be said is: I’d rather these titans fighting it out, rather than colluding. Consumers always lose on collusion.

  32. I actually wanted to contribute to this discussion what I worked on for an hour, paring, polishing, double-checking citations: “FIRST THING TO KNOW, in ECONOMICS view of Reality… HOW DO CORPORATIONS INTERACT WHEN COMPETING FOR A MARKET?” — but I can’t help you with Amazon because Facebook seems to have made my old content inaccessible. I probably DID back these up, but my motherboard friend earlier this month. So I’m using my son’s PC, while waiting for him to be free to swap my terabyte drive (which had most of my documents) into the carcass of my PC. Why do the chips on PC motherboards last such a short time? Why do Amazon and Facebook not care how many hour of work they are intentionally undervaluing by professional content creators? What ever happened to “Content is King”?

  33. @Austin

    I used to be one of those “free loading jerks” until things became more reasonably priced. There will always be people who make copies over buying the original, it’s been that way since recordable tape and xerox machines were invented.

    For me is was about either price or accessibility. I wanted to listen to my music digitally so if it wasn’t released as an mp3/4 I would just find a download. When eBook readers started hitting the scene(Palm Pilot anyone?) I got into the crazy easy. There were very few publishers on board with eBooks and so I again resorted to the internet to find content. A lot of people don’t know that eBooks were heavily pirated pre-Kindle. People would acctually scan and OCR the books, there was no DRM to break.

    Anyways, now days prices are more reasonable. I pay for a Pandora subscription, a Netflix subscription, a Google Music subscription, and Kindle Unlimited(just switched from Scribd subscription). I still buy a quite a few books from amazon, when they go on sale, or when the mood strikes me. I don’t pirate anymore, it’s inconvenient for me,

  34. My opinion has always been this: if Amazon wants to charge $9.99 for ebooks they should be able to do that, even if it means they lose money, but they have no right to expect publishers to subsidize that decision. Granted, this may force other retailers to do the same, even if they financially can’t afford, but that’s how the free market works. It’s always been survival of the fittest.

  35. typo: ” my motherboard friend earlier” should be ” my motherboard fried earlier” Odd, did I type “friend” because of the misleading term “Facebook friend?” Back to lurking now…

  36. I stumbled upon this blog, I don’t agree with what is written here. Let me start with #1 and go from there.

    1a. Amazon makes up far more than 30% of the market. Whether it be digital or paper, amazon is the dominant bookseller. Independent booksellers make up less than 10% of the market. When it comes to publishing and distributing Amazon is always the elephant in the room, please don’t suggest otherwise.

    1b. I think that is the most noble defense of agency pricing that I’ve read. But big publishers don’t care at all about independent booksellers. Agency pricing is about making money not running a charity. This is not a moral story, please don’t frame it that way.

    2. I used to think as you do, but the writing is on the wall. Books are a fungible commodity. The proof is in the rapid shift of bestseller content in the eBook domain. Self published and mid-list authors that price their books competitively are starting to dominate the eBook landscape, despite the big 5 published books having professional editing, typesetting, design and marketing are losing ground. There are a few authors like Stephen King that can buck that trend, but the majority can not.

    3a. It already is fixed at $9.99, because $9.99 is the price of the premium mass market paperback. Since the general consumer consensus is that ebooks are not worth as much as paperbacks, people are unwilling to spend more than what they are willing to in paper form. This is precisely why more revenue is generated at $9.99 than above it on average.

    3b. The supply demand curve does not work the way that you think it does. Arbitrarily dropping prices will not increase demand. Amazon will not keep pushing down the price of eBooks because the demand will not increase, and thus revenue would drop. They’ve recently been encouraging their KDP authors to RAISE their prices.

    4. Isn’t this all wishful thinking? You don’t get to personally decide on the pricing model for your books or how much royalties you’ll take.

    Saying that Amazon, publishers and retailers are on no one’s side but their own is perhaps the only reasonable thing written in this blog entry. Yet I don’t know when it became so evil to be out to make money in a capitalist society. This is yet another strangely perverse and hypocritical “Amazon is evil for wanting to make more money, even though I’m only writing this because I want to make more money as well.”

    I’m frankly tired of well known authors attacking Amazon for threatening their fortunes. Get over yourselves, you’ll make a ton of money no matter what. And don’t pretend that you’re sticking up for the little guy, the authors that haven’t made it yet. You’re not.

  37. It’s really be nice if Hachette would go to the trouble of making an official statement on the subject.

  38. @Jimmy I don’t think they expect publishers to subsidize anything. Since the production cost on an ebook is next to nothing, it’s not like the publishers lose money when they are priced lower, they just make less of it per unit.

    From everything I’ve read, it appears that publishers make the majority of their profits from the “big name” authors. Since high prices disproportionately reward said authors, it’s no wonder that’s the direction they would prefer to go.

  39. @n1quigley The variable cost, the cost of selling the 10,001st ebook after having sold 10,000 ebooks is next to nothing. But there are production costs in the editing, layout, illustrations, and so forth.

  40. David Whitbeck:

    “Get over yourselves, you’ll make a ton of money no matter what.”

    Thus proving that Mr. Whitbeck has not the slightest idea of what he’s talking about, but it’s more than willing to tell authors what to do, nevertheless.

    You’ve stumbled upon this blog, Mr. Whitbeck. You might want to stumble back out of it.

  41. @ n1quigley – I’ve known plenty of underground and midlist musicians from before and after the Napster wave, and while it wasn’t too notable for most of them at first, over the years it does seem like it’s gotten more difficult to earn a living as a musician.

    This is all anecdotal, of course. I’ve seen numbers that argue both ways. Make of it what one will. :shrug:

    @ Jeff – I was a freeloading jerk, too. I still don’t do right by many of the artists I like by actually putting down the money for their albums, which is still the most viable way for musicians to earn a living. But my mind did start to change regarding all this stuff when I started seeing how it was affecting my musician friends.

    Unfortunately, it doesn’t seem like most people give much other thought to the price of content than, well, the price. Piracy persists even when music, games, books, etc. are literally given away for pennies. Despite the many advantages physical books (and physical stores) present for consumers, tangible products continue to lose ground to cheaper (or free!) digital products.

    Ultimately, this is why I feel more or less fatalistic when it comes to Amazon. No matter what, Amazon will always be cheaper, and no one producing a quality product (or paying content creators equitably) will ever be able to compete with that on a serious level.

    Of course, when Amazon finally does complete its monopoly/monopsony, maybe I won’t feel so bad about pirating again.

  42. At this point, I exclusively read ebooks. I still buy dead tree for my daughter. If I want the ebook on the day it is released in any format, and for many authors I do, I am willing to pay up to the cost of the new hardback book price. Yes, this many times means I am paying for two hardcover books. But I find that it is well worth the cost to be able to support my favorite authors and to be able to more widely share books I love. Occasionally, I even pay extra to get a book before it is officially released (Thanks, Baen). I feel this is absolutely fair. Amazon telling Publishers that they should not be able to charge me what I am willing to pay is not fair. Period.

  43. I skimmed the comments and may have missed a prior mention.

    But didn’t Apple just pay a big fine for colluding with the Big 5 publishers to fix ebook prices? Wasn’t one of the primary objectives of their collusion to prop up ebook prices above what the market would bear?

    http://readwrite.com/2014/03/25/amazon-customers-win-big-in-ebook-settlement

    (Just the first link I found – not uniquely informative.)

    I am all for a free market. I even agree that Amazon is working in their own interest to increase market share and to increase the size of the market by pressuring for lower ebook prices. Thus far, Amazon has been working to make my reading habit less expensive, so their interests and mine coincide for a while.

    Given that the Big 5 have pursued a course that undermines the functioning of that market, perhaps we need to be a bit more skeptical of their arguments against letting book sellers respond to the market when setting prices.

    To flip the analogy, Kelloggs shouldn’t be able to tell every grocery store what their profit margin should be in the same way that the grocery store shouldn’t be able to tell Kelloggs how much to pay their employees.

    Regards,
    Dann

  44. Can someone explain exactly what Amazon’s ongoing costs are that require them to take nearly the same cut of revenue as the author and the publisher? Given the whole post-scarcity thing? Is it just data centres and whatnot?

  45. As for break-shrinkwrap-to-accept-terms licenses, IIRC an English court (hint: jurisdiction uncomfortably close to home for me) ruled in the early 00s that because they’d been around since the 1970s they were “customary” and hence had become binding by default. Despite them being strictly anything but, prior to their sneaking in through the back door …

    I believe that ruling has been overtaken by events: I think that EU law makes the position untenable.

    In Holland any bits in a contract you sign that are against the law are invalid. I’m not even remotely trying to suggest our laws are superior on the whole (we have many stupid laws) but this one seems sensible. Not that it would help any Dutch author signing a contract with Amazon but as a matter of civilised principle it seems logical that the law of the land should trump anything an individual or company tries to force on those dependent on their custom or favour.

    It’s a general principle in law that you cannot contract for an illegal act: extreme example, if you hire someone to kill your wife, you can’t sue for your money back if he misses!

    But what’s against the law varies, and I imagine that all Amazon’s contracts are governed by US law.

    It’s also noteworthy that in many jurisdictions, business-to-business contracts allow for more leeway than do business-to-consumer ones, as there is a presumption that a business will take appropriate advice before signing.

  46. Dann:

    However, the discussion here is Amazon’s most recent communication. I agree that skepticism all around is a fine plan – I say so in the entry. But let’s stay on topic, please.

  47. @gadgetdon Yes, I don’t mean to discount the production costs of a book in general (editing, formatting, marketing, etc.), but printing books adds a nice chunk of change on top of that, is all I was saying. This becomes increasingly relevant over the long haul, especially since many authors never get their rights back if ebook sales limp along at a certain level, making it hard for them to personally profit from the backlist.

    @Austin, I think that’s fair. The main thing that probably has changed for the small guys is that since they may have even more trouble than before accessing the marketing power of the labels (although like with authors I’m sure this has always disproportionately gone towards the big names), they have to act more like small business owners. I don’t think piracy is hurting their sales directly, but if they are unable/unwilling to market themselves, get on social media, make a cool website, disseminate sample tracks for free, etc., etc., they may have trouble making it. Of course, in general, “indie” artists of any kind will always struggle to make it. I would still argue the power of the internet makes this less true now than ever before (but still true, of course)

  48. Amazon’s math of “you will sell 1.74 times as many books at $9.99 than at $14.99″ is also suspect

    It is even more suspect than you suspect, I suspect. $9.99 is a popular price for many goods for a simple reason: it is a “psychological price point” that makes people think something is a bargain even when it isn’t. There have been studies showing that you can sell more units of things priced at $99.99 than you can if you price the same thing at $89.99 (weird but true). Thus, that 1.74 advantage is probably extremely narrow; it probably drops off fairly quickly if you change the selling price to $8.99 or $10.99 or even $9.50.

  49. An addendum to the second-to-last paragraph in my last post, one that Dann made me consider:

    Another reason I feel fairly certain that Amazon won’t be stopped is the fact that Apple offering a pricing model that charges higher for eBooks will be busted for collusion, but Amazon’s practise of selling at a loss in order to drive out competitors won’t be called out for dumping.

  50. Yes, I don’t mean to discount the production costs of a book in general (editing, formatting, marketing, etc.), but printing books adds a nice chunk of change on top of that, is all I was saying.

    That may not be a correct thing to say, however. In past discussions, people within the industry have pointed out that this “nice chunk of change” is not nearly as big as people outside the industry think it is.

  51. Quoted: “Please stop making the cost of production argument for books and apparently nothing else in your daily consumer life. I think less of you when you do.”

    Why do you assume people make this assumption only for books? I see people make this argument all the time for a wide variety of things.

    And to say just because someone has paid more for something at one time means that they give up that argument is a very narrow point of view.

  52. I see people make this argument all the time for a wide variety of things.

    It’s still not a very good argument.

  53. While this is not going to happen because this is not the way PR works, I really really really wish Amazon would stop pretending that anything it does it does for the benefit of authors.

    When Hachette does it, I will start criticizing Amazon for not following suit. Hachette never fails to mention its suffering authors when complaining about the situation, and its suffering authors – at least when they dare to speak in public under their real names – never fail to blame Amazon first, last and entirely for their suffering. Until then Amazon, even assuming they are acting in complete bad faith, is only fighting fire with fire.

  54. @gwangung no doubt that’s true, but my point stands, especially about backlisted titles. Plus, don’t forget that printing is not the only cost associated with selling a physical book. You also have shipping, warehousing, and return processing expenses.

  55. Austin H. Williams@12:30 …Apple offering a pricing model that charges higher for eBooks will be busted for collusion, but Amazon’s practise of selling at a loss in order to drive out competitors won’t be called out for dumping. Too right.

  56. no doubt that’s true, but my point stands, especially about backlisted titles. Plus, don’t forget that printing is not the only cost associated with selling a physical book. You also have shipping, warehousing, and return processing expenses.

    This may or may not stand, depending on what actually goes on in the real world. I recall that these costs actually included distribution—but I could be wrong. Details matter; if the associated costs make up a tiny fraction of costs, then I think the point is irrelevant.

  57. Another thing to consider about Amazon’s ability to unilaterally change the terms of KDP vs the “locked in” rates of a publishing contract: authors can opt out of KDP at any time. They can’t opt out of their contracts with a big publisher, even if they realize that some of the terms are not so hot or if their backlist is stuck in limbo forever because it’s limping along above some horribly low bar of ebook sales.

  58. While I absolutely agree that books are not commodities and will be priced differently based on all sorts of factors — I think the one place you are wrong is that Amazon will try to press prices downward from 9.99. There’s a history here.

    We already see that market forces have brought most prices for most traditionally published books down to paperback prices. Not as a discount, just as list. (Then the books go on discount for 3.99 or even 1.99.) Amazon already knows that 9.99 is the upper limit of the optimal range — not a magic price point that all books should be listed at. The range they identified a long time ago is 2.99 to 9.99. They put as much pressure on those pricing lower than that range as they do on those pricing above.

    Amazon is not really focused on the books, so much as the audience. (Pause for disclaimer, I am an investor in AMZN — and some of their competitors.) When you look at their history and financials, you see that they are not actually in a race for the bottom on pricing. They are data geeks — they are all about optimizing the price, and yes, having different prices for different items. They don’t even see their company as a retailer, but rather as a search company.

    The thing to keep in mind about press releases such as this is that Amazon hates to reveal any of their data. In this case, they released a tiny factoid that is good PR — but that’s not what they are basing their pricing positions on. They have a LOT more data than that. They not only have data as to how different prices work for different books, they have data on what different audiences will pay, and how and when they pay it. They have data on whether customers bother to read books they got free or cheap. (This is, obviously, for ebooks.) They know when readers stop reading a book, and whether they go back and finish it later.

    They are not at all confused about what those numbers they release mean. They don’t see it as an optimal price point which all books should adhere to. It’s just a psychological upper limit. They’re not going to set a lower “upper limit” because that line really is where the data shows a huge jump in purchasing. While other price points between 2.99 and 9.99 may offer even better sales, the difference is not enough for it to matter. It would be leaving money on the table for them to cut off any part of that range.

    Camille

  59. I love when people who don’t know what the hell they’re talking about try to tell a successful author about the publishing world.

    BTW, John: Usually you or a reader has caught the occasional typo fairly quickly, but this instance seems to be flying under the radar. The first time you typed “boilerplate” you switched the “i” and “o.” Unless a “biolerplate” is something with which I am just unfamiliar. Sorry. I’m powerless against my obsessions.

  60. @gwangung The point is that there are higher margins in ebooks sales, especially over the long-haul, with a much lower cost of entry. I mean, it’s rather self-evident. Just look at the explosion of successful self-published authors. Some of them even pay editors and cover artists and formatters!

  61. Shayde –

    When a new Playstation game comes out, I can buy the physical copy for $60, or I can get the digital download for $60. Hell, with store discounts, I might even get that physical copy for $55. I wouldn’t suggest that that the digital download of the game is a “lesser” product just because it lacks physical media.

  62. “I really really really wish Amazon would stop pretending that anything it does it does for the benefit of authors.” Looks like you got your wish John.

    From the Amazon website: With a mission “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices,”

    Amazon is concerned with one thing, their customers. Because their customers are how they make money. When companies like Hachette collude to keep prices high, see price fixing lawsuit that Hachette lost, it is the consumer that is hurt.

    Besides, this whole story ignores the fact that if Amazon is such a bad company why doesn’t Hachette and the other big old fashion publishers sell their books somewhere else and pull all their products from Amazon? Oh, that’s right, because Amazon has the largest online customer base that they pay to advertise too.

    Amazon may not be the perfect company, probably because one does not exist, but they are on the side of the reader and authors and publishers will have to either agree to play by Amazon’s rules or go somewhere else. They can no longer bully the readers and retailers like they used to, and that is a good thing for readers.

    Thank you John for provided an intelligent discussion about this topic. Your insight, as always, is appreciated.

  63. Regarding Amazon’s math of “you will sell 1.74 times as many books at $9.99 than at $14.99″ -

    I read this as “John Scalzi will sell 1.74 times as many copies of Locked In at $9.99 than at $14.99.”

    Which sounds like the sort of thing that the biggest book retailer on the planet would *know*, after a couple decades of slinging books left and right.

    (If this was not true, I’m surprised that Amazon would say it. The Forbes article seems to support that. Anyone else have other math?)

    Concerning books as ‘commodities’ – I agree that I – me – I read with definite preferences for some books over others. I do not shop just on price, and I think hardly no one does – if that were so, the ‘free book’ stacks at the library would never have anything in them.

    That doesn’t mean I don’t practice price discrimination, and won’t delay buying a new book until the price falls into the right range. In this, one might draw an analogy to ‘eating out’ vs ‘home cooking’ – just because you’re not going to cook doesn’t mean that you’re going to eat at Ruth’s Chris. Chinese takeout might well be the default choice.

    People who price their goods – clothes, cars, books, whatever – like Ruth’s Chris is the default for their customers are not selling to me.

  64. I should also point out that Amazon has never pretended to be on the side of authors. They have always said — in word and deed — that they are on the side of their customers. In this particular press release, the bit about the authors is a snarky aside in reference to the authors who have come out in support of them.

  65. I am reading as many of the comments as I can while still doing some stuff in the breathing world, meaning I had to skip some, so forgive me if someone else already mentioned this – also, it is very much an aside but one reason that I am not prepared to pay (almost) the same amount for an ebook as for a paper book is that I am buying the actual book but only the right to look at the digital book.

    That is not meant as an excuse for piracy. I will just buy the paper version or do without.

    Downloading shit for free against the wishes of those who have the legal right to sell it is stealing. Same as a person stealing your bicycle or a crooked money man stealing your gran’s life savings. Stealing is stealing and folks who dress it up in Robin Hood clothes are either fooling themselves or morally & intellectually dishonest.

  66. I don’t buy the argument that a physical book has any more inherent value than an ebook. If you prefer physical, great enjoy, I do too. Just don’t discount the value of convenience, instant delivery and doesn’t take up space in your house. In general used books are more valuable as pulp than anything else. I wonder sometimes how often the people who talk about the value of lending books to other people actually do it. If they sell their used books or donate them to charity/friends/the recycling bin.

    How much does a night at the movies cost? How much does dinner out cost? How much entertainment value do those things have over a good long book? Can you lend either of those things out? Does that make them less valuable?

    Despite medium you are getting the same exact art work. It is the art of it that makes it valuable not the medium. Both have their upsides and their downsides and they make their choice based

  67. This is where many people decide to opine that the cost of eBooks should reflect the cost of production in some way that allows them to say that whatever price point they prefer is the naturally correct one [...]

    Another analogy: I don’t buy a painting based on the cost of the paint, just like I don’t buy books based on the cost of the paper or the bits.

    Books are unusual in that there is a definite ‘time cost’ to them as well, beyond most other entertainment content – the main hurdle for me is not the price of the book, but if I think I will enjoy it. Sinking many hours into a novel I don’t enjoy has a negative cost that outweighs the material cost.

    Furthermore, pricing may also have a signaling component – my concern on quality level grows when I see a unknown author with a low-cost book. And part of that is exactly why the publishers need to get paid – they provide a valuable service by curating, and that will naturally be part of the book price. (This isn’t to say there are not good authors like Hugh Howey that are self-published; just that the signal-to-noise ratio is lower, which makes it harder to find those authors).

    However, for what its worth, I would argue that ebook prices from big publishers are too high not from the perspective of production costs, but from the perspective of value. While convenient, I don’t actually own any of my ebooks – I just have a license to view them, and no rights of first sale. At times I wonder, once I am dead and gone, will my children even bother to browse through my digital collection of books? Could they, if they wanted? Also, DRM limits the usefulness of ebooks – I would love to buy ebooks from the publisher, and load them on my reader of choice. But that won’t happen until the publishers sell books DRM-free. So in practice, I wrestle with purchasing an ebook at the same or higher price than the paper book (which I will get to actually own).

  68. For those referencing the Apple lawsuit – the issue was that Amazon was buying ebooks from the publisher at 70% of their listed price but discounting heavily. The agency pricing was to stop that, and was deemed illegal.

    Part of the evidence was an email from Steve Jobs to James Murdoch included (as one of their options):

    “Keep going with Amazon at $9.99. You will make a bit more money in the short term, but in the medium term Amazon will tell you they will be paying you 70% of $9.99. They have shareholders too.”

    The medium term has arrived. Whatever you think of the legality, hard to argue the foresight.

  69. @John Scalzi: Two stupids don’t make a smart.

    Couldn’t agree more.

    However, this is about perception. Assuming what people thinks makes any difference – I’ve seen estimates that this thing may have cost Amazon something like 5-10% of book sales among certain demographics who don’t like what Amazon is doing, which is not nothing, if not exactly crippling – if Hachette is standing on the “we care about authors” moral high ground, Amazon is pretty much duty bound to point out why they are the ones who should be viewed as the Author’s Friend. Even though for both of them it’s a load of horse hockey.

  70. “Killing off Amazon’s competitors is good for Amazon; there’s rather less of an argument that it’s good for anyone else.”

    Competition is meant to encourage innovation and lower prices, neither of which some traditional publishers seem keen on. It’s not really “competition” if we’re propping up entities that can’t “compete,” so of course the real deal isn’t good for them.

  71. Skimming, so perhaps this was addressed but…

    When you get an e-version of a book or comic book, all you get is the story. You don’t get a hard object that can be sold, given, cherished, etc. So by very definition it is a LESSER PRODUCT.

    NO. You get a DIFFERENT product. Not lesser. I have probably a thousand physical books. I love books. Mom worked in libraries as I grew up. But I mostly buy ebooks because I like some of the advantages they give (availability of a library on one device, searchability, ability to highlight a word and Google or Wikipedia it). Some people like the physicality of paper books and don’t value these as much as I. That’s fine… but let’s not conflate tradition or personal preferences with better and worse.

    On topic more… I’m confused by people who rail against spending $12.99 for a new release ebook but feel $9.99 is a good deal. $3 isn’t that much money once you’ve decided to spend $10. If it is, wait for the price drop when that book comes out in paper and the ebook price drops. That’s what i did most of my life – I don’t like the size and weight of hardcover books and generally didn’t want to spend that much money so I waited and bought paperbacks. Much of the kvetching about ebooks and price seems to come down to people saying “I want it, I want it now and I want it on my terms!!!” That’s fine but the world doesn’t often give us everything we want when we want it and how we want it. If it did, I’d be typing this from my Tuscan villa…

  72. Amazon may not be trying to set a hard ceiling of $9.99. They may just be asking for a higher percentage on prices above $9.99, just like they do for self-published books on KDP. In that case, the publisher would still be able to experiment with higher prices, but they would have to pay more to Amazon in those higher price ranges.

  73. I am playing devils advocate on this… so John don’t go crazy.

    First point is aimed at responses and not at John’s post.

    Technically amazon is helping the consuming by driving down prices. I believe under the anti-trust acts, monopolies break the law when they hurt consumers by driving up processes and limiting new technology/competition. At 30% market share, I don’t think there is a monopoly case against them anyway. Even if their competitors are smaller.
    This is actually good for consumers because it lowers prices. I don’t think there is any case against amazon even if it drives B&N out of business which is what I think they want to do.

    My 2nd non-troll devils advocate point… uh.. the devices you use like the nook, your laptop, your TV, etc… and even most of your cloths are built overseas on sweat shops. This lowers the price. This cost alot of blue collar people their jobs. Why should we as consumers care more about your income than we do about the blue collar factor workers that lost their jobs? Books may not be ‘interchangeable’ , but your stake in the game is business. You are concerned about your income. As customers, I’m not sure we should be. I work in IT. I have had my job offshored and onshored (they bring someone in with a VISA at 1/3 of what they pay me)… I have to look out for myself.

    End Devils Advocate position

    Non-Devils Advocate discussion… found one point really interesting.

    John argued that if $9.99 becomes the new price point it will be the price point for all books. Even older books, etc since publishers need to raise prices to make up for their loss on new releases. I’m not so sure this will work real well. Libaries now let you check out ebooks. Overdrive is not as good of an app as iBook (though not real impressed with this) or the Nook, etc… , but your not going to have a library. Its also pretty easy to get older, less popular books. You generally don’t have to wait. Now you don’t even have to go to the library. Its as much effort as buying from amazon. To renew you just click a button. Even after your 9 weeks is up, you just check out again with a button click.

    The value in ebooks purchases is getting it now and there is a long wait at the library for new releases plus when there is a wait you can’t renew. This could increase your sales to libraries, but since many people read a book you sell once, I don’t think this will be a net positive.

    My last comment… ok so what are you going to do about it other than complain in your blog? Do you have any options? It sounds like you feel helpless and you don’t think there is much you can do. Not sure its practical to drop Amazon as a vendor in future contracts.

  74. @Phillip McCollum Competition is meant to encourage innovation and lower prices, neither of which some traditional publishers seem keen on. It’s not really “competition” if we’re propping up entities that can’t “compete,” so of course the real deal isn’t good for them.

    I think you’re blurring the difference between competition between entities providing similar things and hustling for competitive advantage between entities that depend on each other to sell stuff. Amazon aren’t really competing with publishers, they’re competing with other (e)booksellers.

  75. @jtc –

    Given that Hachette often cites print/storage/distribution costs to justify a larger share of p-book revenues in their negotiations with retailers, the minimal costs for producing and distributing e-books is a legitimate point to be considered.

    If we speak to the relative quality of the work, as opposed to the production costs, then it is the authors, not the publisher, who should be getting the bigger cut of e-book sales. However, for a given e-book sale the author gets ~$1.60 less than for a print book and the Hachette gets ~$2.50 more.

    Regardless of their motives, Amazon is perfectly right when they say authors should get a bigger share of e-book sales as the publisher contributes far less of the book’s overall value.

  76. Sorry John, but this post is full of fail. Let’s go point by point:

    1. You suggest that the math works for Amazon but doesn’t work if you look at other distributors. Why would the buying behaviors of consumers be different through other distributors? Do you think customers who shop at Barnes and Noble like to pay more? Hidden in this point of yours is the truth of what the publishers are trying to do – forestall the adoption of ebooks – thus protecting their relevancy which is entirely dependent on print distribution. So yes publishers are trying to protect the print industry – but why should authors care if they are making more money with the transition to digital (at least those smart enough not to get stuck in onerous traditional contracts)?

    2. Your ground assumption has nothing to do with Amazon’s data. They are talking about the same book at two different price points. You say that Amazon selling 1.74 times as many books is good for Amazon, but not for authors – again how is it bad that authors are making more money? You say as the focus tightens, the general rules stop being applicable. I thought math was pretty absolute. Amazon said $9.99 generates 16% more revenue. Why would this same 16% increase not also apply to how much the author earns (unless there is some special discount clause in the traditional publishing contract that lowers their royalty – they wouldn’t dare do that – would they)?

    3. What money do publishers have to recoup if they are making 16% more? How does making more money destroy the top end of the market? How does this have any effect on the bottom of the market?

    4. You mean Amazon is trying to detract from the fact that they are trying to save customers money. Yeah, they wouldn’t want that to get out. Unlike Hachette, who isn’t doing anything to obfuscate their true purpose of keeping prices high, like launching a massive PR campaign to say that Amazon is hurting authors and culture. And again you make a statement that just boggles the mind. How would a higher royalty rate for authors not be better in the long run for authors?

    5. Try replacing Amazon with Hachette in this point, and it reads a lot more truthfully. You are right that Amazon is trying to do what is best for them. And they seem to have learned an interesting lesson – that by treating authors fairly (70% royalties) they can generate more money for themselves. In other words, they discovered it is actually in their interest to help the interest of authors. Too bad traditional publishing hasn’t learned that lesson.

  77. People seem to be confusing the free market and Amazon.

    Amazon, according to this blog, only sells 30% of books. They aren’t telling anyone what they can and can’t sell and at what price.

    I can’t march into my neighborhood 7/11 and insist that they sell my hand-drawn Yeti’s for $20 because of the free market.

    Amazon can put any restrictions they want on what they sell.

    If I self-publish a book through Amazon, sure I accept some fine print that says they can change the deal. That’s not such a big deal because I am free to leave any time I want.

  78. I have a question to ebook fans in general. I have an ipad. I can run a nook app and a kindle app on the ipad and use books purchased from those vendors on the ipad. Can you use books purchased from other vendors on the Kindle?

    if so bigger authors could drop amazon and customer who purchased a kindle can still read their books on their kindle. I know most authors couldn’t afford to do that. However, really big fish can. That being said, really big fish make enough money where I am not sure they have to care.

  79. Bezos gave some good advice not long ago, suggesting that if customers aren’t happy with things like the games Amazon is trying to play with Hachette, perhaps they should avail themselves of other sellers (my words, not his). So I did just that. I needed a new tablet, so I bought a Samsung Tab 4 and immediately installed the Nook and Kindle readers. I plan to buy at least some of my books from Barnes and Noble from now on, particularly if I have the least bit of difficulty buying them from Amazon. Thanks, Jeff! As Mitt Romney’s much wiser father George once said, there’s nothing as vulnerable as entrenched success.

  80. does anyone know why amazon decided to do this with hachette? It makes sense that amazon will only go after 1 publisher at a time. Is there some contract that publishers have with amazon that may be up and they are renewing?

  81. Amazon “decided to do this” to Hachette because their contract lapsed and, according to the only information we have, Hachette refused to negotiate a new contract, or even talk to Amazon, until they killed the pre-order button and stopped keeping stock on hand.

  82. Adam Lipkin-
    A digital version is a lesser product because of what you can do with after consumption. Your videogame example actually makes my point, because you can sell that physical copy at gamestop for a buck or two. A download can’t.

  83. However, for what its worth, I would argue that ebook prices from big publishers are too high not from the perspective of production costs, but from the perspective of value. While convenient, I don’t actually own any of my ebooks – I just have a license to view them, and no rights of first sale. At times I wonder, once I am dead and gone, will my children even bother to browse through my digital collection of books? Could they, if they wanted?

    Only if they don’t tell Amazon you’re gone. I don’t know if there’s a limit to how long Amazon will keep an account open with no purchases (and I suspect the same goes for other vendors).

    But once your account is gone, so is the library, unless….

    Also, DRM limits the usefulness of ebooks – I would love to buy ebooks from the publisher, and load them on my reader of choice. But that won’t happen until the publishers sell books DRM-free. So in practice, I wrestle with purchasing an ebook at the same or higher price than the paper book (which I will get to actually own).

    Amazon’s DRM is actually trivial to defeat – you can back them up using Calibre, and de-DRM them at the same time: this means they can then be read on multiple devices.

    Personally, I don’t feel any regret about this. If they want me to pay the same sort of money for an ebook as for an actual, paper book, then I damn well do expect to be able to lend it to my partner to read, without lending her my Kindle.

    And I confess, I am very price-sensitive with ebooks, because it’s a rental, albeit a long-term one (I hope!). I will wait for the price to drop. $9.99 is just under£6, which is about as much as I will pay for an ebook. And the Amazon maths is right: I spend probably 5 times as much on ebooks under £3 as those under £6, and 50 times more than those over that point. I’ve never spent over £10 on an ebook (other than technical manuals for work, where the paperbacks can be £30+) and I suspect I never will.

    For some authors, there is a limited reach for their books, and dropping the price won’t automatically make them more money. But for some, I suspect they could have serious multiples of revenue if they dropped to the right price point.

  84. As a consumer only, I will never pay over $9.99 on an ebook. Ever. I really wouldn’t care if it was the last book in a series that I’ve been bent on finishing for years, I still wouldn’t buy it. Not on an e-reader or in a physical format. Hachette is shooting themselves and their authors in the feet and kneecaps by not settling with Amazon. Even though I may love an author and all the work they’ve come out with, I’m not going to pay for one e-book what I could pay for one paperback, which I still wouldn’t do, because I can get 3 other e-books that I’m looking forward to reading just as much. If the battle were between Penguin and Nook, I’d feel the same way.

  85. Well. There are a number of questions and considerations, certainly. Who sets book prices? The retailer or the publisher? In most areas, there’s a set cost (more or less), then the retailer decides what they will sell it for in order to accommodate their profit margins. I find it interesting that the publishers, rather than offering a “suggested pricing” for ebooks are apparently trying to control that rather than the retailer. Rather like when Borders & B&N started dramatically discounting hardcover prices on bestsellers. Independent bookstores were not thrilled, but had very little say in the matter. I remember discussing the matter with the owner of a now-gone indie bookstore when she commented that she could buy the hardcover of a bestseller in the same stripmall she was in at Kmart for less than she could order to sell at her store.

    On a more this-is-how-it’s-always-been-done arena, publishers are having a tricky time coming up with a business strategy to accommodate releasing ebooks simultaneously with hardcovers. Formerly, they released the hardcover, then about a year later released some sort of softcover version at a reduced price. But with a significant chunk of readers shifting to e-readers, the question becomes: What do we do? Do we release ebooks at the same time as the hardcover, but discount the ebook? In reality, many of the people who have switched to ebooks (such as myself in about 99.9% of my reading) would not be terribly interested in paying $25.95 for an ebook, nor would it force them to run to the bookstore (or Amazon) to thus buy their favorite authors in hardcover. Sorry. When they priced Stephen King’s “Under the Dome” at $25.95+, I opted not to buy it at all and wait for a reduced price. I actually got it for 99 cents (and haven’t read the damned thing). In our heads, at least, readers tend to view ebooks as a different entity with a different price point than a physical book, especially hardcover. An argument that books are all about content (on either side of the argument) doesn’t seem to hold up in terms of reader perception.

  86. I have a question to ebook fans in general. I have an ipad. I can run a nook app and a kindle app on the ipad and use books purchased from those vendors on the ipad. Can you use books purchased from other vendors on the Kindle?

    Yes- you can natively read .mobi files on the Kindle, (AZW is just a version of Mobipocket format with some custom Amazon tweaks, including some not-very-effective DRM).

    You can buy .mobi books from e.g. Baen, and just load them up. You can also convert DRM-free books from other formats (e.g. ePub) using Calibre.

    There are many other vendors on the web. and no few free ebooks too.

    Baen seems to have a system where perhaps one book in a series of three or four is paid-for, typically about $6. Which means two things:

    1) Average cost of about $2
    2) You can try the first book and see if you want to follow the series.

  87. Daniel Knight:

    “You say that Amazon selling 1.74 times as many books is good for Amazon, but not for authors – again how is it bad that authors are making more money?”

    You’re making the assumption that because Amazon asserts it sells 1.74 times as many books in aggregate that I or any other particular author will sell that many more books in aggregate, which may or may not be the case. I might sell as many books at $14.99 as I would at $9.99, because I might have motivated buyers, in which case Amazon would be forcing me to leave money on the table. Or I might not! Rather than letting Amazon decide for me, I would rather have (through my publisher, who knows rather more about my sales patterns) my own choice in the matter.

    Likewise, you seem to be making the assumption that Amazon’s purported increase in books sales will be equally distributed across all book publishers, which is again is an assertion not in evidence. A publisher might run their own numbers and make the decision that it’s better for their business to price eBooks at another price point.

    Again: What’s good for Amazon is not necessarily what’s good for publishers or for authors — or, for that matter, consumers, since if Amazon (or any other retailer) gets to a monopoly or near-monopoly position, they have no economic reason to price their products in a consumer-friendly manner.

    “I thought math was pretty absolute.”

    I’m not convinced you are an expert on this matter, however.

  88. @Jantar: The same is basically true here in the States… almost all contracts have a boilerplate clause that says something along the lines of “if a paragraph is deemed unenforceable, the rest of the contract stays in effect.”

    However, the American legal system can be very easily gamed to the advantage of those who are patient and willing to spend more money than the other side. You can be clearly in the right in a dispute, but you’ll have to wait 3-5 years and spend over $100000/USD to be proven right in a court of law.

  89. Just a couple of comments, without being too contradictory and certainly without getting into the swirling vortex of what Amazon “might” do someday (not arguing whether they will or not, but any party in the greater world of publishing “might” abuse any additional power it gets).

    First, the Amazon figures are for all ebooks, which means mathematically, the universe of authors earns more at $9.99 rather than $14.99. If you feel Amazon is lying, that is one issue, but if you believe the figure is correct (and no one has a store a priceless data like Amazon), I can’t see any argument that, on ebooks at least, more authors make more money at $9.99.

    I won’t speak to preserving hardcover sales, except to note that markets don’t take well to being told to pay what they feel is egregious for products, even when they want them badly. I can’t think of anything better for the piracy industry than $14.99 and $19.99 ebooks. Almost everyone in the marketplace thinks that is ludicrous, and they’re not going to change their minds because some authors want to shore up hardcover sales for a few more years. Standing in the way of the market is foolish in virtually all cases.

    Aside from the hardcover issue (and assuming no “Amazon is lying about the numbers” conspiracy theories), more money goes to authors overall at $9.99. Yes, there are authors in those conglomerated numbers who might make less at $9.99, just as there are many who would make more. But more money overall goes to authors, at least on Amazon.

    As far as BN and other ebook vendors, lacking data (which could certainly vary from Amazon’s) from them, the best possible estimate is that their results are similar. Markets are markets. Maybe BN has a less price-sensitive audience, but lacking any data to point to that, you would expect similar results from different retailers in the same space.

    Let me be clear. Hachette has the right to sell their product at whatever price they want, just as Amazon has the right to stock what they choose. While I consider the notion of stunting the fastest growing platform (ebooks) to justify high prices for hardcovers to be a poorly conceived strategy, I am not Hachette’s CEO.

    As an author, I can say I would be very upset if my publisher priced my ebook over $9.99. I don’t think it pays in the long run. Others may disagree, but I don’t see the data to support that argument (again, aside from propping up hardcovers).

    And regarding the comment on one of the responses about Amazon’s demand matching that of the price-fixing scandal, it is not remotely the same thing. The publishers didn’t get in trouble for saying, “we want our books priced this way.” They got in trouble because they all got together and agreed to do exactly the same thing (price-fixing).

  90. re: amazon’s math. There are three kinds of lies: lies, damn lies and statistics.

    Cherrypicking your data points is trivially easy now.

  91. @Mord Fiddle:

    Given that Hachette often cites print/storage/distribution costs to justify a larger share of p-book revenues in their negotiations with retailers, the minimal costs for producing and distributing e-books is a legitimate point to be considered.

    I tend to disagree with this – as a consumer, I am looking at it from the perspective of value, not raw material markup or production costs.

    If we speak to the relative quality of the work, as opposed to the production costs, then it is the authors, not the publisher, who should be getting the bigger cut of e-book sales. However, for a given e-book sale the author gets ~$1.60 less than for a print book and the Hachette gets ~$2.50 more.

    I agree that authors likely deserve more, but that is between the publisher and the author, per their contract. Not something to be dictated by a 3rd party. And again, there is value in what the publishers do – and if there isn’t, the market will take care of that; authors won’t sign with publishers, and readers won’t buy books from those publishers.

    Regardless of their motives, Amazon is perfectly right when they say authors should get a bigger share of e-book sales as the publisher contributes far less of the book’s overall value.

    *Shrug*. Sure. I’m just not sure I want Amazon being the one that dictates author / publisher contracts. That said, I am frustrated by the DRM that (most) publishers insist on for ebooks, and I think their use of DRM gives them less leverage with Amazon.

  92. I find that most people just flat out don’t have any idea how much it costs to manufacture things. Like, not even a little.

    I work in comics, where the idea that digital comics should be .99 because print comics are 2.99 -3.99 , with the idea that bulk of a comic’s price is in the printing of the physical object.

    It isn’t. One of my trade paperbacks costs about 1.50 to print. The single issues cost about a a quarter. And for bigger publisher, it’s going to be even cheaper. The printing and shipping of the physical objects accounts for at most 10% of the cover price for any of the books published by the large publishers.

    I would guess that the same sort of scale is true for prose books. I do know, for sure, that what you’re paying for when you buy a hardcover at full price isn’t the object. You’re paying a premium to get it FIRST.

  93. “I feel perfectly justified in considering your cost of production position vis a vis publishing as entirely hypocritical.”

    Not hypocritical in my case, just ignorant. Thanks for this explanation. I hadn’t considered e-book pricing this way. (To be fair, big publishers don’t generally *explain* it this way. They claim that ebooks don’t actually cost less to produce, ship, store, etc., which is a specious claim.)

  94. On the subject of DRM, this is where I note that none of my fiction from Tor or Subterranean Press has DRM on it, because I think DRM does nothing useful, and my publishers agree with me (the latter is not true with all my publishers worldwide, although I wish it were). I do believe that if you’ve bought an eBook with my name on it, you own it.

    Jay:

    “First, the Amazon figures are for all ebooks, which means mathematically, the universe of authors earns more at $9.99 rather than $14.99.”

    That’s nice for the “universe of authors,” but yet again it does not mean that individual authors cannot do equally well at $14.99 (or any other price point above $9.99) than they would at that $9.99 price point, nor should that assertion mean that publisher should be required to sell their wares at that price point if they choose not to. I don’t mind Amazon making the assertion, but it does not follow that because the assertion is made, that the price point should become a requirement.

    While we are on the subject, let’s also note that we are also buying into Amazon’s framing here, i.e., that there’s somehow a $14.99 price point and a $9.99 price point, with nary a price point inbetween. Well, right now on Amazon, my book Lock In is preselling for $10.67, which is neither of those two price points. If memory serves, when Redshirts first came out, its price point was either $11.99 or $12.99; it sold better than the hardcover, which sold well enough to land me on the New York Times Best Seller list.

    Which is to say that we need to ask the question of why Amazon decided to use the $14.99 eBook price point — which to my knowledge none of my eBooks has ever been priced at — to contrast with the $9.99 price point. Rather than, say, $11.99 or $10.67. The answer might be instructive.

  95. @joeiriarte… it’s a specious claim because it’s not true. BUT the costs to print/ship/etc aren’t as expensive as we all speculate, so the profit margin we all expect to be lower for print isn’t really a big factor. They’re getting killed on charges for managing e-books because they got rooked early on by smart people who told them it would be expensive.
    So the cost is really similar due to bad infrastructure decisions. At least that’s how it has been explained to me.
    So anything negotiating the overall cost of the book directly takes dollar-for-dollar out of profit pretty evenly for both E and Print.

  96. I don’t want to spam up John’s blog with all the math, and besides I’m really, really tired of having to lay it all out again and again. So I’m just gonna put it this way:

    I am a book production manager. This is my career of TWENTY YEARS (almost exactly–I started in the first week of August, 1994). I have worked on everything from mass market paperbacks to fancy coffee table books. There’s very, very little I don’t know about what it costs to print, bind, and ship a book. (My knowledge gap: kid’s picture books.)

    When it comes to novels, the average mass market paperback costs between $1-$2 to print and ship. Trade ppk between $3-$4. The average hardcover, $4-$5.

    (If you’re printing POD, it will be higher. Publishers save by printing in bulk on offset presses.)

    So if you want the publisher to give all that savings back to the reader (instead of, say, the writers), the best savings you should be demanding is that the ebook price be $2 less than the mass-market list price, or $4 less than the trade list price, or $5 less than the hardcover list price.

    Go do some comparisons of list price (not discounted bookseller price) for print vs e- editions. See how close these numbers come. I think you will find many, many cases where the publishers are discounting the ebook editions more than this, particularly on hardcovers.

    ———–
    (slight topic change)

    Now, you may personally feel that an ebook isn’t worth the price because you can’t lend it, etc etc. The simple answer to that is: Don’t buy it. I decline to purchase all sorts of things because I think they don’t deliver enough value for my needs. Or I purchase an alternative (store brand over-the-counter ibuprofen instead of Motrin brand, for example).

    Remarkably, publishers still supply that value-added thing called a “print book.” If you would prefer to have a book you can lend to friends or resell or use to balance a wobbly chair, you can buy a print edition.

    Oh, what’s that you say? You like the convenience of having multiple books in a dimensionless space in your pocket or backpack?

    Hello, you have just discovered the value add of an ebook. You give up tradeability and resell for portability. Surely that’s worth something to you?

  97. @znepj:

    Also, DRM limits the usefulness of ebooks – I would love to buy ebooks from the publisher, and load them on my reader of choice. But that won’t happen until the publishers sell books DRM-free. So in practice, I wrestle with purchasing an ebook at the same or higher price than the paper book (which I will get to actually own).

    Amazon’s DRM is actually trivial to defeat – you can back them up using Calibre, and de-DRM them at the same time: this means they can then be read on multiple devices.

    I’m aware of Calibre and de-DRM; however, it is problematic for many reasons, and I would prefer my books to be sold without DRM. And the ease of Calibre and de-DRM makes its presence all the more ludicrous; those that will pirate books can currently do so easily.

    And it hurts the publishers, because _any_ frictional barrier like that will make sure that most of your consumers won’t buy an equivalent product directly from you (e.g. something they can read from either a kindle paperwhite, nook, etc.). When buying an ebook, I shouldn’t have to worry about what my reader is at all, aside from technical limitations (color, etc..).

    But I think you and I are essentially in agreement; lack of ‘ownership’ and presence of DRM lowers the value of ebooks (for us, at least). For me though, that is partially made up by the increased convenience of ebooks.

  98. @John Scalzi

    On the subject of DRM, this is where I note that none of my fiction from Tor or Subterranean Press has DRM on it, because I think DRM does nothing useful, and my publishers agree with me (the latter is not true with all my publishers worldwide, although I wish it were). I do believe that if you’ve bought an eBook with my name on it, you own it.

    Thank you!

  99. As a consumer my interests are in me. Cheaper is better. I have always thought ebooks should be <$10 and hated Apple for trying to change that. Printing and paper is expensive and not so eco friendly for those tree huggers around.

  100. John, I’ve been following this whole thing since I wrote about how iTunes was going to affect the music industry in 2008. I’ve been computing the incremental cost of delivering a copy of an ebook or iTunes song all that time. We know that Wishpernet costs 15¢ a megabyte, so even with Whispernet, the incremental cost of a book as big as _Atlas Shrugged_ is 45¢. The other cost, compute platform and server, is in the order of 10^-6 cents.

    So, with a $9.95 ebook, you have a margin of someplace in the neighborhood of $9.00

    If Hachette can’t figure out how to make a profit on 90 percent margin and still pay the author a decent royalty, it’s because they’re fools. If they want more than 90 percent margin (remember that’s a fixed cost) before they’ll pay a decent royalty, it’s not Amazon that’s screwing you.

  101. John Scalzi said:

    “You’re making the assumption that because Amazon asserts it sells 1.74 times as many books in aggregate that I or any other particular author will sell that many more books in aggregate, which may or may not be the case.”

    No, I’m assuming that the 1.74 is an average, which if we assume a bell-curve distribution means that most authors will sell more books at this lower price point. It is true that some particular author might sell more books at the higher price, but they will be in a minority.

    And yes I’m assuming that the increase in book sales will be fairly evenly distributed because that is how natural bell-curves and averages work. This is also supported by evidence gathered by the self-publishing community.

    Your Amazon monopoly thesis is another strawman argument. Amazon is nowhere near a monopoly and hasn’t shown any evidence of practicing the behaviors you think will happen in the future. If they did they would become subject to the laws restricting such behaviors.

    Finally your assessment of my mathematical skills as stated by you “I’m not convinced you are an expert on this matter, however,” is quite irrelevant. As a high schooler I competed in mathematics competitions on the local, state, and national level, winning first place awards at all levels (in subject matters all the way up through what colleges call Calculus 2). I attended undergraduate school on a National Merit Scholarship (full ride) and graduated with a bachelor’s degree in mechanical engineering. My final GPA was a perfect 4.0, a feat that according to the Dean of Engineering had not been completed in the previous 15 years that he had been Dean (in any engineering discipline). I got my Master’s degree in mechanical engineering from Carnegie Mellon University on a full-ride from a National Science Foundation Fellowship (after turning down a full-ride offer from MIT). It’s true I didn’t get a perfect 4.0 in graduate school – I actually got one A-. I’ve since worked on projects including the space shuttle main engines, maglev haptic systems, warehouse automation systems, inspection robotics, and electron microscope equipment. I have an IQ that puts me in the top 0.1% of all people on Earth. That being said, I’m still wrong from time to time – just not this time.

  102. I have always thought ebooks should be <$10

    Of course, that’s kinda irrelevant if publishers can’t make money at that point.

    I keep on pointing out that printing and distribution costs are a far lower part of the price than people assume (and other posters have been pointing that out as well). I feel that gas should be less than a buck a gallon, but I’m not going to find any outlets that’ll sell at that price.

  103. Charlie Martin:

    Because everything else associated with book production — the editing, design, marketing and PR — comes for free? Not to mention the cost of the writer’s own work (usually quantified by the advance)? I’m not 100% behind your police work there, Mr. Martin. Certainly the longer a book sells (and sells successfully), the marginal cost of each unit goes down. But that’s a long haul, and most books don’t earn out for their authors (which is different than earning out for publishers, but many of them don’t do that, either).

    Mind you, this is once again trying to bring the conversation around to the idea that there is some particular price books should be, based on production costs, and once again I say bah to that. If publishers can sell an eBook at a price point above $9.99 to willing purchasers, why should they not be allowed to do that? It doesn’t matter whether the profit marging is 9% or 99% — what matters is whether there are buyers.

    I’m genuinely flummoxed why so many people seem to be having difficulty with the idea of a free market for eBooks, with the prices set by the manufacturers and demand (or not) provided by consumers.

    Daniel Knight:

    “It is true that some particular author might sell more books at the higher price, but they will be in a minority.”

    And so fuck them, there’s not enough of them to count? I’m not 100% behind that police work, either.

    “Finally your assessment of my mathematical skills as stated by you ‘I’m not convinced you are an expert on this matter, however,’ is quite irrelevant.”

    Well, no, it’s not. Be aware, Mr. Knight, that I could claim to you that I am a super mega math wizard of the 63rd level, plus also a Prince of Andorra. Anyone can claim anything in a comment thread. However, just because you assert something doesn’t mean I am obliged to lend it credence. Likewise, I know I have two decades experience as a professional writer, and that what you’re suggesting is largely aside the point to the way things work in the real word. So, no. I’m still not convinced that you are an expert in this matter.

  104. IQ scores and GPAs, Mr. Knight?

    Heh heh.

    You do know that you’re arguing with someone with extensive experience in both self publishing and traditional publishing?

    Heh heh heh.

  105. If production costs for books really are as low as several of you claim, it’s quite amazing how little of the remaining pie goes to authors. Multiple big name self-published authors have laid out their budgets for professional editing, formatting, cover design, etc., and it tends to amount to a few thousand dollars, sometimes less. In their case, it seems very obvious that Amazon’s position is more advantageous to their bottom line and thus it is rational for them to support Amazon, even if some of the criticisms leveled by individuals like John are true. Unless I’m missing something crucial, that seems more or less undeniable.

    I’m sure it does get muddier when it comes to traditionally published authors, although it’s disingenuous to claim or even to imply that midlisters or new authors are impacted the same as bestselling authors by these sorts of fights. Again, it seems fairly obvious that they are not. Note, I am not saying that this proves Amazon’s position is advantageous to them, only that they should be considered separately.

    That said, while I don’t know that there is data to back this up, my own gut instinct here is that higher prices push unknowns out of the to read list for book buyers on a budget because because a) they can’t afford to buy Patterson AND Joe no-name and/or b) they don’t want to risk a $10+ investment on an author they don’t know. Thus my instinct is that only the most popular authors have a self-interest in siding with the big publishers (even if they support better % on ebooks for all authors as John does here).

    For the record, I am not criticizing anyone for looking out for themselves. Also, this equation is sure to change in the future no matter who “wins” this time.

  106. I just took a quick glance at my kindle purchases and the most I’ve spent on an eBook was $12.99 but I was averaging around $6-8 for novels which is basically why I think capping at $9.99 is silly. There are people who will buy above that and people who don’t want to can wait for the price to drop just like with physical books.

    For the most part I’m very behind in my reading so I don’t normally buy books right away but for some authors I have no problem paying that “just released” price, especially if it’s a book I’ve been eagerly awaiting. I actually find I’m buying more at that “paperback” price because with physical books it’s a lot easier to impulse buy a book I know I’m going to read eventually whereas with digital I just buy when I’m ready to read (unless it’s on sale) so I don’t buy it when it’s released.

  107. Gwangung said:

    IQ scores and GPAs, Mr. Knight?
    Heh heh.
    You do know that you’re arguing with someone with extensive experience in both self publishing and traditional publishing?
    Heh heh heh.

    And that gives him expertise in and the ability to evaluate the expertise of others in mathematics, statistics, and logic – exactly how?

  108. I’m genuinely flummoxed why so many people seem to be having difficulty with the idea of a free market for eBooks, with the prices set by the manufacturers and demand (or not) provided by consumers.

    But isn’t it true that Hachette is trying to manipulate the market just as much as Amazon, if not more (and I’m not referring to the earlier price-fixing)? Aren’t retailers traditionally free to be the ones to set the final price on their stock? Direct me to a source if I’m wrong, but it’s not like Amazon is selling at a loss here. If they want to set a price at a level that reduces their own profits per unit, there is no reason that is acting in contrary to a free market. If Hachette wants to sell their books for more, they are welcome to use other retailers (as they have). If the market thinks their product is worth it, their strategy will be rewarded. If not, not.

    I’m flummoxed why so many people seem to think otherwise. Sure Amazon has a large market share, but there are plenty of other options out there. At worst, they are the online equivalent of Walmart, but even Walmart doesn’t sell all the things to all the people and put all the other retailers out of business. I’m no Amazon apologist (although I’m sure you probably think so by now), but I think you have chosen a side more categorically than you claim.

  109. @n1quigley – Multiple big name self-published authors have laid out their budgets for professional editing, formatting, cover design, etc., and it tends to amount to a few thousand dollars, sometimes less.

    There’s been more than a few indie films that have made millions in revenue with a starting budget of a few grand. That’s evidence that it can be done, not evidence that cash, every movie cost $2,184.

    You need to include the set of people who spent that self-pub average and didn’t become big names, then compare with the midlist success or otherwise of trad published authors before you can come to some kind of rule – and even then it will just be an average.

  110. John,

    No argument that there are many price points that can be compared, and Amazon (just like Hachette or anyone else) is going to offer one that supports their point of view. It is possible, for example, that $11.37 is the optimal price for maximizing aggregate ebook revenue. Or maybe $8.74. However, in the absence of alternate data, I don’t think much is served by presuming that non-existent information will contradict the overall point. Anecdotally, it’s pretty obvious that most readers/buyers don’t think ebooks should be priced above $10. That doesn’t mean they all do, or that those that feel this way won’t make exceptions and buy something they really want. But again, when we look at the whole market (and what else can we look at when deciding what is best for “authors” as opposed to author A or author B individually?

    You can’t know now what your Redshirts sales would have been with a $9.99 price point (or any one other than what you had). Perhaps you would have sold more, maybe significantly more. Or not. Or maybe your hardcovers would have fallen. Or not. It’s idle speculation at this point. Because a book was a success doesn’t mean it couldn’t have been more successful if it had been handled differently (or less so). That doesn’t mean you’re not happy with how it worked out, but I assume you’d have been even happier with greater sales.

    Whether you think YOU would do better at $9.99 ebook pricing is something for you to decide in planning your career (to the extent you can control pricing). But assuming Amazon’s numbers correct, more authors would gain (and more total sales in aggregate) at $9.99 over $14.99. It would be great to have other comparisons at different data points (and Hachette has all these figures too, at least for its own books…I am always suspicious of silence and hypothetical arguments against actual data when on side doesn’t release any). But lacking that expanded information, a reasonable application of statistics in crafting an estimate would strongly suggest that price points between $9.99 and $14.99 would gradually become closer (e.g. more revenue at $13.99 than $14.99, but less difference than the 14.99-9.99 comparison). Certainly there could be statistical wiggles in there, but it’s a pretty good bet it would be close.

  111. n1quigley:

    “Direct me to a source if I’m wrong, but it’s not like Amazon is selling at a loss here.”

    You’re aware Amazon has sold things, including books, at a loss before, in order to increase market share — indeed that Amazon’s general SOP to date is to grow its market share at the expense of profits? This is in fact a long running point of contention with the company and its shareholders.

    Mind you, occassionally selling things at a loss to grow market share or awareness is not bad thing in themselves — “loss leaders” are common in every retail segment. You get people in the store with cheap things you lose a little money on, and you get them to buy other things you make money on.

    With regard to books, in Amazon’s new subscription business, there are apparently some books that Amazon offers on subscription basis where each download is automatically credited as a sale; these are effectively loss leaders for Amazon as it attempts to build that market and its market share.

    Does Hachette (or any other publisher or retailer) want to control its market as much as possible? Obviously they do — again, this in itself is in my opinion neither good nor bad in itself. Where it becomes problematic (or at least interesting) is in the impact it has on other players to do their own thing — in this case, with authors and publishers, to set their own prices.

    Jay:

    “However, in the absence of alternate data, I don’t think much is served by presuming that non-existent information will contradict the overall point.”

    I have absolutely no doubt Amazon would agree with you. However, when I don’t see data here, my initial assumption is not that they are not relevant, or indeed “non-existent”. My initial assumption is that there is a reason the data are not there is because they are not useful to Amazon’s argument, and that if Amazon has data on these two sales points, it has them for every other sales point as well. Given the wholesale amount of spin I see in Amazon’s press release, it would be foolish of me to assume that this price point construction is not primarily designed for spin purposes as well.

    Bear in mind also that from my point of view I may in fact sell more units at $9.99 than $14.99 (or any other price point) — but that it’s possible I might sell even more by selling at $14.99 first, then at $9.99, and then at $6.99. Amazon’s contention does not appear to offer any insight into this; Amazon does not, it appears, seem to want to consider the idea that offering work at multiple price points above and below $9.99 might be useful to me or to my publisher, because it has decided that $9.99 serves its own purposes sufficiently well.

  112. Terms are being bandied about. Pirate sites charge. I have seen my books for more than I charge. They just keep it all. Bit torrent sites had all 3 Shades of Gray books free within days, if not hours, of their release.
    This resource was available on reputable sites. And if you “buy” an ebook, you don’t own it. You acquire the licensed privilege to access it.

  113. I am aware that that has been Amazon’s SOP in the past, but we’re only talking about ebooks here. I believe Amazon’s subscription service credits a sale only when 10% (some speculate that might increase further) of the book has been read and the majority of available titles are self-published, so that’s a different animal, at least for now. Authors don’t get to set their own prices if they are with a publisher anyway, so if you are self-published, Amazon is far more pro-market. If you are traditionally published you have no control either way, although you would certainly want to know which price would be more advantageous to your pocketbook, which is why this discussion is interesting. Certainly, Amazon is more market-friendly from the perspective of self-published authors.

    Nevertheless and again, Amazon is a retailer and retailers have always been able to set their own prices, which is largely where I come down. Of course, I acknowledge that it’s trickier here because ebook profits are split on a % basis, so there is no instance of the publisher making the same with each sale regardless of price. But then why should we give Hachette more say in what to price their product than Amazon, when both have an equal desire to make the most money possible? Maybe the model should change so that the publishers charge a fixed amount to Amazon for each title sold (although I suspect Amazon would object to that). One thing is for certain: author’s should definitely have more clout here, but they don’t, alas.

  114. John,

    I’m always interested in your perspective on this, but you’ve gotten some legal questions here wrong, and in a way that I think kind of misleads your readers.

    Amazon doesn’t have the right to unilaterally alter Kindle Direct contracts. It’s not naive to say that such a provision would be unenforceable, with or without an arbitration clause — it actually seems to be the position of Amazon’s lawyers as well, as they’ve gone to great lengths to get as close as they can to that state without crossing over into unenforceable contract land.

    It might see as though I’m arguing how many angels can dance on the head of a pin. After all, Amazon’s contract essentially requires authors to watch its terms like a hawk, and then take down their book within thirty days if there’s a change they dislike and don’t want to be bound by. But these little distinctions are, legally speaking, important.

    Contracts aren’t magical. If someone is being screwed by a publisher — be it Amazon or a traditional publisher — they should at the very least consult a lawyer. They should never, ever assume that just because the other party wrote the contract that they have no recourse. Maybe, under the terms of the contract, they do. Or maybe the contract’s unenforceable. Maybe the arbitration clause is unenforceable. Maybe the arbitration clause IS enforceable, but the arbitrator finds fault with the publisher.

  115. The reason people balk at paying the same – or more! – for e-books as physical books is because there’s an apparent choice to get one or the other, and the e-book comes with slightly less overhead and significantly fewer rights.

    Your soda analogy doesn’t work because there’s no option to get that soda either with or without the cup and associated costs of production. In fact, it’s a bad analogy because most places offer the product for free once the production costs are handled.

    This is a perception issue in that there is one product available in two formats and one costs less to produce, so people expect it to be cheaper.

  116. correct me if I am wrong — but the “cost” of a book isn’t fixed (in time) it is highest at publication date and generally lower, the further from that date. In the “old” days (IIRC) this had a lot to do with how royalties and contracts to authors were structured. Authors may have had an advance that publishers had to “make back” in hardcover sales within “x” number of days from release date. Books would stay ‘in print’ for a certain number of weeks or months and unsold copies would be ‘remainderd’ back to publishers (who then liquidated them- they ended up in the ‘former bestsellers” or “bargain bin” at your favorite bookstore) If a book was particularly popular, there might be multiple printings, reissues in multiple formats (paperbacks etc.). Now with e-books, publishers STILL need to make back advances paid to authors, they still need to pay the royalties- but the ‘old’ way of doing things (Initial printing of hardcovers covering the costs of acquisition or the ART/content) may be gone. IMHO what publishers want to be able to do is still do things the “old way” when it meets their business needs (big name authors who have advances to make up). What Amazon wants to do is make the transactions/price less dependent on time from initial release (by setting a cap on price of $9.99 – one would presume that $9.99 on 1st day of release and still $9.99 30 or 45 days out)

    I am all for amazon selling whatever for whatever $ amount they want – but they are not involved in how much the content COST the publisher (how much the author is being paid) J.K Rowling’s latest or the newest in the DaVinci code series may cost a publisher considerably MORE$$ than average (in advances or per copy royalties or % royalties) and Copyediting a 1000 page book costs more than a 400 page one – Amazon isn’t just saying that they want to sell ebooks for no more than $9.99, they are saying they want to pay no more than (whatever %) of $9.99 per copy sold. Amazon would be in a position of making their margin on every ebook sold, and publishers would be stuck with the lion’s share of risk and investment and not break even until “x”th book is sold. I can totally see where publishers are coming from – and how Amazon is a disruptive force in/ to the publishing industry. Do not forget, Amazon wants to make money on kindle hardware, content, and merchandise for a to z, They want their customers to come to them for EVERYTHING. Driving down the cost of ebooks may be good for customers – but it is part of an overall strategy to get their customer to spend more at amazon.com (not just for ebooks). anyway that’s my $.02

  117. @John – When Amazon sells at a loss it is Amazon that takes the loss – not the publisher or author. They get paid at the contracted per-unit rate.

  118. “You’re aware Amazon has sold things, including books, at a loss before, in order to increase market share — indeed that Amazon’s general SOP to date is to grow its market share at the expense of profits? This is in fact a long running point of contention with the company and its shareholders.”

    Interesting side note… I used to work at Borders HQ in the mid to late 90′s. I distinctly remember at several all staff meetings, the CEO gladly boasting that Amazon had yet another quarter with no profits, their venture capital would soon run out and show that online retail couldn’t turn a profit, and that brick and mortar stores were still the future.

    Yeah, I think that was the guy they brought back from retirement because they liked him so much. That sure turned out well for Borders.

  119. Mord Fiddle: yes – but that is what Amazon is trying to negotiate away for ebooks, Amazon wants to pay no more than a % of $9.99, ever

  120. @jonjason That is largely true, but also why many argue that Hachette is looking out more for the interests of the big names, potentially at the expense of the majority of working authors. Of course, those big names have just as much right to look out for themselves as the small guys do. Only thing is there are far more small guys in the picture. If someone can provide compelling evidence to me that the midlist (and below) authors will likely make more financially under Hachette’s model (and I’m talking long-haul, not just in a given year), I’ll be more inclined to support them. Ultimately, as a fan of the arts, I’m in favor of whatever model gets the most money into the pockets of the most authors (not just the bestsellers). I am willing to sacrifice the profits of the top 1% of authors if it means more is left for the little guys. I guess that means I’m a socialist :)

    This also leads us into discussions on the value of diversity and experimentation in the book industry, both of which are (in my opinion) unduly punished by the traditional publishing model.

  121. n1quigley:

    “Amazon is a retailer and retailers have always been able to set their own prices”

    Well, no. Retailers frequently have contractual obligations on any number of points, sales price among them; likewise distributors have contractual obligations to retailers (for example, not being able to offer another retailer a lower price for an item being one of them). You should assume that between to companies — and especially between two large corporations — everything that can be legally sorted out in their business relationship is, including prices. This is not new; it’s how business is done. Indeed, that negotiation is what’s going on right now between Amazon and Hachette.

    KG:

    “Amazon doesn’t have the right to unilaterally alter Kindle Direct contracts.”

    However, Amazon quite evidently disagrees with you, since the Kindle Direct Publishing agreement says, rather unambiguously, “We reserve the right to change the terms of this Agreement at any time in our sole discretion.” I’m not sure that we can assume Amazon does not in fact mean what it is clearly and unambiguously stating in a legal document it requires everyone participating in its Kindle Direct Publishing program to agree to, although you could ask Amazon’s lawyers about that.

    That Amazon can change its agreement and the only recourse for authors is to take down their work (or not) means that in fact, that Amazon can unilaterally change the agreement. It’s nice that Amazon lets the authors have a window of time to decide whether to continue after that point — but of course Amazon could change that, too, unilaterally, if it wanted. So. Yeah.

    (Note: I edited the above to desnark it a bit, since I was originally way more snarky than KG merited. Sorry about that, KG.)

    Mord Fiddle:

    “When Amazon sells at a loss it is Amazon that takes the loss – not the publisher or author.”

    I’m not sure where I suggested that Amazon has done otherwise. However, even in those cases the publishers (or authors) may have reasons why they prefer not to have that done — if, for example, they believe Amazon is trying to crater the brick-and-mortar bookselling industry with deep discounts, eventually leaving publishers no choice in who they deal with in terms of sales, or if they simply don’t want consumers to get used to the $9.99 price point for initial release, or what ever. At which point, again, it becomes part of negotiations.

  122. My perspective (and stake) in this whole thing is somewhat different.

    I live in Kenya. What that generally means is if Scalzi releases a new book and I want a physical copy I’ll have to apply for it at my favorite book store. It’ll take forever to get here. Probably not until there’s a mass market paperback or there’s a lot of people asking for it. Importing would be an option but the shipping costs and taxes can bring the books price up to 50-70 dollars, so….no way.

    To get around all this, many Kenyan book worms are buying kindles. There’s three in this household alone. Its a really elegant solution even if it means less physical books around.

    Here’s the problem.

    I don’t necessarily think that ebooks should have a set price cap but there really is something disturbing about paying more for an ebook than I would for a hardcover. Call it hypocritical but I don’t think that’s particularly fair. All made worse for me because I can’t even get the hardcover and forget about the situation. So if someone has to get an ebook for whatever reason, they’re paying more or the same for less.

    I could be wrong but I think a large part of the draw of ebooks was portability and assumed savings in the long run. I’m not pro amazon’s plan but i’m not sure I entirely agree with how things are now either,

    Note: this Hardcover being the same price or lower than the ebook price is not something I’ve ever noted with a John Scalzi book. And it is occurring a lot less across the board.

  123. ‘Likewise distributors have contractual obligations to retailers (for example, not being able to offer another retailer a lower price for an item being one of them).’

    I’m aware that ‘correct me if I’m wrong, but…’ is most often shorthand for ‘I’m wrong, but…’, but… correct me if I’m wrong but didn’t the whole price-fixing settlement preclude MFN clauses for the near future?* And I do know, so don’t correct me, that the EU at least is looking at these again.

    Of all the things that distress me in this whole saga, these no-compete, MFN things… aren’t they the very antithesis of free market competition? Especially when people smugly ask why publishers don’t just sell ebooks themselves cheaper without the retailer’s cut.

    *Answer: Correct me if I’m reading this wrong but yes(?) – it was easier to find than I thought: ‘For at least five years, they may not enter into an agreement with an e-book retailer that includes a Price MFN. ‘

  124. I think your idea of buying bottled water at the store counters your point. When you buy water at the store, you are paying for the brick, mortar and manpower of the store. You are paying for the transportation of the water through inefficient distribution systems, as well as the packaging of the water. It is much cheaper when distributed from a common, automated infrastructure at your tap. The same should be true of e-books.

  125. This is sort of a tangential question, but given the changes in the industry, etc, lately, do you know if there are updated metrics on what makes a person buy a book? In 2002 at Clarion PNH said the leading factor was word of mouth, and I’ve been wondering if that’s still the case. (I mean, I don’t know what I think it could have changed to, but I’m in a curious mood.)

    And for the person asking about reading non-Amazon books on a Kindle, it’s even possible to email books to a kindle or kindle ap–there’s an email address under the ‘manage my devices’ section in amazon. I check ebooks out of the library for my mom and convert and email them to her with no trouble.

  126. Kevgach

    I’m having problems following your maths. You don’t buy hardcovers because it would cost you a great deal of money to get them shipped to your home, yet you say that the ebook costs you more than the hardcover does. This seems unlikely, to say the least.

    Equally, there are plenty of ebook sellers who don’t require you to buy a Kindle; Amazon probably regards selling 3 kindles to your household as elegant but it’s completely unnecessary if all you want to do is to read ebooks. You seem to be propagating the myth that reading ebooks requires you to buy a kindle from Amazon, but it remains a myth, albeit one which Amazon does its best to foster…

  127. For those referencing the Apple lawsuit – the issue was that Amazon was buying ebooks from the publisher at 70% of their listed price but discounting heavily. The agency pricing was to stop that, and was deemed illegal.

    No, agency pricing was not deemed illegal. What was deemed illegal was collusion between Apple and the publishers. Agency pricing has always been legal.

    And that gives him expertise in and the ability to evaluate the expertise of others in mathematics, statistics, and logic – exactly how?

    It’s called domain knowledge.

    Also, too: This whole ‘lower prices is good for the consumer’ thing is just fine when it’s milk. Not necessarily so much when it’s something like books and you begin to damage the ecosystem that supplies good books.

    I find it increasing difficult to find good books on Amazon unless I already know what author I’m looking for, because I’m buried in a tsunami of crap and Amazon makes no attempt to distinguish any of it in any way, other than their recomendations (which are largely gamed, broken or paid for anyway). The Amazon review system is horribly broken. I’ve encountered ‘books’ with 5 star ratings that would fail eighth grade english class.

  128. @John Fair enough. My understanding of that aspect of things is obviously simplistic. I admit to limited retail experience and to parroting the words of others in this instance. Of course, what you are saying seems less free-market than what I was saying, so… Additionally, even granting what you say, retailers still have final say on pricing in that if they don’t want to price something at a level demanded by a distributor, they can simply refuse to sell it. So again, why are Amazon’s actions any more anti-market than Hachette’s? At worst they are both just doing business as business is done. Not sure there is much to criticize, then.

    In any case, that wa far from my most compelling point on the issue. Nor is it a particularly important one, since personally, I care only for what deal will most benefit all authors (bestsellers, midlisters, and self-published alike). Anything that stifles creative competition is just as objectionable to me as something that stifles economic competition.

    While I respect your stance, my main problem is that your arguments are almost entirely based on suppositions of what Amazon might do rather than what they have done or any actual numbers or evidence. Those agreeing with you (and you to some extent) also seem overly reluctant to criticize any actions by Hachette (or other big publishers). As you yourself have said, there are no sides here other than self-interest. I dunno. I’m not trying to pick a fight with you, I just want to get a more nuanced view of the issue and it feels like everyone is just talking past each other.

  129. “Which is to say that we need to ask the question of why Amazon decided to use the $14.99 eBook price point.”

    Because when the big publishers colluded with Apple to raise prices under the Agency model, $12.99 and $14.99 were the price points for ebooks. As Hachette wants to return to Agency pricing levels, Amazon is using them as an example for comparison.

  130. John – ~$14.99 was the price the big five wished to set as the price of all their e-books in the price fixing scheme with Apple:

    “Apple and the five publishers negotiated to switch to a so-called agency model, which would allow the publishers to set their own prices for e-books in exchange for giving Apple a 30% sales commission. After at least one of the publishers threatened to delay the release of its digital editions to Amazon unless it switched to an agency model, Amazon reluctantly agreed, and e-book prices rose across the industry to about $14.99.”

    From: http://www.pon.harvard.edu/daily/business-negotiations/top-business-negotiations-of-2013-apples-price-fixing-defeat/

  131. Rod Rubert:

    “The same should be true of e-books.”

    Why? When you are buying an ebook, you’re paying for the retailer as well, unless you think Amazon’s offices, people and servers manifested out of thin air. You’re also paying for the publisher (and, ahem, the author). Which makes the bottled water analogy rather on point, actually, at least as regards your formulation.

    Although again, it’s neither here nor there with regard to how eBook should be priced, which should be: at however much they will sell at.

    Mord Fiddle:

    “$14.99 was the price the big five wished to set as the price of all their e-books in the price fixing scheme with Apple”

    Okay, that makes sense to me. Thanks. It still leaves open the question of whether it’s a useful metric for comparison, if many books are sold below that price point (but above $9.99).

  132. @stevie

    I mean, I can check on amazon and see the price of the hardcover is more than the ebook. Which doesn’t make much sense to me. Or alternatively wait for a hardcover to be available and pay less. The general point is that the pricing system doesn’t make much sense to me. If the two are priced similarly, i’d rather get the hardcover but since that’s not an option…

    Kindles are just the easiest choice of ereader to acquire here. And i’d rather not read on something with a backlight.

  133. Two funny things on this. Number one is that the average cost of e-books in the U.S. is around $6-7. The majority of e-books are below $9.99 in price point, and certainly the majority of SFFH titles, which are mainly put out first in mass market paperback, are below that price point, with a popular price being $6.59 or lower, which is cheaper than average mass market paperbacks.

    The e-books that are above $9.99 in price are a much smaller group of first run initial bestsellers that are coming out in print first as a hardcover and long running bestsellers which continue to sell well in hardcover. This is pretty much what is done with any highly desired, creative product — music albums, designer fashion, movies, latest editions of games, tech gadgets, etc — when they first come out, it’s a high price point. If you want them first, you pay the premium for it. And then the price goes down over time and you can get it cheaper if you wait — usually way cheaper than $9.99 since the publishers usually sync it with print paper edition prices.

    But that initial premium for getting it fast helps cover the costs of e-book production — because there are actual staff and tech and resources costs to putting out thousands of e-books at once in multiple formats — and the costs of initially marketing and publicity/advertising of the e-book. And it doesn’t just fund the costs for the bestselling title — it funds it for the many more titles the publisher puts out that don’t have hardcover pub and have low e-book prices thereby and aren’t bestsellers. Because that’s how publishing works — they float the money they’ve got in to finance the whole list, which allows them to take chances on books and authors that aren’t bestsellers and may be entirely new. And the author gets more in the initial burst, after which the price comes down and you hope to continue to do well through volume at the lower price point.

    So Amazon isn’t talking about most of Hachette’s international book list. They are talking about a tiny percentage of Hachette international booklist — the newest or most successful and fairly recent of their bestselling authors — the ones where the price is highest (although still much less than the hardcover edition,) for the premium of getting the e-book right away. But they’re pretending that it’s the entire book list, and that e-books should all be priced at $9.99 “or lower.” Which means again as Scalzi pointed out that this would end up raising e-book prices overall and the average would probably move upward. Amazon gets to have its wholesale price for first run bestselling hardcovers — even though e-books isn’t a wholesale market, that’s print mass market paperback — and raise prices for others in the market and control the price for e-books in the market, as they do with the self-published authors.

    Second, Amazon natters on about how really they don’t want to increase their share — even though that’s been the news up till this moment about the negotiation. But they interestingly don’t mention anything about co-opt advertising fees. Special placement, list placements, displays, etc., are things that Amazon usually gives good selling self-published authors for free, because it suits their purposes, but they make the publishers pay for them. And the publishers have to pay the co-opt costs on their bigger and mid-list books to get the orders at all — Amazon doesn’t let them opt out. So Amazon increases its cut through the fees — increasing the cost of e-book marketing and advertising but without necessarily the premium in the initial price to cover that increase. That increases its revenues and also its control of the market.

    This has, again, been exactly what Amazon has been negotiating for the last ten years, before there even was an e-book market and a Kindle. They’ve been squeezing publishers to pay more fees, as well as price discounts and better return terms on print books, giving Amazon more of sales. Small presses, who may have up to 30% of their sales with Amazon have been faced with having to sell on Amazon at a loss per sale or not at all. When the Independent Publishers Group, the distribution company for a host of small presses, was negotiating with Amazon on this, Amazon marked all the e-books from IPG as unavailable for sale — the same thing it’s done with Hachette and other companies.

    So Amazon’s newest spiel is full of fake math. It might actually end up helping authors in their contract negotiations with their publishers over the e-book split, because they and their agents can use Amazon as a whine wedge effectively. (It will not, however, help self-pub authors with Amazon.) But Amazon’s wish list of price control and extra fees are not going to help authors and improve either the wholesale print or e-book markets.

    Because here’s the thing, books don’t necessarily sell more at a lower price. If that was true, then every author put out in mass market paperback would outsell even bestselling hardcover authors. And they don’t. They can sell a high volume, but the wholesale market did collapse in the 1990′s and has not fully recovered, so it’s a lot less guaranteed. That’s why the average author makes fewer sales than they did in the past — the grocery store market isn’t there much no more. And for bestsellers, they will sell a lot of e-books at the premium price and then at the lower price later in conjunction with their paperback editions. Bestsellers already have volume. Amazon’s insistence that they forsake the premium in e-books doesn’t necessarily guarantee them more volume. And Amazon knows this. So again, fake math.

    It’s a rather risky strategy, since Hachette can divulge a lot about what Amazon demanded. Be interesting to see what happens next.

  134. I think Amazon should either settle with Hachette for a short-term contract, perhaps to the end of Hachette’s next fiscal year, allowing Hachette whatever it wants in terms of pricing. The result, I think, would certainly convince Hachette that Amazon was right about the optimal pricing of ebooks.

    Or, since Hachette’s not happy with Amazon’s business model, perhaps Amazon should delist them.

    Either way, I think the result would be about the same. Amazon would be doing about the same business. B&N would be doing much better. Hachette, though, and Hachette’s authors, I think they’d be either willing to give Amazon terms, or they’d be sold.

    I’m a serious reader, and influence other serious readers, and I will have only paid more than $9.99 for three ebooks this year. As for the others I might like to read, but are now priced at $12.99 to $14.99, I will, as my much-missed former father-in-law put it, “let them age.”

    I am not an expert on anything, but am just offering my point-of-view as one of your customers.

  135. “Although again, it’s neither here nor there with regard to how eBook should be priced, which should be: at however much they will sell at.”

    Isn’t that the crux of the argument though?

    Hachette wants the book to sell at $14.99.
    Amazon says sure. You’ll sell 100000 copies at $14.99. But if you price your book at $9.99 you’ll sell 174000 copies. So why wouldn’t you price it at $9.99?

  136. Amazon won’t be the major player forever.

    “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”
    Adam Smith

  137. TL;DR
    I”m sure I’ve heard all your arguments from other sources. $9.99 vs $14.99? Who wouldn’t take the $9.99 price?

  138. It’s called domain knowledge.

    So you are equating working in the publishing industry to expertise in mathematics, statistics, and logic? Clearly, both you and John are lacking in the logic domain.

    Truthfully, I think John is smart enough that he knows his arguments go against the evidence and facts. John, and other authors like Preston, Turow, and Patterson aren’t letting real facts get in the way of their emotional pleas. They fear the reduction in power and relevancy of a system (namely traditional publishing) that has helped them reach their elite status.

  139. John,

    As I said, it’s up to you to decide what’s best for your career. It is always possible to throw out new scenarios ($16.35 pricing for six weeks followed by 11.95 followed by $6.99 followed by 5.99, etc.). Amazon put out a press release, which is a form of communication not typically accompanies by 10 pages of charts and statistics. They picked a data point that seems to support their target pricing. Hachette is free to respond with data as well to counter this. It will be interesting to see if they are willing/able to do so.

    Again, I don’t think Amazon has a right to tell Hachette how to price, but they do have an absolute right to decide what they are willing to offer in their store. And arguing that authors are hurt by $9.99 pricing because of incomplete data from Amazon seems shaky to be when there is NO data supporting the reverse argument.

    Amazon doesn’t have the right to tell you or your publisher how to price your book. Neither you nor your publisher have the right to tell Amazon what they are willing to stock. That’s why this whole thing is not the grotesque moral argument it’s been turned into.

  140. Also, what Amazon is doing is called a Monopsony. Courts aren’t as harsh as they are with a monopoly.

  141. Andrew:

    Yet again, because what Amazon asserts to be a general truth may not be true in a particular case, and because there are more price points between those two to consider.

    Folks, we’re clearly at the point where people are coming in not having read the rest of the comments in the thread. Please do, so we can avoid needless repetition of points.

    Daniel Knight:

    “I think John is smart enough that he knows his arguments go against the evidence and facts.”

    I’m smart enough to know that when someone with no discernable expertise in my particular field thinks his (alleged) expertise in his field means he actually understands enough of what’s going in my field to speak with authority on it, to me, I give that opinion the consideration it deserves. Which is: Not much, because it’s clear he doesn’t have any idea what he’s talking about as regards publishing.

    Run along now, please, Daniel.

    Jay:

    “Amazon doesn’t have the right to tell you or your publisher how to price your book. Neither you nor your publisher have the right to tell Amazon what they are willing to stock.”

    However, I for one have never made the latter argument. Amazon appears to be making the former argument.

  142. Andrew: Because Hachette may owe the author “$X” per copy (in the form of recouping an advance or as terms of a contract) for the first 100000 copies and selling at 9.99 is an unfavorable profit margin (maybe negative) – the publisher may be OK with “letting it age” because they may owe a lessor % in royalties after the first 60 days or whatever. The point is the cost to the publisher is not fixed (the cost per unit in royalties to the author, creation costs of the ebook etc) but amazon wants to pay a fixed price

  143. Again, I don’t think Amazon has a right to tell Hachette how to price, but they do have an absolute right to decide what they are willing to offer in their store. And arguing that authors are hurt by $9.99 pricing because of incomplete data from Amazon seems shaky to be when there is NO data supporting the reverse argument.

    Amazon doesn’t have the right to tell you or your publisher how to price your book. Neither you nor your publisher have the right to tell Amazon what they are willing to stock. That’s why this whole thing is not the grotesque moral argument it’s been turned into.

    Exactly what I’ve been trying to say and much better stated. .

  144. John – The $14.99 price point is useful for comparison in that it represents the pub industry’s preferred price point and represents the anchor point for Hachette’s negotiating position.

  145. @jonjason Well, perhaps if this becomes the new norm, enormous advances will become less common and there will be more money to go around for the less known authors because the publishers are even more afraid of a flop, so they start hedging their bets. Plus, readers would then not be spending their entire budget to just to buy this month’s Patterson. That assertion doesn’t seem any less likely than the hand-wringing doomsday scenarios being posited by some. Even the claim that publishers will try to make up the money on the low end is suspect, because it’s not like there aren’t already tons of new authors who debut title is priced around $10 anyway. Of course, millionaire authors might lose out a bit in this scenario, and gross profits might even go down for the publishers, and they both have a right to complain about that, but I’m not going to feel bad for them.

    Or maybe I’m wrong. It will be interesting indeed to see if Hachette produces its own data.

  146. What’s the story on discounting? I used to hear that publishers were angry about Amazon selling at a discount and ‘devaluing’ titles in the process.
    Now it seems like stopping the discounting policy is a thuggish practice that, ummmm…. anti-devalues the titles?

  147. Mord Fiddle:

    “The $14.99 price point is useful for comparison in that it represents the pub industry’s preferred price point”

    Does it? As I’ve never been priced at that point, and I am just the sort of author who is a candidate for it — one with a committed and reasonably large fan base — I am unconvinced, at least based on my anecdotal experience. I certainly grant that at one time it may have been considered an ideal price point, but it does not follow that what was true in 2010 is true in 2014. I certainly can see how using that particular price point works for Amazon’s rhetorical purposes, however.

    Q:

    “Well, perhaps if this becomes the new norm, enormous advances will become less common and there will be more money to go around for the less known authors”

    The first of these does not lead directly to the second, I’m afraid. What is rather more likely is that fewer authors will get very large advances, while the amount given to newer authors remains what it is.

  148. Amazon is not telling Hachette how to price its books, it’s simply refusing to sell them at that price (or rather, requiring a bigger cut if they do). Hachette is free to go elsewhere with its business. Hell, maybe the best case scenario here is that they do leave Amazon and stoke some competition on other online retailers. I would be thrilled at that scenario, actually. More competition is never a bad thing.

  149. Q:

    “Amazon is not telling Hachette how to price its books, it’s simply refusing to sell them at that price”

    Which is to say, it’s telling them how to price their books, and relying on its own market share to enforce the demand.

    Please note I am not saying Amazon is not within its rights to do so; Amazon gets what Amazon negotiates for. But let’s not be coy about what’s going on, either.

  150. John,

    No worries, I only saw the desnarked version anyway. (I should be clear that I’d never, ever suggest signing a contract on the grounds that you think a provision you don’t like is unenforceable, even if the entire Supreme Court, Scalia and Thomas included, told you before hand that yeah, that would never hold up in court. I’m thinking of people already stuck in bad contracts.)

    I realize in practical terms “submit to the new terms or take your book down” (or, even worse, “not even notice the new terms and be stuck with them after thirty days,”) might not seem any different from “Amazon has the power to unilaterally alter the contract,” but in legal terms there’s a real distinction. Legally, Amazon is defining a process to amend the contract, and stating what the author needs to do to accept or reject those changes. I know that probably sounds like my overactive lawyer brain attempting to justify my student debt, but it could easily flip the outcome of a case.

    Yes, Amazon does state that they “reserve the right to change the terms of this Agreement at any time in our sole discretion” And if that were in any way enforceable, Amazon would stop there. Instead, the contract proceeds to lay out a whole range of conditions and procedures for alterations to the contract that approach that level as closely as possible.

    Why does Amazon include categorical language that sounds like they’re claiming an absolute right to modify the contract as they please when their actual power under the contract is less than that? Well, one, they want the author to believe it, and think they have no recourse if things go pear shaped, and two, it’s something to point to if authors ever complain that the more arcane provisions of the contract granting Amazon near omnipotence are misleading. (“How can you complain about the near omnipotence clause? Shoot, we claim total omnipotence in plain English in the third paragraph. There’s even a picture of a skull laughing!”)

    I’m not trying to defend Amazon here — it’s a nasty set of provisions, and a naked power grab. I just hate to see people dismiss legal recourse out of hand as naive in these types of situations when sometimes it’s the least bad option. If I were to boil all of this down to a sentence, it would be “no matter the contract, never assume you’re screwed, always consult a lawyer.”

  151. KG:

    ” If I were to boil all of this down to a sentence, it would be ‘no matter the contract, never assume you’re screwed, always consult a lawyer.’”

    You and I have absolutely no disagreement on this point.

  152. Several months ago I came across a study (of admittedly much smaller sample size) that an website selling rpg systems/books did of their sale prices that factored in a much wider range of price points than just those two in their efforts to determine, as Amazon seems to be doing, the pricing sweet spot (for their best interests in both cases). Their results, if I recall correctly, noted two or three optimal price points based on a number of factors (length of text, notability of title, intended age range, and so forth). I suspect, as Scalzi has suggested multiple times now, that the reality would be similar for non-rpg books as well, meaning it would be less than ideal to cap or try to skew the average towards a single number via policy and contracts instead of allowing for a more market-driven range, since authors could see tangible benefits at a number of price points.

    Of course, I can’t actually be helpful and provide a link to said study because for the life of me I can’t locate it again. But it is out there, and I suspect it could be informative in this instance should one be able to locate it (and share as my lack of ability to find it is driving me a bit mad).

  153. I think Amazon has a right to set the maximum price for the books it sells only if the publishers get to say what the maximum salary for Amazon’s CEO and board members should be.

  154. John: I am personally rather uncharitable in my feelings about publishers and you may be right about the potential distribution of advance money. My point is mainly that both of us are just prognosticating. There is nothing particularly convincing about a guess. I really do hope we get more data soon.

  155. @Arphaxad and @daringnovelist – No. Amazon does not care about its customers; it cares about its customers’ wallets, the content thereof and how they can convince its customers to transfer that content to them. It’s a business.

    Amazon pretending to care about anything but its own bottom line is disingenuous, and that is as true for what its PR department says in its mission statement as it is for any public statement about authors.

    Personally, as a consumer, I don’t want any corporation dictating anything this broadly for an entire industry. I also sure as shit don’t want any corporation – especially one that deals with something I care about as much as I do literature and books – succeeding with anything that smells so strongly of an attempt at a monopoly. Among other things, it’s worth noting that a monopoly isn’t at all good for the consumer.

  156. @ERose Of course the publishers tried the same thing except instead of lower prices they tried to artificially raise them. Point being, both sides are pretty scummy here, which is why I prefer to try and figure out which one will most benefit the largest number of authors, despite the fact that neither side really cares about them.

  157. @MooGiGon – the best thing I’ve read about pricing of goods that cannot otherwise be distinguished between premium and normal and cheap – that is, information goods – is this (oh my god it’s so old now :( ) paper by Hal Varian – later of Google – http://people.ischool.berkeley.edu/~hal/Papers/version.pdf (um, PDF warning?)

    Key quote for me is right there on page 1 – ‘As we will see below, the point of versioning is to get the consumers to sort themselves into different groups according to their willingness to pay.’

    Amazon’s approach (and, to be fair, they’re only copying Apple) seems the opposite of this – and indeed the opposite of the more interesting e-retailers like pay-want-you-want Humble Bundle or find-a-reason-to-pay-$150 Kickstarter.

  158. “Does Hachette (or any other publisher or retailer) want to control its market as much as possible? Obviously they do — again, this in itself is in my opinion neither good nor bad in itself.”

    Fair enough, though it’s worth mentioning that recent experience shows that while most people would read an implied “within the confines of the law” into that “as much as possible”, Hachette has demonstrated that they are not among them. Warnings from Hachette that Amazon is trying to gain monopoly pricing power are the equivalent of having someone with a rape conviction on their record say “Hey, baby, the guy you’re thinking about is skeevy-looking, why don’t we spend time together instead?”

  159. @Avatar – this is not the first time Amazon has pulled exactly this move on Hachette, the last time being in 2008 (I think), before it lost its moral advantage through, um, price rape? I’m not sure how ‘well, if the US DOJ says it’s wrong…’ helps the analogy, which requires a bit more moral absolutism. Probably something involving Micro$oft would be better.

  160. I think it’s useful to realize that domain knowledge helps against the GIGO problem.

    Just sayin’….

  161. Minor correction – missing the word “with” (added below in all caps for easy finding)

    “That said, I also think I should be able to get more of the revenue of each sale and have the ability to have my work priced at whatever the market will bear, without a multibillion-dollar company artifically capping the price I or my publisher can set on my work for its own business goals, which may or may not be in line WITH my own.”

  162. To be clear, none of you attacking Amazon actually think Hachette has any kind of moral authority, right? At best, this is just a turd polishing competition.

  163. So you are equating working in the publishing industry to expertise in mathematics, statistics, and logic? Clearly, both you and John are lacking in the logic domain.

    No. There’s a very old expression in computer science that applies here. Garbage in, garbage out. If you lack sufficient domain knowledge and all your math is based on faulty premises, you get garbage out.

  164. I think you are obviously correct to view this as a PR statement rather than an as attempt to achieve something constructive.

    From an economics point of view, I disagree with a couple of your points.

    First, my suspicion is that publishers set ebook prices above the profit-maximixing price even when other media are taken into account. The rationale would be to sacrifice (or “invest”) some profits to protect their position in the industry. While I agree that publishers offer a lot of valuable services to authors and customers beyond printing, storage, returns, etc., of physical books, I also think they are less vulnerable to competition in a world where physical books are still central. Just my opinion, which, like other things, I have one of.

    I also put more stock than you in Amazon’s assertion that reducing the price will boost sales and therefore profits. Not to the same degree for every book, but to some degree for the majority of books. I also disagree that, if ebook prices were limited to $9.99, publishers could recoup their losses by making $9.99 the standard and only price. In most cases, that would be cutting off their nose to spite their face. If an ebook costs $9.99, the people who are willing to pay $9.99 or more are going to buy it, and those that are not willing to do so won’t buy it. There may be some books where simply abandoning the “less than $9.99″ customers might lead to higher overall profits, but given that publishers typically sell paperbacks for less than that I’m skeptical that that would be true for most books.

    On the other hand, I think you hit the nail on the head with probably the most important economic point: that it makes no sense whatsever to put a universal price ceiling of $9.99 on all ebooks. That would be great for readers, but from a business point of view it is silly. There are probably many books for which the profit-maximizing price is indeed $9.99, or even less, but I would guess that, for best-sellers at the very least, it is higher than that.

    What I would like to see is more creative ebook pricing – which Amazon actually leans against with its one price fits all scheme. The standard model seems to be basically two price points (mimicking hardcover and paperback prices?) with occasional specials or discounts. Given the advantages inherent in electronic media, I would think there’s a way to imporve on that that both authors and readers would be happy with. Actually I suspect that development of more appropriate pricing models might be a way for an upstart publisher to actually take on the big five.

    Anyway, thanks for posting on this topic – you have the best commentary on these issues.

  165. Hachette and Amazon seem like the couple that can’t agree on anything, but that a divorce would be too expensive. They need each other too much. Each is free to leave the other and yet they won’t because each really needs the other financially for their business. This couple is 2 multi-national corporations fighting for money–nothing more.

  166. First, I’m not an author so whether or not Hachette’s position is better for authors, I am not qualified to judge.

    Second, I see this as a battle between two giants. If I want a Hachette book, there are other sellers besides Amazon and as long as that remains true, it doesn’t matter to me that Amazon has made it more difficult to get a Hachette book from them.

    Third, although I worry about Amazon’s monopoloy power and am less than happy about many individual product decisions the company has made, as a customer I could not be happier. I have never, ever experienced anywhere near the positive level of service Amazon has given me from any other company in any field.

    But speaking solely as a reader, I’m inclined to side with Amazon because I think e-book pricing is absurd.

    I have a huge personal library of paperbacks (like, in 4 digits-worth). About 90% of those were bought in used-book stores, at half-price. Another 5% probably cost a dollar or less (via $1 bins, library sales, free curbside books). The authors got nothing from those sales. E-books, OTOH, unfortunately (for we buyers) can’t be loaned or re-sold. Indeed, we can’t even legally bequeath them to our heirs.

    Now, I have no idea what the turnover rate on used books is. But I suspect that for some used-book buyers, the stores function as a sort-of paid lending library: one buys the book at half-price, sells it back, buys another at half-price, sells it back, etc. Who knows how many hands a hardback or paperback may pass through with only the first-sale copy generating revenue for the author?

    I also don’t know at what price-point the typical used-book buyer would opt for an e-book if the used-book option were not available. Nor do I know what percent of “real” books end up in used-book stores or get recycled through them. But I sincerely doubt that frequenters of used-book stores are likely to buy a non-loanable, non-resaleable e-book for $14.99.

    In short, I would think that authors would prefer e-book sales to real-book sales simply because each sale of the former puts money in their pockets whereas only the first sale of the latter does.

    Lastly, and I don’t know how typical or atypical I may be: I was firmly a “no e-book ever” person until I got my first Fire. Then I discovered public domain e-books. Since my “real” books had long since flowed off shelves onto floors and tables and every other available surface, physical space for expanision had neared the breaking point. It made sense to me to stop buying any book in the public domain. Then I discovered the Kindle Daily Deals and other price cuts. My e-book library now numbers in the hundreds: lots of public domain, e-book versions (on sale) of real books I already own (because it is a lot easier to travel with a tablet than a library), and new purchases.

    I am very price sensitive. I download samples even for books selling for .99. I have a constantly updated list of books I’d like to get when the price drops or they turn up in a used-book store. I bought your “Old Man’s War” (my first Scalzi book) as an on-sale e-book because it was actually less expensive than the paperback in my neighborhood used-book store. You no doubt made very little money on the sale – but you did get more than if I had bought the used paperback.

  167. Thanks John, it’s been a while since I’ve checked up on the site, but I came here specifically because I just read an article about this announcement. I’m not a professional writer, and wasn’t sure what to make of the article. I knew you’d have something valuable to say.

  168. “Yet again, because what Amazon asserts to be a general truth may not be true in a particular case, and because there are more price points between those two to consider.”

    Right, all 500 of them. None of which apparently are going to lead to a higher sales ratio than by selling at $9.99.

    Amazon’s been selling books and crunching sales data for 20 years. Obviously they must be telling tales out of school with these latest numbers. After all, its not in their best interest to tell their suppliers they could make more money if they priced a little less, is it?

  169. Because after all, none of the major publishing houses have been in business longer than 20 years!

  170. On the subject of books being interchangeable: They aren’t fully interchangeable (like perhaps soap), but they are FAR more interchangeable than you give credit for. Your loyalest fans will certainly buy on day one, and damn the price, but for a lot of people, if I’ve got money to spend, then I have lots of good choices – Scalzi’s latest at full rate? Or perhaps an older Stross that I didn’t get to yet at significantly less.

    The point I think I hear you making is that you and your publisher should be deciding these things, not Amazon, and on that we agree, but I don’t think you can dismiss the theory that books are interchangeable at all – there’s LOTS of good writers, and VERY few readers who only read the books of one writer.

  171. I must admit that there’s a sort of naive part of me that has the knee-jerk reaction that lower prices are good for the consumer. But while there’s some truth to that, it is far from the complete truth. Imagine if Amazon managed to get all the books in the world available for a buck. If that were the case, would Scalzi be able to keep writing books for a living? I’m guessing the answer is no. Would the authors of technical manuals with an audience in the hundreds be able to keep producing updated versions if they sold for $20 instead of $200? Again, probably not.

    The market isn’t magically rational. What seems like a good idea in the short term, can cause harm in the long run. Consider the music industry – there are far fewer new bands being carefully groomed for success, and/or allowed to go their own way, because the industry can no longer support it. The labels can’t afford to let a dozen bands have a couple of albums to do their own thing, hoping to get another Pink Floyd or Led Zeppelin. Instead they have to turn artists into income quickly.

    So I’m wary about any argument that turns on lower prices being good for the consumer. The goose laying it’s golden eggs ever more quickly sounds like a great idea, until it dies of exhaustion.

  172. You can’t go far wrong, if you think that they are all out to get you :)

    That said, I prefer SmashWords. Amazon? It’s there. I don’t buy from them though, and I know a lot of people who won’t touch them either.

    Wayne

  173. In retrospect that analogy is much creepier than I intended. Mea culpa.

    I don’t think it’s a moral issue either way. Certainly as a consumer I’m nominally in favor of things which let me purchase things I want for less money.

    In addition, I can also see how an established author can definitely be against this idea. For one, even assuming that the publishing houses were happy to increase their royalty percentages, that money’s going to come from somewhere; the obvious first candidate is the advances they pay. (Indeed, in the self-publishing model the compensation is all royalty and no advance; in effect a negative advance, since you incur the production costs before you start selling at all.) If a significant portion of your income is coming from advances, you’re going to be very leery about plans which would result in a reduction in advances. It’s a paradigm that shifts risk away from the publishing houses and toward authors; fine if you are a new author who can’t command a fat advance, but absolutely the suck if you are an author like that.

    (Not claiming that you’re just taking this position just because you like big advance checks! Nothing wrong with liking big advance checks, either. Just sayin’, as the argument is that both Amazon and Hachette are pushing their preferred narrative for their own economic benefit, I don’t think anyone in this conversation is taking a position where they end up worse off in their own estimation, myself included.)

    Also, I mean… I’m not a professional author, but I’ve heard many, many horror stories about the unreliability of royalty payments and the questionable accounting practices that are sometimes involved. So even if you were convinced that your personal pie could get bigger in the abstract, I don’t know that “but you’ll make it up in royalties!” is a convincing argument to people who have doubtless heard a lot more about it than I. I can buy that an advance check you can cash today is better than a royalty you might never actually collect…

  174. “Because after all, none of the major publishing houses have been in business longer than 20 years!”

    From an industry that can only tell its contractors how much they’ve earned twice a year, and even then they get the math wrong sometimes, thats not exactly a ringing endorsement.

  175. Thanks for the clear thinking about Amazon. More good information came out of the NYPL panel discussion on July 1st, Amazon, Business as Usual. Also lots of up-to-date news bits in Shelf Awareness. My local bookstore is my shop of choice. There ought to be room for both Amazon and independents. Amazon looks at books and their production and marketing as nothing more than nuts and bolts. But even nuts and bolts are not the same, some are better than others. I don’t want just one stop shopping for books, not the ones I buy, or the ones we review.

  176. Andrew:

    Hachette wants the book to sell at $14.99.
    Amazon says sure. You’ll sell 100000 copies at $14.99. But if you price your book at $9.99 you’ll sell 174000 copies. So why wouldn’t you price it at $9.99?

    No, Hachette does not. Hachette has e-books at all different prices. Most of Hachette’s e-books are priced BELOW $9.99. Some are priced in the $11 range and the A slot lead bestsellers coming out in hardcover are priced at $14.99, some ten bucks below the hardcover price, and then the prices decrease over time. Amazon’s plans would actually end up RAISING the prices of a lot of e-books that are cheap now, which would be not great for lesser known authors. Having one price for e-books is a disaster for the market. And bestsellers, including in e-book form, have higher costs for marketing and publicity that Amazon doesn’t have to pay — publishers do.

    Also, again, Amazon can’t guarantee that you would sell 174,000 copies at $9.99. They are making up figures. For e-book buyers who are price conscious, $9.99 is too high. They want $2.99. Or at least $6.49, the price a lot of e-books are sold at. So there is no potential explosion in sales for that $9.99 price point. And other readers are not price conscious. They are willing to pay for the book in the formats they want — hardcover, e-book, audio. And they are willing to pay more to not have to wait to have it. If you’re willing to wait a bit, your local library will let you read a bestseller for free, including now often in e-book form. So this isn’t just about price per unit, nor is it a simplified $14.99 vs. $9.99 issue. We’re talking about thousands of e-books priced at $6.49 — and Amazon wants more money in co-opt fees for those too.

    Q –

    To be clear, none of you attacking Amazon actually think

    I’m not actually attacking Amazon. I’m just pointing out the actual realities of the case, versus Amazon’s spin on it. You’ve got a lot of people who know squat about actual production costs and the book publishing industry making up scenarios and trying to pretend that it’s a victim and villains situation, and it’s not. It’s a business negotiation and there are a lot of factors involved. Nor is it simply two mean corporations trying to screw everyone out of a dollar either. The melodrama around this very prosaic and average dispute is just off the charts.

    Michael —

    What I would like to see is more creative ebook pricing

    Again, we already HAVE creative e-book pricing. We have lots of different prices for e-books and e-book prices for bestsellers drop over time. That actually does not help Amazon out. They want to have more control of e-book prices for the entire market.

    I love these assertions that believe that a drop to $9.99 for bestsellers will somehow be a magic selling tool, not only for the bestsellers, but for the entire industry, most of which are not selling anywhere near that price point. Publishers have been selling bestsellers at a range of prices in different editions and mediums for over a century. And as such they know that price is not the be all and end all, especially now when the wholesale market is smaller. Books are a luxury item bought by a small portion of the population on the more affluent side of the scale. (That’s one of the reasons that Amazon picked books as its gateway product — to collect data on educated, affluent shoppers to whom they could then sell more expensive products.)

    Books are also unusual in that we have publicly funded libraries that loan books out, especially bestsellers. If price is your be all and end all in whether you will try a book? Free books online and free books from the library is what you use. You never have to buy a book at all. And yet, people do. That’s a particular type of market. Which is why Amazon can’t actually guarantee squat. A lot of people like discounts, sure, particularly on bestsellers — which is why the fact that an e-book is less than a hardcover does well. But drop the price only to $9.99 and the increase in volume will be very uneven, depending on the bestseller. And e-books still make up less of the market than print.

    Michael Kohne:

    Your loyalest fans will certainly buy on day one, and damn the price, but for a lot of people, if I’ve got money to spend, then I have lots of good choices – Scalzi’s latest at full rate? Or perhaps an older Stross that I didn’t get to yet at significantly less.

    Yes, the core fans will buy the premium price of a hardcover to have a permanent copy right away. (Some will even buy leather bound special limited editions with special artwork for much more.) Other fans go, no, hardcover is too expensive, but I want it soon, so I’ll buy an audio or e-book version at the lower price. Other fans go, too expensive, I don’t need it now, I’ll wait for a paperback edition or the e-book price to drop. So you might buy the older Stross instead of the newest Stross, which is more expensive, and wait for Scalzi’s newest to become older and buy it then when it’s cheaper and no longer his newest. The publisher’s job is to get everybody at the different price points they are willing to pay. Everybody is not just you. It’s about what the consumer values the book at — not all consumers value creative products at the same price.

    Wayne:

    That said, I prefer SmashWords.

    I do and I don’t. A decent company, but they also lied in their own PR spin about the publishing industry to self-publishing authors, so I don’t particularly trust them either. But I might buy books from them anyway.

    Drew:

    From an industry that can only tell its contractors how much they’ve earned twice a year, and even then they get the math wrong sometimes, thats not exactly a ringing endorsement.

    1) Authors aren’t contractors of publishers. They do not work for publishers. Publishers are the contractors of authors who issue the publishers a license as business partners. 2) You clearly know nothing about how vendors like Amazon get to pay publishers monies and in particular the returns system that applies to over 70% of the market, including Amazon’s print sales. 3) Amazon not only gets math wrong sometimes, but they’re so secretive, there’s considerable concern over whether they are actually reporting all e-book sales and whether they are inflating and exaggerating e-book sales that then disappear when revenues are sent. There’s a lot of concern over the whole accounting system. But that’s also a normal part of business too.

    The reality is that Amazon doesn’t give a crap about the health of the publishing market. If it collapsed, they’d just dump books — including the self-published ones, and go on selling the stuff that actually makes them a lot of money. And that’s fine — they are a department store. But publishers are actually focused on the health of the publishing market so that there continue to be books. That doesn’t make Amazon the villain, but it certainly doesn’t make Amazon a hero for authors or book buyers. It makes them expedient. And what’s expedient for Amazon is not necessarily helpful to authors or publishers, the growth of the book industry, or even customer service.

    Amazon deserves to get paid well, given its large role in the marketplace. The question is whether now it wants to be paid more than that particular marketplace can afford, even given its role. If you can’t deal with that issue rationally, at least stop throwing out clueless statements about how the industry operates.

  177. You’ve got a lot of people who know squat about actual production costs and the book publishing industry making up scenarios…

    And they’ll keep on doing that, even after people inside the industry are telling them they got the facts wrong.

    Hm. Wonder why they’d do that….

  178. One thing my spouse noted was that the contract negotiations are probably under a NDA. So Amazon can say all it wants about what it thinks ebook rates should be — and Hatchette actually can’t say, “Well, actually, what you’re trying to get is…” (E.g., out of my imagination, 50% of ebook prices and 60% of paper books.)

    Amazon isn’t saying this is what they’re fighting for, are they? They’re saying “This is what we think is right.”

    (My biases? I’m mostly self-published. I think Hatchette is a buffer-state between the Zon Empire and my small barony. In this case… I think it’s in my best interests for Amazon to blink first. Besides, if big publishers want to price their books at whatever, then I can do the “unknown, but an inexpensive risk” pricing on mine, and with my lower overhead, I do well with this tactic. I also think it’s in my best interests for at least some people to buy my books at places other than Amazon, so that if Amazon’s terms ever change in a way I find unacceptable, I can walk without dropping my book income to $200 a year from $200 (or more, depending) a month. Competition keeps Amazon more useful to me.)

    I had something else I was going to say, but I need to get my kid to sleep.

  179. Amazon almost certainly knows way more then the publishing houses about markets and price elasticity. A market is a market is a market and it doesn’t matter if it is widgets, books or TV’s they all work the same way and the main key into them is lots of data, and math.

    Data Amazon has both access to and world renown expertise with. While the publishing houses mostly still keep their data on punch cards and are frankly lucky to manage to pay people on time. This coming from a guy who worked with Simon and Schuster on their analytic systems (shudder) in addition to some hands on experience with Amazon and Facebook’s internal analytics.. It’s space shuttles vs biplanes there

    That doesn’t necessarily mean Amazon isn’t lying or misrepresenting of course it just means the publishers are throwing rocks at tanks when they try to compete with amazon and my money is on the tanks

    Also, I really doubt John’s domain knowledge of which he doubtlessly has a ton, comes into play much here. I would be surprised if he was generally involved in pricing his books or dealing with the market mechanics, that is not his job any more then an airplane pilot is an expert on maintenance of jet engines.

    With regards to the relative production price of an ebook vs a physical book it is not just the physical manufacture and shipping that plays in, it is also the relative cost of the retail vs e-retail system. Stocking and selling ebooks is way way cheaper then having to pay for a physical store. The cost of stocking and selling a single ebook is so close to zero as to be effectively zero.. .

    Also this whole authors against amazon thing reminds me of Metallica vs Napster. .

  180. John, thanks for sharing your thoughts with the world, I’ve read Preston and Russo’s thoughts, as well as Eisler and Konrath, and it’s nice to see a point of view with more of a legacy slant that isn’t complete nonsense. It would definitely be nice to see more actual discussion on the topic… although it looks a little like you’ve already made up your mind, based on your replies here.

    I agree with you that Amazon has Amazon’s best interests at heart, and it’s going to use data points that support its own argument best… but those data points are consistent with other peoples’ figures, where people have published their own findings – at the moment, there seems to be MUCH more money to be made at lower price points than higher.

    Regarding your thoughts…
    1. Eisler and Konrath have already discussed the “Amazon is killing the bricks-and-mortar bookstore” idea, so I’ll point you at them.

    2. It’s not just Amazon saying this. Everyone who has released their figures seems to come to the same conclusion (if not the same figures), so unless you know and are willing to release any data to the contrary, “I’m not sure about these conclusions” just looks like being contrary.

    3. This hasn’t happened in any market, and seems pure straw-man. Amazon wants publishers to run with a $9.99 standard list price because that’s the price that will make Amazon the most money. Based on the same logic, it’s also the price that will make the publisher/author the most money, because it will bring in the highest gross. There’s absolutely no indication that this is a flat price suggestion though, Amazon internally recommends prices throughout the $2.99-$9.99 range, so I can’t see why you think they’re forcing a single price?
    Also, without visibility of the actual negotiations, it’s impossible to say what the concrete bargaining positions of either Amazon or Hachette are. Based on what we CAN see though, Amazon’s dealings with KDP authors seems mostly fair, and Hachette’s dealings with its own authors seems mostly unfair, so don’t mind me if I extrapolate from there.

    4. I really think you’re reading too much into this one. This reads like a pure throwaway PR point. “Hey, we give KDP authors the full 70% which would cover the normal publisher’s costs too. Wouldn’t it be nice if publishers shared more of that pie with their authors?” Amazon explicitly states “We believe Hachette is sharing too small a portion with the author today, but ultimately that is not our call.”, so I don’t see where you’re getting “letting Amazon also attempt to set what that percentage should be” from. This is a war for our hearts, and Amazon is trying to win us over.

    5. You could say that it was Hachette that set this tone, since they were the ones who accused Amazon of harming the poor authors in this whole hostile renegotiation. If Amazon feels like it needs to demonstrate that it cares about the authors, it’s because of a bunch of venues calling Amazon out for not thinking about the authors. Or to put it another way, with Hachette and the Authors Guild (no apostrophe – authors don’t own the guild, publishers do!) and the new Authors United all claiming that Amazon is harming authors with these negotiations, what would the reaction be if Amazon DIDN’T make counter-claims and demonstrate why they care about authors?

  181. @gwangung “Heh. And they do it again.”

    read: “Your opinions are wrong because reasons. So you’re wrong.”

  182. After this next masterpiece (Locked In) do you have plans to finish the story started The Human Division?

  183. Yes, clearly Amazon knows more about book marketing than publishing houses, some of whom have been doing this for more than a century. How could they /possibly/ know anything about it? They aren’t the latest hotness.

    The amount of willful /deliberate/ misunderstanding that goes on over this issue confounds me, and I continue to be amazed that Kat has the patience and the grace to explain it over and over and over.

  184. I would argue that if brick and mortar bookstores’ or publishers’ business models are that dependent on the $25-30+ Hardcover, they’re already in deep doo-doo, because this genie is well and truly out of the bottle. Luckily for them both, the $8-10 Paperback is actually competitively priced vis-a-vis e-books with the value add of being a tangible, physical good, and with a little effort I suspect that the $12-20 TPB could easily supplant the Hardcover as the “lead” version of paper books.

    Heck, if not for the desperate efforts of publishers, Hardcover would have an even smaller market share than it already does. Can you imagine if for the first year or two of a new video game or DVD release, the only version available was the deluxe-ultra-mega-collector’s edition that cost 250-400% what the standard sku will retail for…only without any of the extra features except for a fancier, sturdier, longer-lasting box?

    Finally, while books are not -perfect- substitutes, they absolutely ARE substitutable in the modern market to some degree. 1,000 people going into a bookstore wanting John Ringo might not settle for J.D. Robb (well, aside from a few people I know), but I doubt even 300 of them are leaving the bookstore empty handed. They’re walking out with books from David Weber, Walter Jon Williams, Lois McMaster Bujold, H. Paul Honsinger, Jack Campbell/John G. Hemry, David Drake, James S.A. Corey, Elizabeth Moon, Rachel Bach, Neal Asher, Hannu Rajaniemi, Michael Z. Williamson, Kameron Hurley, or maybe even something by a Mr. Scalzi…

    …and that’s JUST from authors whose newly published books I’ve picked off the shelf at a bookstore or from a website in the past few years, almost all of them having examples in a specific SUB-GENRE of what mainstream publishing still considers to be a lesser “genre”. When we start to look at older works by current authors or the the greats of decades past, made easily available by digital sales and/or web stores, “spoiled for choice” doesn’t -begin- to cover it.

  185. I live in a country where mass market paperbacks are routinely priced between $20 and $25. Ebooks were amazingly cheap to begin with, and then the market for readers took off and the publishers ramped up the prices. Our ebook prices are significantly higher than those in the US. the argument on higher prices has always been higher taxes, but books purchased through amazon ( with geo location) are not paying any tax. Yet still the price charged is only marginally less than the physical version.
    Amazon and the publishers are doing this. Not a fan of either. And Hachette? One of the worst offenders. What the publishers and amazon are looking for is the sweet spot of what consumers will pay. It has little to do with actual costs to produce the book.

    And while readers for a particular book/series/author may be willing to pay higher prices, the overall reader community is very price sensitive. Unknown books are a fairly interchangeable quality. I am far more likely to take a chance on a new author if the cost is less than $5. And I will buy those alternate authors if the one I like is selling their newest book for $20 as an ebook.

    I stopped buying Hachette books about three years ago,as a result of what I considered egregious overpricing of backlist by a favourite author and a rather frustrating refusal to publish an author I liked in ebook format in my region ( they owned the rights to ebook publishing in the region and choose not publish). I was sufficiently frustrated by this to find a list of all their imprints and to not to buy from them. Yes, this is sometimes irritating when an author I like is published through them, but there are plenty of books out there.

  186. “Q:

    It’s turd polishing all the way down!

    Which, mind you, is what I’ve been telling people since, like, forever.”

    John – So help me understand why you’re defending the status quo – In which publishers collude to fix author royalties at 15%, and in which e-books earn you ~1.65 less per sale and them ~$2.50 more than p-books – so aggressively? All Hachette has to do is weep a few crocodile tears for authors and the literary culture and authors who’ve had success in the system grab torches and pitchforks and march to sow Amazon’s corporate HQ with salt.

    I’ll be honest, as Mr Troy points out above, you post comes off as contrariness and Amazon bashing. Sure, Amazon isn’t in it for the authors, and I don’t think they’re saying that. I hear them saying that their model is better for Authors than Hachettes. And the numbers I’ve seen from Amazon and elsewhere supports that. I’ve yet to see a single market analysis from Hachette or anyone else that suggests Amazon’s wrong. It’s all crossed arms and knee jerk suspicion because its Amazon.

    As you’ve pointed out Hachette is every bit as much in it for their own interests as Amazon and routinely and burn authors in a heartbeat if it’s in the interest of their bottom line. So why Amazon gets you in such a lather is a bit of a mystery. Maybe it’s because, having gotten inside the gates of publishing’s Mingo City you’re more invested in Emperor Ming than that upstart Emperor Palpatine (see Popham’s ‘Down and Out in Mingo City’ – http://theinfinitereach.blogspot.com/2014/06/down-and-out-in-mingo-city.html). I honestly don’t know.

    As you’ve previously advocated approaching this fracas as a matter of business, I’m puzzled as to why you’re suddenly picking sides in the holy war.

  187. “Yes, clearly Amazon knows more about book marketing than publishing houses, some of whom have been doing this for more than a century. How could they /possibly/ know anything about it? They aren’t the latest hotness.”

    If you think this is a fight about different views on who knows how to sell more books you are sadly mistaken. For Amazon it is, they believe Amazon, publishers and authors can make more by hitting a sweet spot on the price-profit curve. Self interest, yes, but with a flow on effect that benefits both publishers and authors.

    But for Hachette this isn’t about profit, they want to control ebook prices to protect their control around print books. That’s why they colluded to fix ebooks at a higher price. It’s a rational decision for them to do so, and here’s why:

    Publishers can’t let ebooks supplant paper because almost all their promotion is based on paper and bookstores. That promotion is what pushes their ebook sales. If ebooks take away their paper sales, they also lose the promotion that pushes sales of ebooks. If that happens, they have a bunch of eBooks bobbing in the tsumani with all the rest, and they’re begging Amazon for promotional spots because they don’t know how to market directly to consumers.
    Without paper, publishers do not have a competitive advantage. Their protection of paper is rational.

    Publisher marketing doesn’t really drive sales in an online world where web-based co-op spending is far less effective than retailer algorithms tuned to showcase to each customer the books they are likely to actually want.

    Bookstores: Publisher co-op determines what sells. Publisher marketing “makes” bestsellers. Reduced visibility (and enforced scarcity) of midlist/backlist titles keeps sales concentrated in the premium-priced frontlist.

    Online Retailers: Customer preference determines what sells. Retailer algorithms “make” bestsellers. Limitless inventory ensures that the long tail continues to sell, even if that competes with the premium-priced frontlist.

    For Hachette, this isn’t about profit. It’s never been about profit.

    Hachette simply wants to maintain control. And they have no qualms about doing this even if it means less money for authors.

    Both Amazon and Hachette are in this for their own self interest, but only one is screwing authors.

  188. Mord Fiddle:

    “I’m puzzled as to why you’re suddenly picking sides in the holy war.”

    A negotiation between two very large corporations is somehow a holy war now? Well, see, that’s your problem right there.

    And it is a problem, because it points to the stupid, short-sighted, rabble-rousing aspect of the public messaging around this negotiation. Please get it into your head: Amazon is not a “side.” Hachette is not a “side.” “Traditional publishing” is not a side, nor is “self-publishing.” Authors are not a “side.” Saying that any of them is a “side” is like saying cats are one side of mammals; it fundamentally misapprehends the nature of things. People who are thinking about this as sides in any other sense but Amazon and Hachette’s very specific negotiations where the two of them are representing their own interests to each other are, in my opinion, being more than a little dramatic, and need to go sit in a corner for a time out. That’s the most polite way I can put it.

    Likewise, criticizing Amazon’s messaging does not a priori mean anything regarding my thoughts and opinions on Hachette in a general sense; it simply means I am criticizing Amazon’s messaging. I have said time and again that I have very positive relations with Amazon, and some negative ones; I have said time and again that I have very positive relations with publishers I work with, and some negative ones. I have criticized “traditional” publishers at least as harshly as I am criticizing Amazon now. Do I have a bias? I do: It’s against writers (particularly me) being fucked over by, or being manipulated by, companies that fundamentally do not give a shit about them except for their particular use. Amazon’s the one who’s been posturing publicly on that score, so guess what? That’s where my attention is at the moment.

    That you (and it appears others) have assumed my criticism of Amazon’s messaging means I am “picking sides in a holy war,” says rather more about your, frankly, woefully simplistic and binary view of this event than it says about what I am saying. You are welcome to have it and it’s clear you do, but I’m not obliged to subscribe to such a view, and I don’t. This is not in fact a holy war. It’s two large corporations, one with a very small profit margin and one with currently no profits, trying to find a way to make money off of each other, both of them throwing off chaff in the form of public messaging — and that public messaging — all of it, from both of them, to be viewed with suspicion, particularly as it regards authors’ interests.

    I hope I am being sufficiently clear on what I think about “sides” and “holy wars” here.

  189. Right, all 500 of them. None of which apparently are going to lead to a higher sales ratio than by selling at $9.99.

    Minor pedantic correction: none of those lead to a higher increase in sales than does the change from $14.99 to $9.99. However, the sales might actually decrease for an ebook priced at $12.99 when it is priced at $9.99 and the lower price point could lead to further downward pressure on prices (i.e., lead to lower long-term sales volume and lower profits in the long run). In addition, those sales ratios are extremely sensitive to the pricing points; “cherry picking” doesn’t begin to describe it.

    Right now, we only know that Amazon asserts that you will on average sell 1.74 times more ebooks at $9.99 than you would at $14.99. We have no information on the ratio between $9.99 and $11.99 or $12.99 or $10.49; given that Amazon has elected to publish just the one price point suggests that they are probably much lower than 1.74. If the sales ratio drops to 1.45, then you lose money by changing $14.50 books to $9.99; similarly, if drops to 1.30, then you lose money by changing $12.99 books to $9.99.

    To say that pricing is fiendishly complex would be understating the matter.

  190. This is all very concerning and I appreciate your post and analysis. Your mathematical points are spot on and is something that anyone that has taken a statistics course should have been aware of themselves (but apparently are not).

    I have fiction and nonfiction (mathematics in fact) published in the Kindle Direct market and whereas I am fine with my individual fiction titles being priced under $9.99 and individual sections of the nonfiction being priced low also, my 5 year plan includes compilations and $9.99 is just too low.

  191. John –

    You reflect my point precisely. This is all about technological change driving a business paradigm shift. It is not an either-or-choice between a genteel literary culture or writers as sharecroppers.

    If I and others have expressed dismay at your apparent choosing of sides, it’s because that it how your column comes off. Accusing me of being “woefully simplistic” and “binary” does not change the way your column is generally perceived. It’s rather like sitting in a writing workshop and telling the people providing feedback that it’s their fault for not getting from the story what you intended. Sort of ‘I wrote what I meant and if you didn’t read it the way I meant it it’s because you’re a bunch of stupid-heads.

    I respect you as a writer and have a high regard to the nuanced thinking you often bring to your blog. In this case, however, you come off as taking sides – I’m sorry if I offend you by saying so, but that’s how this post reads to me and I find it puzzling. Calling me names for expressing that opinion in a civil manner is unkind at the very least.

    Like you I am not on a side so much as acknowledging the publishing paradigm shift happening under traditional publishing’s feet, trying to figure out where it’s going and what the publishers of the future will. I truly wish the discussion in the author community generated less heat and more light.

  192. I just want to make a quick rebuttal on point 2, which is not quite what price elasticity suggests. They’re not saying books are fungible, and that every book is equivalent to another at the same price point. What they are saying is, for the average book, if you sell 100 of your book at 14.99, you would have sold 174 at 9.99. Now, granted, this is based on agglomerated data, and so it’s entirely possible that the price elasticity of _your_ book is not 1.74, and maybe one should conduct this analysis (which prompts the question, what was the increase in books sold for you, Mr. Scalzi, when you dropped the price to 2.99 for a day? I’m not being snarky, I just want to know if you have some data to shed and can calculate your own price elasticity. If you can run the experiment, you probably should, and then you could figure out your optimal pricing strategy.). However, their point stands; for the average author, a reduction in price results in an increase in sales.

    JohnD brings a relevant point though, in which we only have a single piece of data to go with, which is hard to apply to other books with different prices, and with no assurance that 9.99 is the optimal point, on average. I doubt the

  193. Here’s the real question…
    If Amazon can sell more at 9.99, why not reduce the price and take it out of THEIR part of the profit?
    As long as the author doesn’t get less, no harm no foul.

  194. … somehow clicked on post instead of preview.

    My last point was that I doubt the average consumer cares about all of this however, because if Amazon can bring the prices down, the consumer will jump on it, and frankly, I’m sure the average person is more interested in books from the big sellers (ie, better known authors that can charge 14.99) than unknown works at 6.99, which makes Amazon’s battle a win for them.

  195. @Charlie Stross:

    Why are those binding arbitration clauses EVEN LEGAL?

    Because it’s two parties to a contract mutually agreeing to waive their right to deal with any dispute in the court system in favor of arbitration. There are all kinds of things that people can agree to give up via contract; in the US, this is one of them. The assumption is that unless there is some really good policy reason, or it violates the law, people can make whatever agreements they both want.

    It’s not, as @Brian would like to believe, some reaction to class action lawsuits (which contrary to his comment are becoming more restricted these days). It is in fact the ‘rational tort reform’ he praises. i.e., mandatory arbitration shifts cases out of the public area, where there are fixed procedures and protections, and judges have no interest whatsoever in the outcome of a case, to a privileged (literally: private law) system with its own rules. Arbitration is generally more expensive for anyone who isn’t a large company, and even if the arbitrators are not openly biased towards one side, as for-profit companies they have a very obvious interest in finding in favor of repeat customers. Those would be the corporations writing arbitration clauses into their contracts, not the individual authors or on the other side.

  196. John Scalzi said:

    I’m smart enough to know that when someone with no discernable expertise in my particular field thinks his (alleged) expertise in his field means he actually understands enough of what’s going in my field to speak with authority on it, to me, I give that opinion the consideration it deserves. Which is: Not much, because it’s clear he doesn’t have any idea what he’s talking about as regards publishing.

    So the term “average” means something different in “your” field? Are you applying the special snowflake argument that in publishing everything works differently (even math)?

    Rather than address my actual points you have simply attacked my credentials. As others have pointed out your particular credentials of being a published author have no relevance in understanding price elasticity of books, and even less relevance in your ability to evaluate statistical data. How often do you get to set the price of your traditionally published works? For your self-published works, have you done extensive pricing experiments with the $14.99 and $9.99 price points? Even if you did, do you think your experience as a single author is valid for the entire mass of authors in the world?

    I prefer to debate purely based on evidence and logic, but you decided to bring into question my credentials as the primary reason for questioning my conclusions and refutation of your points. Can I take it that if I provide you with proof of my credentials (since that seems to be the most important criteria to you in evaluating the validity of an argument) – you will then make a new blog post stating that each of your points were wrong for the reasons I stated?

  197. JS–

    Killing off Amazon’s competitors is good for Amazon; there’s rather less of an argument that it’s good for anyone else.

    If publishers sustain prices for ebooks closer to hardcover and other printed books, at say $14.99, to benefit retailers of books, it harms the consumers, who will be paying a price premium that they otherwise wouldn’t under the Amazon $9.99 model. Readers can be 50% fewer titles at the higher price than the lower price.

    From the author/publisher standpoint, your position makes quite a bit of sense. But for the vast majority of people who are not authors or publishers, Amazon is doing a much better job arguing for lower prices than for higher prices.

    In the end authors and publishers have the ultimate trump card – you can always opt-out of Amazon completely. And then the theory of author/book non-fungibility can be put to the test. And also you can see how well retailers can hold up. If you went exclusively non-Amazon, it might start a huge trend that would do a big benefit to traditional booksellers.

    We have 1/2 of a quarter of reduced Hatchette shipments in, and by the way, Amazon still sold more units of both books and ebooks than the pre-dispute quarter.

  198. I hope I am being sufficiently clear on what I think about “sides” and “holy wars” here.

    JS, do you have any theories on why both Amazon and Hatchette seem to be treating this as a holy-war, and directing followers to “take sides”. I mean, for example, the SFWA recently
    “picked sides”.

    You had a nice post a while ago about your many business arrangements, and how it entangled you essentially into having a stake on both the Amazon and Hatchette side. Is that common among bestselling authors or are you somewhat unique in that regard?

  199. Mord Fiddle:

    Oh, good. Glad that’s settled.

    Charles Pearson:

    Hugh’s an excellent fellow and I definitely encourage people read his thoughts.

    dh:

    It’s certainly in the interest of both Amazon and Hachette to motiviate authors for their own goals, so why wouldn’t they? I would prefer authors look at each critically.

    Let’s also be clear: “Authors” are not a monolithic front. Some authors legitimately have interests aligned with Amazon more than Hachette, and vice versa. Acknowledging such is not an issue. I do think an issue is not acknowledging those alignments are usually temporary and contingent.

    “If publishers sustain prices for ebooks closer to hardcover and other printed books, at say $14.99, to benefit retailers of books, it harms the consumers, who will be paying a price premium that they otherwise wouldn’t under the Amazon $9.99 model.”

    And? If they don’t like the $14.99 price point, they won’t buy it at that price. Eventually the price point will drop and they’ll buy it then. Again, this is what already happens with books: They come out in hardcover to service people who will buy at that price, and then later they come out in paperback at a lower price. This doesn’t “harm” consumers, it’s a standard practice. Also, of course, no one is being forced or required to buy a book (exception: academic market, which is its own animal, so let’s not get into it here), so again the issue of “harm” is not a great one to apply here.

    (This would be where people bring up collusion — let me agree that collusion to keep book prices high is bad and harmful. But we’re not talking collusion right now.)

  200. Daniel Knight So the term “average” means something different in “your” field? Are you applying the special snowflake argument that in publishing everything works differently (even math)?

    Given that there are multiple definitions of “average” (arithmetical average {or mean}, geometrical average {or mean}, harmonic average {or mean}, weighted average, etc.), then yes, “average” could mean something different to two different people. And given that you misused the term in your second post (if we use the mean on a bell curve then it means that half of the authors would sell more and half of the authors would sell less {unless we assume bias}, not “most would sell more” as you asserted), then you probably shouldn’t pound too much on your authority in the topic.

  201. I am not sure amazon will end up having a single “price” for a book. They have shown ability to selectively target pricing to individuals. There are all sorts of options to play with that can drive sales. Like I said, it’s space shuttles vs biplanes

  202. For the people making the math argument that 1.74 > 1 respectively at 14.99 and 9.99. Part of Scalzi’s argument is that the people that would buy at 9.99 will still be there and you can drop the price afterwards. So a simplistic model would be:

    $14.99 x 100 = $1499
    $9.99 x 174 = $1738.26
    $14.99 x 100 + $9.99 x 74 = $2238.26

    Artificially setting a cap on price would decrease overall profits.

    I have no side in this battle, but will take any press release from either side with a grain of salt. So the same week Amazon reported more losses than predicted which caused a stock price drop and has shareholders openly wondering when they’ll make a profit, Amazon has a press release that wants lower prices (for the consumers!) and better royalties (for the authors!) with the one publisher they happen to be in contract negotiations with. The grain of salt here is boulder sized.

  203. Honestly, there is a lot of condescension going on here that is really harming the discussion. Pro tip: belittling others will not get them to agree with you. Most people can change their minds if you care to try and convince them in a non asshole way. Also, if you stop using condescension and supposition and start using evidence and facts, that will probably help as well.

    Incidentally, I think it’s clear that many “pro-amazon” commentors actually do disagree, at least in part, with their actions, but still see possible merits that are worth exploring, as well as problems with the way Hachette does things. Or maybe that’s just me. Frankly, a lot of you decrying people for picking “sides” seem to be doing so yourselves, and much more strongly than I or others trying to broaden the discourse. Before you respond to slap me down, if you truly believe you are treating all angles fairly, I am probably not addressing you.

    Also, those of you bickering about the actual production costs bla bla bla need to realize that you have been kicking a dead red herring for quite some time now. Yes, some people keep rising to your bait, but that doesn’t change what it is.

    But publishers are actually focused on the health of the publishing market so that there continue to be books.

    This is a rather obvious misconception I’m seeing repeatedly that even Scalzi has eschewed. Publishers are focused on their own health, just like the record labels were during the whole music piracy saga. Except this spat is far less dramatic. Let’s be honest here. Amazon is not going to kill the book industry, as some of you seem to think is possible. Publishers are not fighting for the book industry either, other than to maintain their place in it. They are fighting for their own bottom line and that will affect different authors in different ways. That, my friends is the crux of what we should be discussing (imo), instead of trying to decide which “side” is more of an asshole.

    The industry is changing and will continue to change. Publishers need to change with it and stop trying to cling to the old ways, or Amazon will soon be the least of their problems. That might be beyond the scope of this thread, but it’s also a far more important discussion. Just my two cents.

  204. Daniel Knight:

    I’ve gone back and re-read your argument and see where we differ. You are assuming that the population of price sensitivity follows a bell curve, not the population of authors 9which is what my first reading got). Looked at from that perspective, you are closer to being right but there are still some hidden assumptions.

    If we assume a σ of 0.24 on the μ of 1.74 for price sensitivity, then approximately 1/3 of the authors will do worse with a price of $9.99 than they would with a price of $14.99. (We’ll ignore the associated questions of different price points for now.) OK, so we’ve got a clear majority of authors who are selling more books, so that’s good, right? Not necessarily as it could mean that the total profit for the authors and for the companies is lower.

    The reason for that is because those authors who do worse probably have less price elasticity and are more likely to be the authors who sell the most books. That is, people are willing to pay more for popular authors because they like the books more. As a result, the total number of books sold may go up but the total profit for the universe of authors as a whole could go down and the profit for best-selling authors (such as your host) will almost certainly decrease.

  205. I prefer to debate purely based on evidence and logic,

    That’s what you say, but not what you’re doing. You have used the latter and have actively denigrated the former. THAT is why you are getting pushback.

  206. As a former NY author and now a small press publisher dealing with Amazon as a wholesale vendor, Yesssss to everything John said, Yes to everything Kat Goodwin said.

    Please, y’all, go read THE EVERYTHING STORE, which points out that Jeff Bezos picked books as his entry product because of their demographics, nothing else. Amazon routinely price matches to beat other competitors, eating the losses, and eats the difference on all those yummy discounts you see, and on promotions (when it does the picking.) That’s how it maintains the low, low prices customers love, while driving booksellers out of business and framing publishers as greedy villains — even though books are the *only* product we sell, whereas books are just the gateway drug Amazon uses to lure customers through the door.

    My press has made a lot of money thanks to Amazon, though the gold rush days are over. The dark side of the relationship is a landscape of double-talk, manipulation, and ever-increasing contract demands. (BTW, my authors get 40 percent net on ebooks, and our average ebook price is under 9.99)

    I know the dark side of the NY houses, too, and had both wonderful and bitter experiences there. “It’s just business,” is the best summary in all cases, I suppose.

    I don’t trust a word from either side. I’m just doing business, too.

  207. JohnD – “[T]he profit for best-selling authors (such as your host) will almost certainly decrease.”

    This is only true if we assume the authors royalty cut remains remains at the 15% (for p-books, less I believe for e-books) maintained by the big 5 imprints. Also, I believe it assumes the increase in sales is constant across the universe of authors. I would expect best-selling authors to increase their sales at the $9.99 price point more than obscure authors as they benefit from media and advertising.

    For example, my sister bought Rowling’s ‘Silkworm’ in hardcover. She’s a fan. I bought it from Amazon as an e-book for 9.99. Despite Rowling’s reputation, I wouldn’t have bought it at over $10.00 (It’s a 14.99 e-book on B&N). Having read her, I might buy her next book despite never having bought any of her prior books. However, I wouldn’t have bought the book at all if it hadn’t been so heavily advertised and reviewed.

  208. None of this matters. The game is over, and what we’re seeing now is the dying gasps of NY publishing’s old ways. Even if Hachette comes out on top in this particular battle and forces Amazon to charge high prices for digital books while windowing the titles to try and help Hardcover books survive for a few more years, it’s not going to change the end result.

    Digital is here, the genie is out of the bottle, and no time in history has an the old model survived when faced with a new and more convenient technology. Eventually, Amazon will get what they want. There is no doubt about it.

  209. A few points: (1) Missing from the discussion thus far is the “barriers to entry” nature of the monopoly/monopsony problem, with regard to Amazon’s short-term vs. long-term strategy. If it is, in fact, trying to drive consumer prices down (and accept short-term losses) in order to be the only (or major) supplier of books to consumers and/or reseller of books from publishers, this can be viewed as predatory pricing – perhaps good for the consumer in the very short run, but less so in the long run, since there are significant fixed costs to establishing a similar e-book/bricks&mortar presence in the market, particularly in the light of Amazon’s potential willingness to drop prices enough to make business untenable for the new entrant. Re @Austin’s point on dumping, the Clayton and Sherman Acts do address the issue of predatory pricing – the question is whether current or future governments will act on it. (2) Another drawback of e-books: digital rights are country-specific, so you can buy an e-book in the US, but it may not be available when you take your e-book reader somewhere out of the country on vacation, business, etc.(3) Consumer response to temporary price changes requires that consumers be aware of such changes. A Scalzi e-book may have been available for $2.99 for a day, but as I was not aware of that, I didn’t buy it. Absent some sort of widget that provides real-time price quotes on all of the books one might be willing to purchase from all of the suppliers that might be able to sell it, the cost of acquiring such price information means that consumers will be operating under conditions of imperfect information much of the time; thus, one cannot expect all of the benefits and results of the free market to obtain, even if you assume other market imperfections away.

    What I really need is someone to design “library shelves of holding +8″.

  210. Mord Fiddle: This is only true if we assume the authors royalty cut remains remains at the 15% (for p-books, less I believe for e-books) maintained by the big 5 imprints

    That is a fair point but secondary to the question of pricing; an author who gets 15% royalties when her books sell at $14.99 is not going to magically get 25% royalties when her books are priced at $9.99. Indeed, I would expect publishers to try to decrease author’s royalties in order to keep their profits high. As Scalzi has noted extensively, this isn’t personal, it is just business.

    I would expect best-selling authors to increase their sales at the $9.99 price point more than obscure authors as they benefit from media and advertising.

    The (scanty) evidence argues against that. Best-selling authors tend to have more demand which means that their readers are probably less price sensitive as a group than readers of less popular authors; indeed, there is some evidence that publicizing an author makes her readers less price sensitive.

  211. Am I the only one who’s not worried about new releases in this scenario? I go to repurchase The Wheel of Time series. Paperback: $5.50; eBook: $14.99. What? You can’t deny the eBook has less value than a paperback, and cost less to produce, so please explain to me this thinking — because I don’t get it, and as a result, most publishers can rot with their set the price methodology.

    (NOTE: My pricing is from an incident that occurred before the collusion between Apple and others was adjudicated. Currently the book I was looking for is $4.99. Much better; who had to win the fight to get it there?)

  212. JohnD – The reference journal article is dated 2002 and is related only to hardcover/paperback pricing over time. A lot of technological water (and new data) under the bridge since then.

    A few other articles of interest tracking numbers:

    http://libraries.pewinternet.org/2012/04/04/the-rise-of-e-reading

    http://www.publishingtechnology.com/2014/02/ebook-sales-growth-where-its-really-coming-from-an-analysis-of-author-earnings

    http://www.digitalbookworld.com/2013/best-ebook-publishers-in-2013-hachette-penguin-random-house-on-top-of-publisher-power-rankings

  213. gwangung:

    Heh. And they do it again.

    Books are sold just like widgets! And publishers will die soon! I don’t know what any of the terms involving book marketing and accounting mean, but I will use them anyway! If you point out, (as has now been done about 15 different ways by different people,) that Amazon’s math is wrong, I will give you fake math about how things should be!

    Notice how they keep arguing as if there were only two e-book prices — $14.99 and $9.99. Most e-books are sold for less than $9.99. Most books never come out in a hardcover edition. They are essentially arguing about a small handful of books that are initially priced higher because they are new and popular — like any other creative product sold in the market — and ignoring the entire rest of the market.

    You never hear anyone going, how dare they sell that designer handbag for $700 when it comes out with the spring collection for the first time, when there are handbags for twenty bucks sold on the street! Or how dare this new digital game be priced $50-200 on its initial release when there are older games that now only sell for $25!

    But with books, apparently hardcovers, which are sturdier than paperbacks and more permanent than e-books or audio books and so some customers pay for those features because they want them, are evil. Never mind that more and more self-published authors are also putting out print books in trade paper or hardcover too for a wider distribution of customers. Never mind that publishers have been selling hardcovers just as long as they’ve been selling paperbacks at different prices and nobody freaked out about it ever. Never mind that e-books are cheaper than hardcovers by a lot to an enormous amount. Never mind that you don’t actually ever have to buy a hardcover and they actually have very little impact on e-book prices. Never mind that Amazon sells tons and tons of hardcovers happily. They’re evil! And the symbol of everything that is wrong with book publishing, but not apparently wrong with any other creative or tech industry.

    Oh, and if Amazon says that the bestselling author will sell mega more e-books at $9.99, apparently that must mean that it is true. And Amazon’s only concern and demand in the negotiation is about e-book prices, which we already know is bullshit.

    I don’t really get the worship of Amazon — I never have. It’s a good company, sure. It expanded markets, not invented them, (the digital e-book market existed in the 1990′s, online selling existed before Amazon did.) Other newer companies now are probably more innovative. It’s been a company impressive for running for twenty years on losses and no profits but still getting investors in its “potential.” It is ruthless in its business practices and grip on market shares and probably breaks the law on predatory pricing. It’s helped shore up the losses after the collapse of the wholesale market, but extracts a heavy price for it. It did a neat PR move with self-published authors so that they could then sell self-published authors and their families goods, that has increased book distribution, so good. (But now self-published authors may be entering a new bind there.) It treats its warehouse workers like shit and its customer service has gone down hill. It’s not the Death Star and it’s not the Rebellion, and neither is Hachette.

    They are simply negotiating. Amazon dragged the authors into the middle of it, because they do love a good Death Star PR spin. And Amazon may have hit the boundary wall of what they can suck out of publishers with their market leverage and strongarm tactics. Which they will survive. So will Hachette.

  214. “Notice how they keep arguing as if there were only two e-book prices — $14.99 and $9.99. Most e-books are sold for less than $9.99.”

    This average includes independently published and small press published.

    What is the average price of a major 5 publisher e-book?

  215. Mord Fiddle -

    Hey, I said that the data was scanty! 8-)

    Seriously, though there has been a lot of technological change, I doubt that the buying habits of people have changed all that much as they are closely linked to our mental makeup. (Yes, I’m one of those who thinks that homo economicus is {mostly} a myth.) So though technology has changed quite a bit since 2002, our habits are still stuck in the 1980s.

  216. “However, their point stands; for the average author, a reduction in price results in an increase in sales.”

    This point would only stand with a could stuck in there. A point made earlier that needs to be reiterated here is, Amazon’s numbers are based on overall sales of a group of books sold at $9.99 versus a group of books sold at $14.99. At no point do they specify anywhere what books are in group a. and what books are in group b. Even if they took an even sample of literary fiction, balancing the male and female authors in both groups, debut versus legacy authors, books adapted to film versus never adapted, etc… They’re still looking at two disparate populations of books. Even if they took books priced at one time at $14.99 and now priced $9.99 or vice versa, they’re looking at books at differing times in their lifespan.

    Their numbers show that they sell more eBooks at one price point than they do at another, which suggests an author could see more sales of eBooks at the lower price point than the higher, not that they will.

    “JohnD – “[T]he profit for best-selling authors (such as your host) will almost certainly decrease.”

    This is only true if we assume the authors royalty cut remains remains at the 15% (for p-books, less I believe for e-books) maintained by the big 5 imprints.”

    We also have to assume here that increasing sales of eBooks doesn’t cut into sales of hardcover books. If pricing within Amazon’s preferred margin preferences eBooks and hurts sales of hardcover books, John could end up either seeing no monetary advantage, or possibly losing money in the exchange.

    Advantaging eBooks over physical books has a huge upside for Amazon (still sells books, sells Kindles, spends less on shipping, storage, etc…), but it’s far less advantageous if you’re income derives from selling both.

  217. @mrTroy quoth: “Hey, we give KDP authors the full 70% which would cover the normal publisher’s costs too. Wouldn’t it be nice if publishers shared more of that pie with their authors?”

    It would be nice if Amazon actually gave self-publishing authors the full 70%. I get 35% on my 99-cent short stories. For the novels, I get 70% minus “transmission fees” that are about a dime each. And that’s in the “blessed” countries; in other countries, since I didn’t go exclusive, they offer only 35% no matter what price range I’m in.

    Which is to say: Amazon apparently likes to nickel-and-dime people, and what they say sounds really good — and then they start assessing fees, or wanting exclusivity, etc., and it becomes… maybe still better than alternatives, but it’s not really what they’re touting. So when they make their pretty, shiny, idealistic comments about what they think the split should be? Grain. Of. Salt.

    @mmug — I like your points. :)

  218. @Mikes75 “We also have to assume here that increasing sales of eBooks doesn’t cut into sales of hardcover books”

    Indications are that purchases of e-books doesn’t reduce p-book purchases and can actually increase. People with e-readers read more books than they did before purchasing the e-reader. And a person who buys 20 p-books a year will likely still buy at least 20 p-books after they buy an e-reader. It’s not a zero-sum game. See the Pew research link above.

    e-books have been very, very good to Hachette and company.. They were one of the top e-book sellers last year.

  219. No Name said:

    You can’t deny the eBook has less value than a paperback…

    Sure I can. For many of the books that I read, I value the size, weight, and portability of an ebook. Instead of carrying two or three paperbacks with me to a dentist appointment or on a trip, I can carry one small device. I also really like the fact that the light on my book reader is adjustable and adds no weight to the device, which means that I can read in bed at night without keeping my wife up (an improvement over either the lamp on the nightstand or a booklight).

    I get that I am theoretically giving up the right to resell that book or that it could cease to exist at some point in the future if the retailer or publisher decides to yank my license (all the more reason to buy books without DRM, if that is a concern). However, the reality is that the kinds of books that I buy digitally are, to me, disposable entertainment, much like going to a live concert or movie theater. I read the book and am done with it. Paperback books just end up taking up space in my house, and the hassle of boxing them up and taking them to the local bookstore outweighs the benefit (to me) of whatever pittance I might get in reselling them.

    So, while an ebook might have less value to you than a physical book, there are definitely specific classes of books (i.e. those that I read as disposable entertainment) for which an ebook has greater value to me.

  220. @JohnD – Again, check the Pew survey data. It shows our buying habits have changed. and it’s consistent with my own informal surveys – people with e-readers tend to buy and read a lot more books. Seems books are habit forming. ;)

  221. Mord Fiddle:

    “Indications are that purchases of e-books doesn’t reduce p-book purchases and can actually increase.”

    My anecdotal notes: I don’t see eBook sales cannibalizing hardcover sales (they bite into mass market, but kind of put them in the same bucket, so I don’t see it as a loss — really, it works out just fine). Also, audio sales don’t seem to have an impact on either hardcover or eBook sales. I suspect they address audiences that overlaps but have substantially separate elements.

  222. In the end, Amazon has already won this war because organizations like SFWA have proven themselves to be utterly worthless. It doesn’t matter what anyone says on this blog or any other, Amazon has already won.
    The debate is over.

  223. Who knew this was a war between Amazon and the SFWA? The things one learns, listening to trolls.

  224. You know rochrist, I have to concede, you are absolutely right, there is no disagreement between SFWA and Amazon, yet another reason that Amazon will win.

  225. DH —

    This average includes independently published and small press published. What is the average price of a major 5 publisher e-book?

    Are you under the impression that small presses charge less for their books than the big five who can do deep discounts and mass market paperbacks galore? Small presses generally rely on hardcover and trade paperback sales and price their books at more than the big five usually do.

    As has already been explained, most of Hachette’s books aren’t hardcovers, only a percentage of Hachette’s books are going to be bestsellers, and like everybody else, Hachette drops the price of the e-books over time. In SFF, which Hachette has several imprints in multiple countries, half the market is mass market paperback. Most new authors in SFFH are brought out in mass market paperback original only and don’t get a hardcover until they build up enough of an audience that would be willing to buy a hardcover edition first because they like the author’s series and they want it.

    So you can get nearly all the offerings of your favorite SFF authors in e-books already for under $9.99 (at least if you’re not in Kenya.) You just can’t get that price for the new one that just came out of the big sellers who get hc pubs because everybody wants it right off, so if you want it right off — which is a service you’re getting and has higher initial costs in not only production but marketing and publicity costs — you pay a premium for it. If you don’t like that price, you wait and buy it later when it’s lower. Or get it from the library.

    Publishers do this, booksellers do this and self-publishing bestselling authors do this — they’ll put new offerings at a slightly higher price of a few bucks (even though Amazon then takes a bigger cut for the exact same service it’s giving,) and then drop it over time. It’s called selling for what the market will bear because different readers, again, value different books at different levels. One reader won’t pay over ten bucks even for an author he likes; another has no problem with it. Authors don’t make more money by selling only to the guy who won’t pay much and not to the other person who values the author more. He makes the maximum money by selling to BOTH. That’s why we have both hardcovers and paperbacks.

    Elizabeth McCoy:

    Which is to say: Amazon apparently likes to nickel-and-dime people, and what they say sounds really good — and then they start assessing fees, or wanting exclusivity, etc., and it becomes… maybe still better than alternatives, but it’s not really what they’re touting.

    Amazon gave the self-pubs a lot of free passes in the beginning because it was building the marketplace. It doesn’t have to give as many freebies anymore, so it’s taking some of them away and it’s exerting control over the marketplace since it owns 90% of it. If you want to sell with Amazon, Amazon controls what price you can sell for in the whole e-book market (and self-pub audio market too, sounds like.) But it wasn’t giving freebies to the publishers and was demanding more fees in co-opt money as well. Which is a big part of the negotiations with Hachette — e-book prices of bestsellers have very little to do with most of it.

    Blackadder:

    In the end, Amazon has already won this war because organizations like SFWA have proven themselves to be utterly worthless.

    Dude, SFWA has got very little to do with price setting and booksellers. It’s an author organization that tries to help authors run their business. It helps authors in legal disputes and to get services like healthcare. It provides information and resources, keeps an eye out for scam operations, offers mentorship and networking, and helps spread awareness of the field and authors with promotional opportunities. It isn’t like the AUW. And it has nothing to do with Hachette and Amazon’s negotiations. SFWA may be effective at some things and not so much at others, but authors coming together to help each other is not worthless.

  226. Mord Fiddle – Again, check the Pew survey data. It shows our buying habits have changed.

    I don’t think that our two points are incompatible. People can buy more books and still be price sensitive about some authors (“Huh – a RHDS book for $0.99 – nah, still too much!”) and not so sensitive about other authors (“Oh, boy! A brand new edition of The Silmarillion with extra glitter! And only $99.99!”). So even though folks buy more books, decreasing the price on ebooks won’t necessarily translate into more sales or more profits for the authors; instead, the money that would have gone into buying the book may be used for other forms of entertainment, such as eating or having running water.

  227. Rochrist:

    Indeed, it was in reading a Slashdot comment that I was moved to remark on Twitter that I enjoyed reading about the fantasy versions of me that exist in people’s heads, which don’t actually seem much like me at all. But, eh.

  228. @ JohnD

    “Right now, we only know that Amazon asserts that you will on average sell 1.74 times more ebooks at $9.99 than you would at $14.99. We have no information on the ratio between $9.99 and $11.99 or $12.99 or $10.49; given that Amazon has elected to publish just the one price point suggests that they are probably much lower than 1.74. If the sales ratio drops to 1.45, then you lose money by changing $14.50 books to $9.99; similarly, if drops to 1.30, then you lose money by changing $12.99 books to $9.99.

    Using the values you’ve given, the earnings are quite close. If you’re an author (and you get a 17.5% royalty), and I say you can sell 100K books at $12.99 and make $227325, or you can sell 130K books at $9.99 and make $227272, is that extra $53 dollars worth 30K less readers (and their potential buys of your books) to you?

    100K at sold at $14.50 with a 17.5% royalty rate is $253750. 145K sold at $9.99 with a 17.5% royalty rate is $253496. You lose $253 but gain 45K additional readers. Not a bad trade.

    The ratio line from $9.99 to $14.99 probably resembles a sine wave than something straight, if the ratio at $12.99 to $9.99 was better, Amazon would have used it.

    “It doesn’t have to give as many freebies anymore, so it’s taking some of them away and it’s exerting control over the marketplace since it owns 90% of it.”

    Amazon had 90% of the market in 2008. Since then their share has fallen to 55% to 65%, depending on who you read, and its falling each year. Maybe not a lot, but its falling. If Amazons trying to achieve a monopoly, they’re doing it wrong.

  229. @Elizabeth McCoy: “It would be nice if Amazon actually gave self-publishing authors the full 70%.”

    Indeed you are correct, I was aware of the different royalty rates that KDP offers at different price points (and other considerations), but I either forgot or never knew that other fees came out of that royalty.

    Do you know if legacy royalties to authors include these fees or if they are handled separately? Also, are Amazon’s fees on their royalties offset by the fact that they are paid monthly (I believe) instead of six-monthly, giving you an opportunity to earn (on average) three extra months of interest on the earnings (or contrarily, three fewer months accruing interest on credit)?

    Not that nickel-and-diming anyone is a good thing, and it would be nice to see Amazon simply incorporating fees into its percentage cut rather than taking a “percentage-plus-fees” approach, as long as that doesn’t lead to a higher cut being paid overall.

    @Kat Goodwin: “Notice how they keep arguing as if there were only two e-book prices — $14.99 and $9.99.”

    You make some great points, but it would be even better if you could spend less time attacking straw men and easy arguments. Obviously creative pricing exists, (nearly) nobody is arguing that there are only two e-book prices.

    Like it or not, books are an entertainment good, and are largely fungible across other entertainment goods, such as movies, computer games, board games, and to a lesser extent cups of tea or coffee while out with friends. The point of lowering prices and increasing demand is slightly due to price sensitivity within the market… but also to do with price sensitivity between markets. If I can afford to buy a computer game or a book, but not both, then I will make a choice based on which one I think I will get more enjoyment out of for the price.

    Everyone who has released figures in every entertainment industry has demonstrated this price elasticity, so it seems that it doesn’t overly matter if core fans are price insensitive, since you get to enjoy price sensitivity over the whole entertainment market.

    You don’t have to agree with me, but saying that I’m wrong because I’m not in the publishing industry, without backing it up, doesn’t make for a very compelling argument.

    @John Scalzi: I enjoyed reading about the fantasy versions of me that exist in people’s heads, which don’t actually seem much like me at all. But, eh.

    And yet you don’t do or say anything to disprove them. When it comes to public perception, it unfortunately doesn’t matter what you think you should be perceived as. Just as Mord Fiddle mentioned, people react to you in a particular way because that’s how you come across. If you want a different reaction, act differently :-)

    Or be true to yourself, and don’t give a damn what people think. I think you’ve got the first bit down, just stop complaining about other people not liking it and you’ll get the second bit. Or at least you’ll look like it, which is most of the battle.

    Finally, to those who are suggesting that you can maximise profits by releasing at a premium price point, then dropping to mass-market afterwards… this is demonstrably true, but can you accept that this might be considered as rude and exploitative by your fans? I mean really, why would you want to charge your biggest fans 50% more than people who aren’t such big fans of your work? Aren’t they the people that you want to reward the most? I mean, these are the people that really want you to keep writing, so I can see why they are willing to pay more to support you… but I’d like to offer an alternative, where you let your biggest fans pay the same as everyone else as thanks for their loyalty, and then offer them other ways to support you further if they want to and can afford it.

    Hardcover sales are great for your big fans, since they are a great product (if you have the space) that lasts a long time (although I don’t know if this is a good example, since I don’t know how much extra you make off hardcover sales), donations, book signing tours, speaking events… I’m sure there are many other ways to maximise both revenue and fan goodwill, with the benefit that all of these add-ons are all piracy-proof!

  230. It’s interesting, I have been buying ebooks ever since the first edition of the kindle came out and my purchase of physical books has gradually dwindled down to zero. It took about five years though. My overall purchase of books has certainly gone up

    My guess is this pattern is not going to prove unusual there is a lot of habits to build up and tear down with regards to th physicsl object that is a book but eventually the convenience factor gets you

  231. Ian:

    Again, all of these figurings are based on an either/or pricing system — that you can sell the e-book for either $14.99 or $9.99 but not both over the course of the book’s sales time. And it is based on the assertion that books are guaranteed to sell more copies at the lower price point — that the lower price point will automatically bring in these new readers.

    As has been explained, selling the e-book at $14.99 and then later $9.99 or $6.49 in conjunction with paperback, can sell more copies than just selling the e-book at $14.99 or $9.99. And the volume rates are not guaranteed for any one book, as any person in publishing can explain to you. Books don’t sell at the same rate, just because they are at the same price. Amazon can no more guarantee a bestseller will sell 175K or 145K at the $9.99 price point than they can build a unicorn. Nor can they guarantee that if the publisher first prices the e-book at $14.99 when the hc comes out, and then drops it later to $9.99 or lower, that they won’t sell 175K when the book is dropped to the $9.99 price point plus the 100K sales or more at the $14.99 level. The e-books that are doing the best are in fact new bestselling fiction coming out with the hardcovers — the ones at the higher price point. It’s entirely not uncommon for an individual book to sell better in hardcover than it does in paperback at the lower price point.

    So there’s no point in saying that the earnings would be relatively close as you have no way of knowing that those would be what the earnings would be, and neither does Amazon. Nor do publishers have to make Sophie’s choice on the book prices — they can do all of them.

    Amazon had 90% of the market in 2008. Since then their share has fallen to 55% to 65%, depending on who you read, and its falling each year. Maybe not a lot, but its falling. If Amazons trying to achieve a monopoly, they’re doing it wrong.

    Amazon still has 90% of the self-publishing book market, which is the market I was referring to in reference to the freebies that Amazon gave the self-published authors. They have about 55% of the whole e-book market. They did have a very nice monopoly of the whole e-book market, but that was broken by Apple and other players in the field as the e-book market expanded. They milked it as long as they could. But they maintain their monopoly on the self-published market, largely by having the largest sales base and by ruthlessly squashing as many competitors for that market as possible and using contracts with self-published authors to control their prices in the market.

    Troylaurin:

    Obviously creative pricing exists, (nearly) nobody is arguing that there are only two e-book prices.

    Well yes, they are. Amazon did for one, which was the whole point of Scalzi’s post. And a number of people have been running math on just those two prices and ignoring everything else, making up math and ignoring the explanations for why that math is wrong that others have put up. So how about you don’t tell me what somebody else is saying when you are clearly not reading a lot of people’s posts.

    Like it or not, books are an entertainment good, and are largely fungible across other entertainment goods, such as movies, computer games, board games, and to a lesser extent cups of tea or coffee while out with friends.

    Yes and no. As has been explained before, book publishing depends on a core readership that regularly buys books, tries new authors, and puts aside money specifically to buy books. (About 20% of the population.) And then they try to drag other people in, largely with word of mouth and things like movie adaptations and hope that a small percentage of them add to the core readership.

    But dragging other people in is not simply a matter of low prices. It’s a matter of what books are offered. People who become interested in a drag them in book, like say Twilight or The Yiddish Policemen’s Union, are usually the ones most willing to pay the premium price for it, not the cheap price. When a book becomes a film, for instance, the hardcover, trade paperback and mass market paperback editions of that book may all end up back on the bestseller list at the same time, despite the mass market being the cheapest (and the e-book too — that’s one time where the e-book price may be raised again because they know people will pay it.) Cheaply priced editions of books, even bestsellers, are readily available — and yet people will pay the higher priced version if it has the features and speed they want, just like with other creative products.

    If I’m choosing between a computer game and a book and my determinant is price, I’m looking at a $50-60 game, plus a $400 gaming system, plus several hundred dollars in accessories like headphones and mics — that’s a lot of cash versus even a $200 e-reader and some e-books. But let’s say I’ve got the equipment already, so it’s just the $50 game. I can buy two hardcovers for that, five paperbacks, three trade paperbacks, and anywhere from three to twenty e-books. Now I can play the game for a long time, more than once, with friends, etc. so it may be worth putting my money into that if I don’t like to read. If I do like to read, then I may go for getting more books instead of one game that will be obsolete in four months or require me to shell out more money for updates or a whole new version. If I like both, I might go for a cheaper, older game at the $25 level if I can find one and buy a book or two. Now I have both — whoopee! Not everybody makes the same buying decisions, so it’s not a one to one ratio.

    Movies in the theater are fricking expensive. And yet my husband and I go see big special effects movies on the big screen right off, because we don’t want to wait. (We’re dragging the clan to Guardians next week.) We get sattelite t.v. which gets tons of movies only a few months after they were in theaters. If we watch one we saw in theaters, since they get a fee from the t.v. folk, we’re paying twice. And yet we also have to have Netflix, which has some of the movies and lots of t.v. shows for a lower but additional price. And then there are DVD’s, some of which you can borrow for free from libraries, but some of them we’ve bought. Those are purchasing choices we make. They don’t have to be the choices others make, or maybe even can make. If price was the issue, there are a lot of ways to get things cheap, or free, especially if you wait. Price isn’t the main issue.

    And that’s just fiction. The bulk of the money in book publishing comes from non-fiction, not fiction, which does not compete with movies, games, etc. Non-fiction provides information, information that you can very possibly get for free on the Internet. And yet people still buy non-fiction books for a variety of reasons in a variety of editions, very few of which have anything to do with price.

    Amazon’s figures in its media spin are bullshit fluff. Amazon has gotten self-published authors to price their books as low as possible for several reasons, a prime one being it lets them control the market and crush competitors who are stuck also selling those e-books at the low price. And it works to a degree because new authors will get more gamblers for a cheap price. But when the self-pub author becomes a bestseller — they raise their prices because people are willing to pay that price, and many of them have made deals with print publishers and have hardcovers, etc. at the higher price because they will sell. They sell at the higher and they sell at the lower. How high and how low depends on the particular book, the selling venue and a lot of other factors.

    So I’m not saying you are wrong because you are not in the publishing industry. I’m saying you are wrong because you are saying things that are wrong (which likely comes from ignorance of the publishing industry.) And rather than just saying that you are wrong without backing it up, I’ve been writing paragraphs and paragraphs explaining aspects of book publishing and pricing issues to show why you and others are wrong. And others in the industry have explained why the math is wrong and Scalzi has explained why the math is wrong. If I back it up anymore, people are likely to pass out.

    Finally, to those who are suggesting that you can maximise profits by releasing at a premium price point, then dropping to mass-market afterwards… this is demonstrably true, but can you accept that this might be considered as rude and exploitative by your fans?

    If it’s demonstrably true, why do you keep arguing that it’s not? Also, why is it rude or exploitative? No one makes readers buy any of these things at any of these prices. They choose to do so, knowing full well that they can get it cheaper in another format later on or at the same time, or get it for free from the library, which you can’t get with a lot of other stuff. Why is it not rude and exploitative that there are movie theaters showing movies for premium prices? Why is it not rude and exploitative that a game sells for $60 when the game will be only $25 the next year, and why is it not rude and exploitative that the new gamebox for the games will not play the old games and you have to get all new versions if you get the gamebox? Why is it not rude and exploitative that a handbag is sold for $700 from a designer but then will be sold for $100 a year later? Why is it that books — one of the cheapest, most valued creative books available — is the only product that is rude and exploitative if you offer people willing to pay authors a decent amount the choice of a hardcover version? Why is it rude and exploitative to have sales where prices drop?

    Books are not gallons of salad dressing. If you value a book, you decide what you will pay for it or if you will get it at all.

    donations, book signing tours, speaking events

    Readers don’t/won’t pay for book tours and most speaking events. Authors can’t even get cons to pay for them to come anymore or even let them in for free. Some projects can get some stuff like kickstarter, but by and large authors don’t get donations. Readers also seldom buy supplementary merchandise from authors, unless there are dramatic adaptations — and the authors don’t get much of a cut from the adaptations merchandising. The you should come up with other ways to cage money because I don’t like the existence of hardcovers is a strange argument. If you don’t like hardcovers, don’t buy them.

    Unholyguy — E-book sales are leveling off, so no. E-books have many pluses. But there are reasons people buy print instead. There are a lot of people who can afford to occasionally buy a print book, but can’t afford to buy an e-reader and its accessories and its batteries and have to replace it every few years since they are designed to die as soon as possible or may get damaged or stolen. Hard copy books also have their uses in permanence. People like to use books to decorate as well as read. For some readers, however, e-books can be very useful, or at least some types of books as e-books can be useful. It varies.

    Bundling now, that I still think may end up more common. But ironically, Amazon has put a big spike in bundling.

  232. Like it or not, books are an entertainment good, and are largely fungible across other entertainment goods, such as movies, computer games, board games, and to a lesser extent cups of tea or coffee while out with friends.

    Deciding on how to spend your finite amount of money doesn’t make the things you are choosing between fungible even if they all fulfill a general need of entertaining you. If they were fungible, buying birthday presents would be a whole lot easier.

  233. @Kat Goodwin, again, thanks for discussing. You continue to raise good points, but I think you also continue to see things from the same limited point of view, which contributes to other people looking to be wrong.

    “Well yes, they are. Amazon did for one, which was the whole point of Scalzi’s post. And a number of people have been running math on just those two prices and ignoring everything else, making up math and ignoring the explanations for why that math is wrong that others have put up. So how about you don’t tell me what somebody else is saying when you are clearly not reading a lot of people’s posts.”

    Amazon mentions and compares two specific price points in its PR, but never claims that no other price points exist. Near the end of the PR it distinctly implies a range of price points: “Is it Amazon’s position that all e-books should be $9.99 or less? No, we accept that there will be legitimate reasons for a small number of specialized titles to be above $9.99.”

    And yes, a number of people have focused on those two price points, on both sides of the discussion, which is why I hedged with “(nearly) nobody”. I’d like to invite you to ignore them as they are obviously not reading what you’re saying, so you won’t have to get frustrated repeating yourself at them.

    “I’m looking at a $50-60 game, plus a $400 gaming system, plus several hundred dollars in accessories like headphones and mics … I might go for a cheaper, older game at the $25 level if I can find one”

    The computer game market parallels the book market much more than you seem to think. There’s a bunch of legacy-published stuff that sits at high prices – $50 and more at first release, and some of those are pure gold. There are also huge swathes of games released at $10 new (strangely never $9.99), and at any particular point in time there are any number of games available anywhere from $2.50 to $25 to whet one’s appetite, between Steam and GoG.com and Desura and Humble Bundle (who also offer e-book bundles now)…

    Movies don’t just include the cinema, since renting a movie from iTunes or similar runs around $5, or a subscription to Netflix if you happen to live in the US. If we’re talking DVD or blu-ray, $25 could get you a copy of a beloved movie after the cinema run, comparable to buying a hardcover copy of a beloved novel.

    So at a variety of price points – $5, $10, $25 – there are direct comparisons available between books, movies and computer games, and there’s a growing number of consumers who span all three markets (or more). You’re right, this only applies to fiction though. I have no idea if this is at all applicable to non-fiction writing.

    “And others in the industry have explained why the math is wrong and Scalzi has explained why the math is wrong. If I back it up anymore, people are likely to pass out.”

    I think you’ve been restating your claim, more than backing it up. Note that yet others in the industry have explained why the maths is right, too. See JA Konrath and Barry Eisler in particular, I haven’t had time to read other opinions at this point. Those two in particular seem to have done quite well for themselves using Amazon maths. Does that extrapolate to the rest of the industry? I have no idea, but they seem to think so.

    “If it’s demonstrably true, why do you keep arguing that it’s not?”

    I probably left that impression from my first post, but I think I’ve stopped arguing that since then.

    “Also, why is it rude or exploitative? … Why is it not rude and exploitative that there are movie theaters showing movies for premium prices? Why is it not rude and exploitative that a game sells for $60 when the game will be only $25 the next year …”

    Just because everyone does it, doesn’t make it rude. As I mentioned in my last post, I think it’s rude (I guess many would disagree) particularly because I enjoy reading series, and a high initial list price like this that feels like a slap – “You want to know what’s going to happen to your favourite characters? I know you’ve already been waiting for a year or more, but if you don’t want to wait for another year then you’ll have to pay more! Bwahahahaha!”

    I know that other people find it rude in other industries as well. In computers in particular, if the price of a product drops a few months after it’s released people tend to complain quite loudly, often to the point of demanding (and sometimes getting) refunds.

    As to why I think it’s rude… it’s really because you’re offering a one-sided contract. Take it or leave it. If I leave it though, is that because the price was too high, or did I miss the release for some reason, or was I uninterested at any price? And how crappy do your fans feel when they buy at the higher price the week or the day before the price drops? Perhaps if the high initial release price also included dates of expected price drops then it isn’t rude any more, because then I can see the terms of the contract I’m potentially agreeing to.

    I can’t stop anyone from pricing high and then dropping the price over time, and I don’t expect to be able to. I can only share why I don’t like it when it’s done to me, and hope that somebody cares to listen. If you are simply after a way for fans to prove that they are willing to support you in your endeavours, then give them whatever you think is a fair price, and let them donate if they think the fair price is higher. I don’t know if such an approach will work for everyone, but some artists (musicians, comedians, and authors, at least) have done ok out of releasing their works for free and asking fans to pay what they think it’s worth. Heck, even our host John Scalzi has been in a Humble Bundle.

    “Why is it not rude and exploitative that a handbag is sold for $700 from a designer but then will be sold for $100 a year later?”

    That’s actually a bit different – the handbag isn’t the product in this case, being in front of the fashion trends is the product. So after a year, you’re not buying the fashion trend, you’re only buying the bag, and that’s what the price is reflecting.

    Most books aren’t fashion items though, so I don’t think it quite applies here. Then again, Dan Browne and Stephen King might disagree…

    “Readers don’t/won’t pay for book tours and most speaking events.”

    Perhaps not, but budding authors who like your work will. Smaller market, and sorry for the shifting goalposts, but still non-zero if available.

    “The you should come up with other ways to cage money because I don’t like the existence of hardcovers is a strange argument. If you don’t like hardcovers, don’t buy them.”

    I suggested that hardcovers fit exactly into the model of offering a larger product to allow fans to support you, why do you think I don’t like hardcovers? I’m quite a fan of hardcovers, but I unfortunately can’t fit any more into my house. Even paperbacks require a one-in, one-out scheme at my house at the moment, which is part of what I like about ebooks.

    I do find it interesting that you consider my proposal to be cadging money off your fans, but outright charging them more for the same thing just a bit earlier than everyone else is fine.

    And that’s more than enough from me. Have a great weekend, folks.

  234. @CS Clark,

    But those categories are fungible, at least accounting for taste. If you know someone likes thrillers (and doesn’t dislike either movies or books), then a thriller novel or a ticket to a thriller movie are largely comparable. It doesn’t even have to be the same genre, as long as you know that person likes all the options.

    Sure, it doesn’t help in narrowing down a person’s tastes, but that’s not enough to discount the argument that this is the way that a growing part of the world is choosing to spend their disposable income.

  235. @MrTroy – Fungible doesn’t just mean a bunch of things you might potentially like that have something in common. Building a rocket, fighting a mummy, climbing up the Eiffel Tower, discovering something that doesn’t exist, giving a monkey a shower, surfing tidal waves, creating nanobots, locating Frankenstein’s brain, finding a dodo bird, painting a continent and driving your sister insane are not fungible even if they’re all good ways of spending your summer vacation.

    And, come to think of it, doesn’t your whole argument about the rudeness of asking people to pay X rather than X – 5 + a donation revolve around a hypothetical reader who is vexed by having to wait six months until the price of Book V of Blood Wrath Of The Dragon King’s Vampire Storm Zombies drops down to what they are comfortable with? How does that happen if they won’t be (almost) exactly as satisfied with buying Book XLI of Lord Angst Magic And The Apocalypse Of Doom? Or getting a coffee?

  236. Troy Laurin:

    “And yet you don’t do or say anything to disprove them.”

    Alternately, I clearly state my thoughts and they ignore them for their own version of what I said, which in my experience is rather more often the case. In which case I shrug, because that’s their karma. There’s a lot of reading comprehension fail (for example, in this particular case, the illogical inference that noting a problem with Amazon’s position a priori means one is on the “side” of Hachette, especially when I’ve taken pains to note both companies work for their interest, not mine), and it’s not my job to wander about the field, gently teaching people how to parse arguments. Grown humans should know how to read, and a quarter century of being a professional writer suggests strongly I know how to write.

    “this is demonstrably true, but can you accept that this might be considered as rude and exploitative by your fans?”

    You know, if someone holds as a cherished tenet of their life that I am only allowed to make money in a manner they find personally acceptable, otherwise I run the risk of being seen as rude and exploitative, perhaps they will accept that I might tell them to fuck right off. If work of mine is not at a price point they find acceptable, they can wait until it is, or they can go to the library and read that copy. Or they can pirate it and never pay me at all, although if they prefer never to pay me or the people I work with over waiting a bit for the price to come down (or visiting the library), I question whether they are “fans” at all.

    I like video games, but I very rarely pay $60 for them, so it means that I wait for the price to come down to a price I’ll pay. I don’t consider it “rude” or “exploitative” to price something at what the market will bear, and then drop it when that market goes away. This is because I am a grown human being in control of my emotions and I don’t get into a stompy hissy fit when I can’t have a mass-produced commercial item that I want the way I want right this very second. This is partly because as a grown human being I recognize that it’s economically beneficial for the video game makers to address that upper market tier, even if I can’t see why I would want to be a part of it, and partly because I can keep myself busy with other things until that game’s price point drops to something I’ll pay.

    That said, I like the idea of the “why don’t you just do [x] instead of what you’re doing now?” plan you suggest, and I heartily encourage you to develop that system and mature it to the point where it’s in fact economically viable for me to participate without penalty (I will look askance at you, however, if you suggest I have to do all the heavy lifting and carry all the risk). I’ll note that if you follow my career at all, you’ll have seen many many examples of me trying various economic models to see how they work, because I’m always interested in new ways to make money; some have worked, and some have not, and I generally share such information.

    However, in the meantime I hope you will understand when I say that I will also continue to use a distribution model that I know benefits my career and income, and continues to do so at this point in time. I know my fans like it when I get paid, because it means I don’t have to do anything else other than write the books they like. And this is a fine way to get paid.

  237. Ian – Using the values you’ve given, the earnings are quite close.

    Only for values close to one σ. Get two σ away and the discrepancy is much larger. For example, there will be some authors whose works only have a price sensitivity of 1.26 at those two price points (see the discussion with Mord Fiddle for why). One of those authors would see their readership increase by 26,000 new sales but their net sales would decrease to $1,258,740 for a net loss of $240,260 and a royalty loss of $84,091 on assumed sales of 100,000 units. Don’t know about you, but $84k is pretty significant money to me.

    You lose $253 but gain 45K additional readers. Not a bad trade.

    But shouldn’t the choice to make that trade be in the hands of the author or publisher and not the wholesaler? And, as noted above, the price per reader can become very high indeed for the more popular authors.

    The ratio line from $9.99 to $14.99 probably resembles a sine wave than something straight,

    Nope. It is far funkier than that with lots of local minima and maxima. But I agree that Amazon picked the points they did in part because they helped to make a better case. My complaint is that it is an incomplete case.

  238. @ JohnD

    “But shouldn’t the choice to make that trade be in the hands of the author or publisher and not the wholesaler?”

    Publishers made that choice the first time around with Agency Pricing. $9.99 and more units sold wasn’t good enough. $12.99 and $14.99 was the future, according to them, and that’s what they’re trying to get back to.

    I know more than a few authors who are upset at how their books have been priced in the past, and have yet to meet one whose traditionally published who has final say over what their work sells for. And remember, were talking about an Industry that doesn’t do MSRP. It prints the prices directly on the product, and hardly ever changes them downward.

    If Amazon’s ratio is wrong, why hasn’t Hachette said so? Surely there’s a bean counter with a spreadsheet somewhere in France that could look at the number as well?

  239. I could use a jpg of Scalzi looking askance at me just for those times when I contemplate doing something counterproductive.

  240. Mr. Scalzi, I’ve defended you against SJW’s, as being free to speak your mind, because I thought you were intelligent. This post has removed that belief. You may, or may not be a good author (for certain values of author :-)), but you clearly do NOT know business economics. I do. For the sake of assumptions, a minimum wage worker earns wage is $6.12/hour, after taxes (FICA and income, no state/local income taxes). Your $14.99 ebook costs 2.45 hours of pay. a $9.00 ebook costs 1.63 or _50%_ less. I’ve spent a lot of years working at “low paying jobs,” so I know what choices you have to make. If you make $50K/year, $14.99 is trivial (probably), but at $14.5K, it’s very different.
    As to prices in general, Amazon is 100% right in saying that “book prices are not very elastic.” (Elastic pricing means the price has little effect on sales.)
    For example, Fuel (gas & diesel) are somewhat elastic. A 10% rise in price does not mean a 10% or more drop in sales. Food is more elastic in vegetables and fruit, than in meats. A $10/lb. steak can be replaced by cheaper cuts, masking the _individual_ cut’s elasticity. OTOH, clothing, housing, furniture is very *non* elastic in price. Doing without “new,” or just not buying, are very real choices, and often used. Another example is books of all kinds. Books compete with free TV, Libraries, movies, DVD rentals, etc. Every book purchase (text books and reference books are an exception) has to have a _perceived_ value of more than the time required to earn the purchase price. James Patterson, L.E. Modessit, David Weber JD Robb (Nora Roberts)and Steven King may be able to sell ebooks at $14.99, but most can’t. They don’t have fanatical (I want their books at whatever price) readers. Maybe your sales wouldn’t change, but *most* authors will sell more at the $9.99 top price. _That_ leads to more royalty income.
    Finally, yes the retailer/publisher “sets the price,” but the *buyer* decides whether or not to *pay* that price. If as a buyer, I decide that a rice is “too high,” I don’t buy the book. *No one* has the power to _make_ me pay a price higher than _I want to_. (Note:my first book is about to come out, and I pay close attention to this subject. I want to sell the _maximum_ number of books, at the highest profit {royalty} I can. Maybe other authors don’t care, but _I_ do.)

  241. If Amazon’s ratio is wrong, why hasn’t Hachette said so?

    It isn’t a question of the ratio being “wrong”; the ratio is incomplete. It tells us the average change in sales for authors as a whole for two selected price points. It does not, for example, tell us what change in sales John Scalzi could expect if his latest book was priced $9.99 instead of $14.99; it is possible (though unlikely) that sales would actually decrease (marketing wonks call this the “discount effect“). Without knowing that information for each individual author, we cannot tell if the price change that Amazon wants will be a net benefit to the author or not; indeed, it is likely to be a net loss for the more popular authors as their readers are less price sensitive (i.e., would be willing to pay the higher price for the book).

    The only thing that we know for sure is that Amazon would make more money if the book prices were lowered to $9.99. Not that there is anything wrong with that, but it would be nice if the authors made more money, too.

  242. Like it or not, books are an entertainment good, and are largely fungible across other entertainment goods, such as movies, computer games, board games, and to a lesser extent cups of tea or coffee while out with friends.

    Yeah, no, citation needed and all what the kids say. Are you really trying to argue that the market for books, movies, computer games* and board games is nearly identical, such that consumers really don’t care whether they read a Scalzi book or play Monopoly, they’ll just pick whichever is cheaper and more available? Or that all this stuff about ‘bestselling authors’ is illusory, and people will always opt for the $9.99 e-book of Author McNoName’s latest thriller over paying $14.99 for the newest Brad Thor or Dan Brown novel – after all, they’re equally available and one is cheaper?

    Because that’s what “fungible” means; the goods are so like one another that substitution doesn’t matter. If the grocery store bagger drops my sack of flour, they hand me another one; there’s no real difference between the one that broke and the replacement. What you seem to be trying to say is that people may buy Book A or go to Movie B if they can’t get Book C. Setting aside whether that’s even true, that’s not “fungible”. Fungible would mean that if you ordered a Scalzi book from Amazon, and they were out, so they sent you Danielle Steele’s latest instead at the same or lower price, you’d be just as happy.

    *Even ‘computer games’ is not a fungible category, since that encompasses everything from mobile games to freemium MMORPGs to blockbuster episodic titles; you can’t possibly be saying with a straight face that the audience for the next Grand Theft Auto sees that game as fungible with Clash of Clans.

  243. Walter Daniels:

    “James Patterson, L.E. Modessit, David Weber JD Robb (Nora Roberts)and Steven King may be able to sell ebooks at $14.99, but most can’t.”

    And this argues for artificially capping the top price for all authors and their books how, exactly?

    Note also that the authors you note sell very well, and add significantly to the profits of the publishers, some of the profits of which will go into the acquisition of works from other writers. I’m not entirely convinced that arguing to publishers that they should remove a significant chunk of their profit potential, thus starving them of the funds they need to run their business and develop new authors (and thus, new sources of income) is one that they are going to see the wisdom of.

    Likewise, when an author can’t sell at $14.99, what happens is the publisher prices their works for less. This already happens; take a look at the vast number of books between the $14.99 and $9.99 price points (and also, below $9.99 as well). And yet again, the idea that books may be priced at one level to take advantage of those willing to pay it, and then at another level for another audience, appears to be disregarded. When Amazon contends that book prices are not very elastic, it (and you) appears to be willing to elide its own experience at selling books at price points ranging from $14.99 to $.99, finding willing consumers at each, and moving prices about to take advantage of different groups of consumers. As I’ve noted before, one of the great things about ebooks is the ability to have more flexibility in pricing — I’m not sure why I or you or anyone would want to choke off that flexibility on either end of the price scale.

    Let’s stop pretending that Amazon doesn’t want books at no higher than the $9.99 price point for its own reasons — i.e., to lock people into the Amazon ecosystem, and to help winnow out other competitors — and isn’t massaging its messaging to aid in that quest. I know you’ve already insulted my intelligence here, but don’t insult it that way.

    “you clearly do NOT know business economics. I do.”

    I have reason to doubt this assertion, based on the available evidence.

  244. What lost is the fact that Amazon wants books to sell at $10. Unfortunately that’s a long way from the price of comparable digital media—games, tunes, shows, apps—which is about a buck. So the bad news for publishers has only begun. And it’s bad new for Amazon as well.

  245. “Finally, to those who are suggesting that you can maximise profits by releasing at a premium price point, then dropping to mass-market afterwards… this is demonstrably true, but can you accept that this might be considered as rude and exploitative by your fans?
    I think it’s rude (I guess many would disagree) particularly because I enjoy reading series, and a high initial list price like this that feels like a slap…

    When people talk about “fan entitlement”, this is what they mean. This assumption that it’s about you, personally. It’s not. Authors (and filmmakers and musicians and game developers and their attendant studios and publishing companies) are not your buddies. They don’t know you, they aren’t in it to do something for you, they don’t particularly care about you. I imagine that may come as a shock, if you’ve been operating on an assumption that it’s otherwise, but there it is.

    They do care about your money. It is a solution to the problem of their own prime motivators: food, shelter, reproduction. When Scalzi posts funny comments about how he’s having to spend the day writing because he “like[s] to eat”, or “has to pay [his] mortgage”, or “need[s] to pay for Athena’s college”, he’s not actually making a joke. And so, he wants to price his work at the highest point the market will bear, in order to make the best living possible. I’m no staunch capitalist (I’m a public school teacher, FFS), but even I understand that that’s the deal.

    Mr. Daniels, here’s how I know that you both don’t know the book industry very well, and haven’t even bothered to read this (or any other) discussion thread on the topic: while your analysis about real costs probably seemed clever and on point, it is in fact irrelevant because, as has been pointed out several times, minimum wage workers are not the market for books. Books are, as has been pointed out, a luxury item marketed to reasonably affluent customers. Low income customers have long known known that they can get books for free, if that’s how they want to spend their small amount of leisure time. Further, despite your expertise in business economics, I think what you’ve done here is allowed your private financial choices to color your analysis. You have as they say, allowed it to become personal.

  246. Winstuff, you might have a point if those were actually “comparable digital media”. But since they aren’t, well…

  247. @Walter Daniels – “(Elastic pricing means the price has little effect on sales.)
    For example, Fuel (gas & diesel) are somewhat elastic. A 10% rise in price does not mean a 10% or more drop in sales.”

    Technically speaking, price elasticity is defined as the absolute value of the ratio of the percentage change in sales to the percentage change in price. Ratios higher than one are said to show elastic demand, while ratios less than one show inelastic demand. Thus, if a 10% rise in price does not result in a 10% or more drop in sales, the price elasticity of demand for fuel is deemed “inelastic”. Obviously, there are degrees of elasticity (and inelasticity), and the characterization of demand depends on the broadness or narrowness of the categorization of the item of which you speak: “entertainment” vs. “written entertainment” vs. “books” vs. “fiction” vs. “space fiction” vs. “space fiction by someone whose last name is Scalzi” etc. There is also a corresponding measure, “income elasticity of demand”, measuring the sensitivity of demand to changes in the level of income. This measure is not insensitive to the level of income being considered – a 10% increase in the price of books will have more impact (% change in expenditures on books) on me than it will on Donald Trump, despite the fact that books are a line-item in our family budget, ranked behind food and shelter, but before clothing. So, when Amazon says that book prices are not very elastic (a mystifying comment, since elasticity has to do with the responsiveness of demand to a change in price), are they suggesting that changing prices will do little to change demand? If so, they are undercutting the price point argument they are making.

  248. Kat Goodwin:

    “Are you under the impression that small presses charge less for their books than the big five who can do deep discounts and mass market paperbacks galore? Small presses generally rely on hardcover and trade paperback sales and price their books at more than the big five usually do.”

    I am under the impression that non-big 5 published ebooks are not often priced above $9.99, with many or most seemingly priced between $2.99 and $7.99.

    What is the average price of the big 5 e-books? Do you have this information? I presume that you do, because without that information, you really can’t argue that “most are under 9.99 price” without understanding the pricing of big 5 versus everyone else.

    You keep mentioning that the average price of e-books is already below 9.99, but I think that this number does not mean what you think it means because it includes an awfully lot of ebooks that are given away, or sold less than $9.99 outside of the traditionally published channels.

  249. dh,
    I’m just a reader, but even I can tell that most ebooks are below 9.99. Go take a look at Scalzi’s books on Amazon. I scrolled through about 10 pages of his books. You know how many of his ebooks were priced above 9.99? A grand total of 3. All 3 ebooks were new releases, not yet available in paperback . In fact, most of his ebooks were priced well below 9.99. Other than a boxed set, his new releases were priced below 14.99.

    I would say that Scalzi is a good example of what Kat has been saying. I can’t give you specific numbers, but it’s pretty easy to investigate. Oh, and my experience as an actual shopper tells me that Kat is correct.

  250. Oops, in my discussion of the income elasticity of demand, I should have said that a 10% increase in my income would yield a different change in my demand for books at my current income level as compared to the change one would see if my base was Donald Trump’s income level. Been away from academe too long…

  251. Mr. Troy:

    No, we accept that there will be legitimate reasons for a small number of specialized titles to be above $9.99.”

    Like, say, that they are bestsellers, just out. And also, umpteenth time, most of the e-books sold by the publishers are well below $9.99 and the price of bestselling e-books drops over time. So Amazon’s concern in this piece is ONLY with the bestselling, hardcover produced books where the e-book might be above $9.99 — the specialized titles. They think that they should be less in price. And at the same time, they say that they understand why they would be more. In other words, bullshit fluff.

    What they are trying to imply is that publishers are pricing all the e-books at $14.99, which is a lie. And Amazon thinks that all the e-book prices should come down to $9.99 or lower, except for the specialized first run bestsellers. In other words, Amazon thinks the e-book market prices should be exactly what they already are.

    Essentially, Amazon is banking on a lot of authors being very bad at business and math here, and having very little awareness of the overall market. Stephen King and James Patterson are not bad at business or math, and they aren’t at all happy that Amazon is trying to muck with their business (which includes many more sellers than just Amazon,) in order to gain more control over the marketplace and get more co-opt money from publishers.

    And yes, a number of people have focused on those two price points, on both sides of the discussion, which is why I hedged with “(nearly) nobody”. I’d like to invite you to ignore them as they are obviously not reading what you’re saying, so you won’t have to get frustrated repeating yourself at them.

    You mean like when somebody claims that nearly nobody is arguing about two price points so why am I falsely implying that there are more of them, and I have to repeat myself that there are actually quite a few people arguing just that, and then that person contradicts himself to agree that there are a lot of people doing that and this time instead I should just ignore people doing that? Seriously, dude, read your own posts.

    The computer game market parallels the book market much more than you seem to think.

    My point was that in pricing systems, computer games and books are parallel. There are games that are cheap, but the bestselling games go for $50 or more when they first come out because lots of people want them right away and are willing to pay for that service. Likewise, there are books that are cheap, but the bestselling books go for more when they first come out because there are lots of people willing to pay for that service.

    I do find it interesting that you consider my proposal to be cadging money off your fans, but outright charging them more for the same thing just a bit earlier than everyone else is fine.

    I don’t consider artists cadging money off their fans to be a bad thing. It’s just a reality that while readers will pay for the hardcover and initial e-books because they value getting the work right away, they don’t have much interest in paying the author directly to hear the author speak. They care much less about fiction authors as personalities than they do about the actual books. If an author is a really big name and speaking at a convention or for a charity, readers may pay to listen. But, the convention, while it pays actors for showing up — they very seldom pay any authors for showing up and speaking. And the author speaking to just make cash for the author — mostly that’s only going to work if you are a non-fiction writing expert on the speakers and seminar circuit, speaking to an audience that are not readers but usually business folk. That’s part of your overall business.

    But the business of fiction authors mainly is fiction, and the books are mainly the only thing readers want from authors. So the suggestion that authors give up huge reams of their income and try to find other sources when those sources don’t work, well, see what Scalzi said. There are authors who are trying to do some innovative stuff with Kickstarter and such, but that’s just to fund the project so the author doesn’t have to do it on spec (similar to a book advance.) The project still is going to be priced and sold to maximize sales. Because people value artwork from different people at different prices.

    Andrew:

    Publishers made that choice the first time around with Agency Pricing. $9.99 and more units sold wasn’t good enough. $12.99 and $14.99 was the future, according to them, and that’s what they’re trying to get back to.

    That’s not at all what actually happened, nor is happening. What publishers wanted was price flexibility and more vendors for e-books, rather than Amazon controlling the market and prices, and since e-books are a tech product, to use the agency pricing system used throughout the tech industry — including by Amazon with other suppliers. For the zillionth time, most e-books from publishers are priced lower than $9.99. Bestsellers can be priced higher because many readers value them enough to pay it.

    And AGAIN, there is no guarantee that if you price a bestselling e-book at $9.99 that you will sell more books. You may sell more books, depending on the title, but it’s not automatic money, and even if you do sell more books at the lower price, there’s no reason you won’t sell them if you drop to $9.99 after selling at $14.99. (This is how hardcovers and paperbacks work.) The reality is — and Amazon knows this and is lying about it — that publishers sell and are far more likely to sell more books in total by pricing bestselling e-books at $14.99, then $9.99, then $6.49, than they would selling the bestselling e-books only at $9.99. So if selling more units is the goal, why would publishers and authors want to sell less units than they are selling now?

    It prints the prices directly on the product, and hardly ever changes them downward.

    That is completely and utterly untrue for print, e-books and audio books. First off, prices may be dropped when a new printing is done, and often is. Second, prices drop when the book switches print formats — hardcover to paperback. Third, e-book prices are dropped all the time. Fourth, there are these things called stickers that you can put on books to create a new price, and sales, where a bookseller may say they’ll give you a fifth paperback free if you buy four, or you can buy two e-books together and get a discounted price. Amazon does them all the time. They built their business by doing deep discounts — which publishers partly paid for.

    If Amazon’s ratio is wrong, why hasn’t Hachette said so?

    1) Well first off, because responding to an obvious PR fluff from your negotiating partner is not necessarily the right media strategy. 2) Because Amazon never releases any actual data of its sales. It can say the ratio is whatever it wants without any data, much less a guarantee which it can’t give. 3) Because as already mentioned, Hachette can’t discuss various terms being negotiated with Amazon in the media — terms that have nothing to do with e-book prices. That’s how Amazon got around it — they are talking about e-book prices instead of what they are actually negotiating with Hachette about. 4) Saying no you can’t sell a lot of e-books at $9.99 is silly. Hachette is not falling for arguing against the nonsense salad Amazon is making.

    Amazon is arguing that a publisher can make more sales selling a bestselling, first run e-book only at $9.99 than it can by selling that e-book at $14.99, then $9.99, then $6.49. Which is highly unlikely and they can’t prove it in the least. But by pretending that the publisher is only selling the bestselling e-books at $14.99 forever, Amazon is making an economically pointless argument. They set up a pretend market and then argue that the pretend market needs to change — into the market that we already have.

    Walter Daniels:

    James Patterson, L.E. Modessit, David Weber JD Robb (Nora Roberts)and Steven King may be able to sell ebooks at $14.99, but most can’t. They don’t have fanatical (I want their books at whatever price) readers. Maybe your sales wouldn’t change, but *most* authors will sell more at the $9.99 top price.

    Actually no, most authors will not sell at $9.99 — that’s too high. Which is why most authors’ e-books already sell for less than $9.99. (Seriously, did you read anything previously in this thread at all?) It’s only the bestsellers put out in hardcover that sell for $14.99. And as you note, they have fans who will pay that price when the e-book first comes out. Which maximizes their royalties. So why do you want James Patterson to have to lose royalties? Joe Schmoe — his e-book is already selling for only $6.49 because that’s his value, and he’s maximizing at that price.

    Jane Schmoe self-publisher — she’s got even less clout in the marketplace, so she sells her e-book for $2.99 — because that’s all Amazon will let her sell it for without taking an arm and a leg for just letting her sell in their market stall. And Amazon keeps her from selling it for less anywhere else with the contract she agreed to, even though they can change the terms of the contract whenever they please. But even with Amazon taking more of her sales than they are entitled to for the service they offer (which is not the same and is much more limited than a publisher business partner,) Jane does well, so it works for her business. Her low price attracts some readers who are willing to take a chance on her because the book is cheap (just as they do with Joe.) And they spread word of mouth, so lots more come and buy her book and she is also able to sell it on more vendors than just Amazon.

    Now Jane’s a bestselling self-pub author. People value her work more, they’re willing to pay more for it. So she raises her price to $5.49 for her newest book (and also puts out a trade paperback version priced at $11.49.) That means Amazon gets an even bigger cut — even though they aren’t offering her any more services — but because lots of people are willing to pay it, she maximizes her profits over her costs. (Amazon does not pay her a royalty, Amazon just takes a cut — a cost. Amazon is not her publisher. We’ve been over this before.)

    Later on, Jane drops the e-book price from $5.49 back to $2.99 while pricing her next new title at $5.99. Joe Schmoe’s $6.49 e-book is dropped to $3.99 because it’s older, and his newest title (a mass market paperback in print,) his publisher sets at $7.77 because the previous title did well and Joe’s a bigger name now. Meanwhile the bestseller e-book drops from $14.99 to $9.49 and then $6.49 as the paperbacks come out. When the bestseller’s new title comes out, it’s at $14.99 or possibly $12.99 if they do a special deal.

    E-book prices go up and down, as do print book prices for what the market will bear. That’s business economics. And I am done, folks. Anyone else pops up to say that the meanie publishers want to sell all e-books for $14.99, I will consider them clueless trolls and let Scalzi mallet or kitten them as he chooses.

  252. To add to what Kat just said,

    $14.99 isn’t even the standard price of an ebook of a hardcover. It is the high end of the usual prices. Look through Amazon. Ebooks of hardcovers are priced at about half the cover price of the hardcover. For example, I just looked up Lock In. Hardcover list price 24.95. Ebook list price 11.99. That is a $13 dollar difference, or 52%.

    Honestly, and yes for fucks sake, if you really think that 52% less than the hardcover list price is too onerous to pay for John’s new book, then as so many others and John himself have been trying to tell you. You don’t have to buy it.

    This is fairly standard pricing for all major publishers. Around half the list price of the hardcover for the initial ebook release. Then the price goes down, as the book is released in cheaper print formats.

  253. Oops, I missed DH. Okay, one more.

    I am under the impression that non-big 5 published ebooks are not often priced above $9.99, with many or most seemingly priced between $2.99 and $7.99.

    Well we weren’t talking about just e-books. Many, many small presses don’t do e-books — they can’t afford to to do them. They do print, and they usually do hardcover and trade paperback, because they can’t do wholesale mass market distribution but instead do smaller, regional distribution and online distribution. These hc and tp are priced at hardcover and trade paperback prices that are often not as deeply discounted as hardcover and trade paper from the Big 5. The smaller presses can’t necessarily afford to do say a 30% price discount on their titles like the Big 5 can do, so they usually sell for the retail price.

    If the small press does do e-books, they usually sell the e-books for a lower price because their authors are less well known, and since the production costs are less past the initial set up, they can try the lower price. If an author does well, they can then raise it. But a lower price of $2.99 is less common for a small press (as opposed to a self-pub.) The small press’ terms with Amazon are not the same as Amazon does with self-published authors, and are more akin to what it does with larger publishers. Amazon may demand more co-op money from small presses than they can afford, and bigger cuts to Amazon are harder for them to do. Amazon negotiates with small presses over both print and e-book titles if they have them, so that was the factor I was addressing.

    I presume that you do, because without that information, you really can’t argue that “most are under 9.99 price” without understanding the pricing of big 5 versus everyone else.

    The price of the e-book depends on what the title is and what they are doing with their print publishing when. Half or more of the Big 5′s titles are mass market paperbacks sold at retail $8.99 or $9.99 and often sold at further discounts. Now, if it’s a bestseller, and still selling a lot in hardcover while the mass market paperback is out, then they might price the e-book at slightly higher than the mass market paperback retail price. But most of the paperbacks aren’t bestsellers and half of them are paperback originals with no hardcover. So they price the e-books below the mass market paperback retail price usually, unless the whole series is being pumped up with a new release and it’s a mmp bestseller. If it’s trade paper, they will usually price it below the trade paper price, which most of the time also ends up below $9.99.

    Which as Jennifer showed you by doing your work for you, is information readily available on Amazon itself. In fact, Scalzi himself, earlier in the thread, pointed out the level of his e-book prices. So I can get Lone Survivor, a bestselling non-fiction memoir that was made into a movie, for $7.54 as an e-book. I can get Brent Weeks’ bestselling The Way of Shadows for $6.59. N.K. Jemisin’s bestselling The Killing Moon for $9.42 and her 100 Thousand Kingdoms for $6.59. I can get Laura Resnick’s rapidly growing in sales Esther Diamond books for $9.75. The Night Eternal by del Toro — $7.45, etc., etc. It’s a very wide range of e-book prices and publishers and vendors do experiment, raising and lowering, as do the self-pubs. The idea that the Big 5 are selling all or most of their e-books at $14.99 is easily disproved by their own website.

    Again, Amazon is focusing on just the big bestselling authors to make a simplified and false price argument that has almost nothing to do with their actual contract dispute with Hachette. Which is not unusual in a contract dispute. But seriously, even for that sort of thing, this particular volley of Amazon’s is very lame. All this energy you’re putting into trying to make it somehow, in an alternate universe, plausible — why? Amazon does not care about giving you low cost books. They’d just like their e-book monopoly back. And I don’t blame them for that, but seriously, they are beginning to sound like the Queen of Hearts in Alice in Wonderland. Or the Mad Hatter.

    I’ll give you a last, more anecdotal one. I was given a Paperwhite for a gift that my daughter could also use. Since I don’t want a Paperwhite for my e-reader (I want a tablet and a very particular kind, my husband uses an iPad and buys titles from Kindle,) I didn’t mind my daughter absconding with it. My daughter still likes a lot of YA authors and the bulk of the YA market is actually trade paperback, with a large number of hardcovers and some mass market paperbacks. That’s expensive. So my daughter was thrilled to be able to con me into letting her get a bunch more YA titles in e-books — from the Big 5 — because they were way cheaper than the print. I would not have allowed her to buy those books if they were $9.99 or more. (If they are that much, might as well just get the trade paper or even hc,YA hc often being lower than adult hc.They are sturdier and more permanent and portable, although only as one by one, whereas the Paperwhite gives her a library, but for me, the price point had to be cheap.) Because everyone makes their book purchase choices differently with different values. My husband, he just bought the new John Sandford e-book, for slightly less than the hardcover — felt it was a good value because he wanted it. But that’s again the big bestseller new release.

  254. What are those greyed out prices next to the sales price?

    Luttrells Book, $9.00
    Weeks, $7.99
    Jemsin $14.99 for the Killing Blood
    Resnick’s Diamond Books $7.99
    Del Toro $9.99

    Those same books usually more expensive on BN.com, where NOOK books are often as expensive as, or in some cases more expensive, than their paperback versions.

    If publishers wanted to experiment with price, why print the price directly on the product?

    Publishers ceded the digital domain to Amazon, and now they’re playing catchup. Amazon needs the competition, if anything to keep them on their toes (ala today’s announcment with regards to investing in India). But Publishers are going to have to be smart and innovative about such things, and judging how poorly they accepted digital, hang onto DRM, and haven’t really changed any of their business practices for a few decades, I’m not getting my hopes up.

    HarperCollins started an e-tail site featuring their books a month ago. It’s a bit clunky, and didn’t work to well with Opera, but you can search by genre and imprint. I checked out ebooks in their Harper Voyager Division, home to Raymond E Feist, Kim Harrison, Robin Hobb…

    Blood of Dragons. $14.99
    Queen of Dark Things $13.99
    Magician’s End and Witch with No Name $16.99, and Feists book was published last year.
    Some ebook prices are comparable to Amazon and BN.com, and it looks like when you buy a bundle you get a small discount, but half their eboook titles are in the $10 to $20 range.

    This is what HarperCollins prices ebooks at knowing it has competition from Amazon and BN.com, amongst others. Any bets what those prices would be like without them?

  255. The best thing for amazon to do would to release the data. Or allow authors to run their own A/B tests with different price points and prove to themselves what prices result in the most revenue

  256. Well that sucks, wrote a post with citations as requested, but I can’t post links or edit the post, so it’s all lost.

    See: JA Konrath, Techdirt, Barry Eisler, Smashwords. I and other commenters might not be in the publishing industry so our opinions are subject to being ignored, but would you mind commenting on the opinions of opinions of people actually in the publishing industry? Their summary: Amazon might not be perfect, but they’ve done more for non-best-selling authors than anyone else. If best-selling authors are showing support for the legacy publishing industry over Amazon, then maybe their interests don’t align with the interests of non-best-selling authors.

    Re entitlement, I’m not forcing anyone to do anything, and I’m under no illusion that there’s a measurable impact on your life if I like you or not. But there’s a growing number of authors and other entertainers around that do things the way I like (of their own volition – that’s how I learned about the practices),

    Keep in mind that pricing high and then lowering the price over time might harm your numbers as well… say you release at $12.99, then drop to $9.99 after 6 months, then $6.99 after two years, and eventually down to $3.99 for backlist… sure, if I am that eager for the book and I really like what you do then I’ll put down the $12.99… but if not, why would I buy at $9.99 either? If I’m willing to wait (and there’s a lot of good books out there now, I’m probably a couple of years behind in my to-be-read pile by now, let alone good indie authors who release at lower prices, and bundle books, and regular sales by etailers…) Now, you’re the one in the industry and you have better view of the numbers than I do, but do you actually get good sales numbers when you drop the price? How do they compare overall to releasing at a lower price from the start? I know you’ve gotta eat, and an experiment gone bad could mess with that, but you still could be cannibalising from your sales numbers by pricing high and working your way down.

  257. Ian:

    What are those greyed out prices next to the sales price?

    Luttrells Book, $9.00
    Weeks, $7.99
    Jemsin $14.99 for the Killing Blood
    Resnick’s Diamond Books $7.99
    Del Toro $9.99

    The greyed out prices are the retail prices for print paperbacks and Amazon is showing you how much you save on those paperback prices buying from them. The $14.99 price for Jemisin is the retail cost of the trade paperback but you can get that trade paperback apparently for $6. Del Toro’s mass market paperback is $9.99, but you can get the mass market paperback from Amazon at $6.58. How much of a price cut on paperbacks you get depends on who Amazon bought the stock from and if they are trying to dump inventory, etc. If they are trying to dump paperback inventory that outlasted the return period from their warehouses, they may give you the remainder or close to remainder price.

    Publishers ceded the digital domain to Amazon, and now they’re playing catchup.

    No, Barnes & Noble and Borders ceded the digital domain to Amazon, because they are all booksellers. The publishers supplied all of them with books and e-books. Other companies such as Apple and Kobo did not cede the digital domain to Amazon and chipped away at Amazon’s market, which is why Amazon went from having 90% of the e-book market in 2008 to 55% now. But since Amazon has been effective in trying to control price to stomp out book-selling competitors, and since it uses its still considerable leverage to extract a bigger cut of sales by doing things like freezing publisher book sales in negotiations, some publishers are renewing and expanding direct mail sales but with e-books as an experiment, just as Amazon is experimenting — for the third time in its history — with publishing books with their own imprint, as well as selling them. Since the e-book market itself grew for everybody, publishers and booksellers, saying that everybody is playing catch-up now doesn’t make a lot of sense. Publishers were playing catch-up to build tech and accounting infrastructure to meet Amazon’s supply needs back in 2008; they caught up already.

    And Kindle titles have Amazon’s Kindle DRM — they insisted the publishers do it. So they cling frankly harder than publishers to it.

  258. The best thing for amazon to do would to release the data.

    Best for whom? Not Amazon. They’re waging a PR campaign, not doing science.

  259. @Kat Goodwin: “And Kindle titles have Amazon’s Kindle DRM — they insisted the publishers do it. So they cling frankly harder than publishers to it.”

    I was going to call this out as something that came from the publishers rather than Amazon, but it turns out that’s not the case. (boingboing dot net/2013/10/11/amazon-requires-publishers-to.html) Turns out it is actually Amazon pushing DRM the hardest. So yeah, definitely take what Amazon says with a grain of salt, but I maintain my position that Amazon seems to deal more honestly (and is more likely to deal) with midlist and starting authors than the legacy players.

  260. @Kat Goodwin

    And Kindle titles have Amazon’s Kindle DRM — they insisted the publishers do it. So they cling frankly harder than publishers to it.

    Hi Kat, is this mistaken, or perhaps just true during early days of the Kindle (or maybe I just interpreted what you wrote incorrectly)? Because there are books that are DRM-free, at what appears to be the publisher’s choice, in the Kindle store (as JS noted, Baen and Tor both eschew DRM – and this seems to extend to Amazon’s Kindle store, see http://www.baen.com/pressrelease122012.asp and http://www.tor.com/blogs/2012/07/torforge-e-books-are-now-drm-free).

    From an outsider’s perspective, it would appear DRM is good for Amazon given their dominant ereader position, but strategically bad for publishers (and by extension, authors), as it facilitates ecosystem lock-in. I am perplexed as to why some publishers choose to enable it.

  261. Article on the front page of the new york times today on this, where they raise a very valuid point, why are prices even part of the contract at all? Only reason I cna think of is to protect the brick and mortar business

    It’s interesting browsing Steam’s top sellers and seeing how different it is with video games

    #1 Popular Indie franchise for $39.99
    #2 Early Access Indie game for $29.99
    #3 Two year old big budget franchise discounted to $14.99 from it’s original $59.99
    #4 Two month old Indie game discounted from $19.99 to $13.99
    #5 Freemium Indie MMORP for $49.99

    The #7 spot is the entire 5 game Red Faction franchise, which is 3 years old, for $5.99

  262. @Unholyguy -

    It’s interesting browsing Steam’s top sellers and seeing how different it is with video games

    #1 Popular Indie franchise for $39.99
    #2 Early Access Indie game for $29.99
    #3 Two year old big budget franchise discounted to $14.99 from it’s original $59.99
    #4 Two month old Indie game discounted from $19.99 to $13.99
    #5 Freemium Indie MMORP for $49.99

    The #7 spot is the entire 5 game Red Faction franchise, which is 3 years old, for $5.99

    While there are some similarities between video games and books, I think the change over time of prices is probably not quite as similar. I think video games, as a general rule, have much more time value decay than most fiction books. Obviously there are exceptions in both camps.

    (amusing anecdote – I was at a used bookstore a few weeks ago, and they had a 1988 SAT prep guide for $10… that must be some hardcore nostalgia, to want to buy an old SAT prep guide for $10! Obviously _that_ type of book should have price decayed down to $0)

  263. Yes I am sure that video games decay faster mostly due to increase in compute power that make old graphics obsolete. However things that are worth noting that probably apply to books

    1: wide range of price points even for new releases argue against a one size fits all pricing
    2: most prices start at lower then what used to be the norm ($49.99 or $59.99). There I some $149.99 title in the top ten but it’s a collectors edition kind of thing
    3: a market that is well informed and technically literate adjusts prices frequently to maximize sales
    4: Steam doesn’t have a lot of say about pricing, the publisher sets the price and things work fine
    5: PC game brick and mortar sales are essentially dead which makes all this possible

  264. @docrocketscience: … you might have a point if those were actually “comparable digital media.”

    Here’s what buyers know about “comparable”: All digital media are just electrons and there is no marginal cost to publication. And we don’t own digital media. If we did, we could loan and resell it.

    Everybody thinks their baby is a unique creation. And it is. Unfortunately buyers/users decide what’s comparable, not the authors/creators. Among the forms of digital media … games, apps, tunes, shows, books … only shows can justify a bigger ticket, due to innate technical costs.

  265. @Unholyguy,

    If you publish through Amazon you can track your day to day sales. I believe most of the other online stores/distributors have similar tools.

    @ Kat,

    “The greyed out prices are the retail prices for print paperbacks and Amazon is showing you how much you save on those paperback prices buying from them.”

    OK, so if Amazon wasn’t able to discount as much, which apparently one of the things Hachette is aiming for, it’s possible I could be paying more for that ebook, full retail price? And the constant price changes are not directed from the Publisher of the book, but Amazon using its own information and algorithms to try and sell it, yes?

    “No, Barnes & Noble and Borders ceded the digital domain to Amazon, because they are all booksellers. The publishers supplied all of them with books and e-books.”

    Barnes and Noble didn’t come up with the idea to release the ebook version six months after the hardcopy version came out, did they? It wasn’t a Borders exec who said “For every print book we lose to an e-book, we lose money.”
    “We hoped that a handsome object would slow the migration to e-book for [Stephen] King.” wasn’t said by someone at Barnes and Noble.
    And Barnes and Noble started selling online in 1997, only three years after Amazon did. IIRC, they tried an even earlier online store, yes, from their website, Trintex, in the late 80′s. Open Ebook was available in the early 2000′s. The opportunity was there, and publishing (publishers and sellers) muffed it. And their one response to try and combat it was to get caught colluding on prices, using a pricing model that hurt authors.

    I’m still interested in what you think of the price listings on HarperCollins. And I’ve looked, but either my search skills are failing (which is quite possible), or I’m looking in the wrong places, but where was this level of outrage last year when Barnes and Noble was doing the same thing to Simon and Shuster? A brief google search shows some good news reports, but nowhere near the number that this current dispute has engendered, and to be honest, nowhere near the level of vitriol either.

    In fact, a brief review of the SWFA website does not mention the Barnes and Noble vs. Simon and Shuster fight at all. Lot of posts wrt the Malzberg/Resnick blowup happening at the same time…then again maybe Stephen King wasn’t as motivated as Douglas Preston appears to be. :-)

    Thanks for the earlier reply!

  266. Sorry Mr. Troy, I crossposted one of your posts there.

    Amazon might not be perfect, but they’ve done more for non-best-selling authors than anyone else. If best-selling authors are showing support for the legacy publishing industry over Amazon, then maybe their interests don’t align with the interests of non-best-selling authors.

    Authors aren’t showing support for publishers (please stop calling them legacy or traditional publishers, they are just publishers and self-pub is the older form of business.) They are pissed that Amazon dragged them into business negotiations by cutting off their sales and mucked with their livelihoods. And again, what Amazon is negotiating with Hachette about is not e-book prices. It’s business expenses that cut into revenues.

    One of the big issues on this is that Amazon and Smashwords and such pretend that the monies that they give self-published authors are “royalties.” And then there will be all these fake math comparisons between publishers and Amazon, as if Amazon was a publisher which had been given a license to production rights, was exploiting those rights and paying the author a royalty for those rights. Amazon isn’t the publisher. The self-pub authors are the publishers. Amazon just lets them sell directly in their marketplace — a book-selling broker. When Amazon takes fees and the agreed upon amount of the sales as a fee, they are a business expense. What Amazon gives to the self-pub authors is net sales revenue the author earned selling their book, not Amazon, and not a royalty. The two business situations are entirely different. But the pretense is that it’s the same because it sounds better. That doesn’t mean that self-pub may not be a good, money-making choice for many authors. It does mean that they sell it on comparisons dishonestly, which is something that has come up before.

    Amazon has been good for all authors, best-selling and non, self-pub and partner pub, because, for a few, A) Amazon helped replace part of the wholesale market, which shrank in the 1990′s, and really helped open up online book-selling; B) Amazon has increased international publishing by expanding into numerous countries, allowing more international authors to hit the big English markets, English authors to hit new markets and transnational publishers to do multi-country launches more easily; C) by launching the Kindle, Amazon juiced the small e-book retail industry into a much larger, fast-growing market, which helped replace mass market wholesale sales, etc. Amazon has been bad for all authors because it insists on deep discounts to near costs, resulting in losses it can handle with its system but publishers and authors can’t. Amazon has been bad for all authors because it ruthlessly squashes competitors with predatory pricing and other tactics, reducing marketplace competition that would benefit authors, particularly mid-list authors. Amazon has been bad for non-bestsellers because its co-op demands cut into the money that would otherwise fund publicity and marketing efforts for mid-list writers and gambles on new authors. Amazon is good in some areas and bad in others, like any other company. It’s not simple, it’s complex.

    Overall, the wholesale model of selling, which Amazon uses, benefits best-sellers more than mid-list authors. The independent bookstores that hand-sell and specialty stores therein like SF or mystery bookstores — they are the big helpers of mid-list titles, which is why mid-list authors have had it hard for awhile. Mid-list authors published in mass market paperback or even trade paperback do not have $14.99 e-books. They may not even have $9.99 priced e-books. So saying that this issue of the $14.99 price point is terribly important to mid-list authors is simply not true.

    Amazon has been very good to self-pub authors, offering them a fast, international, low cost distribution ability. It was good to them for its own purposes, giving them stuff for free it makes publishers pay for, because then those self-pub authors and all their buddies would buy Kindles, and would be loyal customers who buy other stuff from Amazon that brings in more money. And there’s nothing wrong with that. It’s been great for some authors and at least fun if not profitable for thousands of others. But the downside is that the self-pub e-book market is almost entirely dependent on Amazon. All e-book sales are slowing in part because there aren’t enough vendors to help the market grow. And Amazon is now starting to dump freebies in favor of raised fees — increased business expenses. Additionally, Amazon totally controls the prices of self-pub e-books by linking how big of an expense they are to what the author sells for, pressuring authors to sell for less, and ensuring that the author can’t allow any other vendor to undersell Amazon (although Amazon can undersell other vendors.) That’s okay for now; later it may be problematic. But it has nothing to do with the business issues involved in pricing e-books for best-selling titles from publishers. And it has nothing to do with Amazon’s negotiations with Hachette.

    Now, you’re the one in the industry and you have better view of the numbers than I do, but do you actually get good sales numbers when you drop the price?

    Well, you see, we have this system in print called hardcover and paperback? And it’s been working pretty darn well, yeah, for a long time. And again, the area of e-books that has sold best? First run bestselling fiction titles that have the highest prices. Because price is not the number one issue with books, especially fiction, and time is an issue for some buyers and not for others. If business people want a business non-fiction title that they feel has time-sensitive info or illuminates hot new trendy business jargon — they’ll buy it at the high initial price. If a person really likes a fiction author, like my husband with the new Sandford book, they may want to read it right away and buy the high price and feel the author is worth it. Or they’ll wait, if they don’t need to have it right away, and buy it when it’s cheaper. Not necessarily the cheapest price, but cheaper. Or they’ll read it at the library for free, then get it in a nice hardcover to re-read if they like it. Or any way of a number of ways that works for them.

    Do you know how Amazon got the $9.99 idea, that it attached to only a handful of authors, mainly hardcover bestsellers? Because it’s the cost of a 10 song album on iTunes. In the very early days of the Kindle boom, people demanded that 500 page e-books be .99 just like a 3 minute song on iTunes or they’d go pirate, and Amazon picked that up in part because that’s what they thought Apple would try to get e-books for. And so now the screaming is about $9.99 being what should be paid — a higher price point. How much people value things changes with the market. And if Amazon cared that much about how much the authors were getting from e-books, they would A) stop cutting into revenues with extra fees so that the publishers would be able to give authors a bigger unit royalty (which is happening anyway as publishers and authors negotiate,) and B) take a 30% unit fee from all of their self-pub authors, not just the ones with the cheapest prices (no tiers for the same service.) But everybody has different business factors and have to work out the expenses and the payment plans.

    Mr. Konrath prices e-books at $3.69. Why doesn’t he price his e-books at the lower $1.99? Wouldn’t he sell more if he did that right off the bat (and Amazon’s fees would be lower)? He has trade paperbacks at around $11. Why have them when the e-books are cheaper, and if have them, why aren’t they cheaper than $11? Hugh prices his e-books now around the $5 range. Why not .99 cents — wouldn’t he make it up in volume? Why did he team up with a Big 5 publisher and other publishers in other countries to have print editions of his work which are more expensive than the e-books? Why, when you can get a hardcover for a 30% discount at Barnes & Noble, or a 40% discount from Amazon, do many people buy it at a local indie bookstore for retail price or only a 10% discount? Why ever buy a store version of a book when you can get them cheap from used booksellers?

    Many reasons — timing, nearness, willingness to pay that price because that particular author is worth it to them. Casual readers don’t choose between games and books — they don’t read books mostly, no matter what the price. But when they do get interested in a book, it’s usually a big name one and they’ll usually pay the high price for it. So nobody is the same, and expenses change, and prices have to be flexible, rising, falling, and rising as market factors and different audiences dictate. Self-pub authors and publishers have to make business decisions and figure price points against their costs — including the fees from vendors like Amazon. And no one, including Amazon, can actually predict the volume of sales an individual title will have at any price point, or in dropping or raising the price. They can’t predict what authors will become the new bestsellers. Everybody makes guesses; nobody knows for sure.

    Amazon seems to deal more honestly (and is more likely to deal) with midlist and starting authors than the legacy players.

    I would disagree. Amazon is not particularly honest with anybody (although they keep it fairly legal,) and they are way more ruthless than any publisher I’ve ever encountered. They aren’t in the same business as publishers (except for their small imprint.) They’re booksellers. And it doesn’t care at all about mid-list and starting authors selling in its market. It does not invest in the self-pubs either; it just sells them, sink or swim. It mainly cares about the bestsellers, because those are the ones that mainly bring in their bacon and make the good PR. Which is why they keep whining about the price of e-books of best-selling hardcovers.

    In contrast, publishers care a great deal about their own mid-list and starter authors. They invested in those books, laying down hard money, and they want to recoup their costs. They want to grow as many of the mid-listers as they can into bestsellers, and they need new books to be the continuing lifeblood, but they need the funding to gamble on them. That doesn’t mean that they treat even their bestselling authors well. It depends on the title and what’s happening with that author, who the author is working with, outside market factors. In a recession, mid-list authors get squeezed for the safer bet of bestsellers and fewer new authors are spent money on.

    But self-publishing has the same tiers — bestsellers, midlist and newbies. And the midlist self-pub authors can get just as squeezed because they don’t yet have enough word of mouth and name recognition. And they don’t have anyone investing in them to back them up either. Whether they publish alone and just as e-books, dealing with Amazon’s monopoly, or they partner with a publisher for license rights, authors are running a business. A creative business, the valuation of their goods being entirely different for each customer.

    Frankly, what Amazon needs to do is make a better argument for why publishers, their authors and self-pub authors should keep giving Amazon more money. Are they getting more services? Can Amazon open some further sales channels or more and better publicity? Why is making Amazon the only seller in their best interests? But Amazon may not be able to make this argument because of non-disclosure rules about their negotiations with Hachette, or because they don’t want to.

    This is really long. I think I’ll do JTC’s question separate.

  267. Oops, sorry, it did the italics quote all over thing again. Maybe Scalzi will fix it for me if he gets the chance.

    JTC –

    No, Amazon did Kindle DRM from the beginning and has continued to want to have it, but since they’ve been working to get their app on more devices, they are a bit less zealous about it. When the boom occurred, publishers did not have the infrastructure in place to handle the giant demand. They were happy to go along with Amazon helping them set up Kindle DRM version of the e-books. But over time, they got the infrastructure and staff and wanted to have e-books in more places.

    The problem was that there were like twenty different formats, used by the e-book industry before the Kindle and by Sony for their pre-Kindle reader and then by companies now entering the e-book market in the wake of the Kindle. And each of those formats had to be prepared separately and proofed 4-6 times (which they pay people to do.) So they locked everything in DRM so they’d have more control over the formats and the e-book market until it got worked out which would be the main, fewer formats and how everything would operate. This coincided with the smartphone explosion and the iPad/tablet explosion, and there was a lot of battling over which systems, like Android, were going to be the top dogs there, which effected e-book format choices and possible vendors. So they sort of had to wait to figure it out and publishers are cautious. Publishers weren’t going to be moving as fast as tech companies do because they aren’t tech companies.

    But Baen likes to do open tech and Macmillan decided that the market was sufficiently standardized, with the main formats settled, to take off DRM. And they negotiated with Amazon how that would work for the Kindle. So Amazon is not un-open to it and the publishers aren’t either, but the tech world keeps mutating rapidly in terms of devices and connected systems, etc., so it’s an on-going thing. The Kindle DRM lets Amazon wipe files off your devices if they need/want to, but I understand that it is fairly easy to strip off, if you want to do that. However, most people just buy the Kindle e-books and don’t bother. Eventually, I think most of it will be removed, but the boom e-book market is only seven years old.

    Ian:

    OK, so if Amazon wasn’t able to discount as much, which apparently one of the things Hachette is aiming for, it’s possible I could be paying more for that ebook, full retail price?

    The greyed out discount is only about paperbacks, not e-books — it has nothing to do with the e-book prices. And that print discount is not, as far as I know, one of the things that they are negotiating. Amazon sells like a wholesaler for print, rather than a retail bookseller. As a wholesaler, they can do deep price discounts on print books because they buy them from the publisher at a very low price. That does cut down on revenue per book, but the trade off is that Amazon can sell hopefully a high enough amount of volume to make it worth it. It’s not guaranteed, though, and it is something that publishers have to deal with in making business decisions. Warehouse stores like Costco also sell/buy for a very deep discount. The chains have been able to negotiate a bigger price discount for print than indie bookstores, so they can do 30% instead of 10% discount on the retail price. Returns also factor into print sales calculations. It’s a very different system than selling e-books.

    Barnes and Noble didn’t come up with the idea to release the ebook version six months after the hardcopy version came out, did they?

    It wasn’t an idea so much as that the publishers didn’t have the staff to make the e-book in the multiple formats in time with the hardcover in the early days. And they weren’t sure that it was a good idea until they figured out the market. But now, I can buy Lock In, which just came out, in hardcover or e-book. They really didn’t know what the sales patterns with e-books were going to be. So a lot of people said a lot of dumb things in the early days. Such as that print books should already be gone by now. :)

    Nonetheless, the publishers supply the booksellers like Amazon. They primarily aren’t in competition with Amazon — Amazon is selling their products. Barnes & Noble and Borders were in competition. But Amazon had the tech, they did not, and they were very cautious. And so they ceded the digital market to Amazon, giving Amazon a monopoly for a few years. Apple had the tech and they broke Amazon’s monopoly, along with other companies. But Apple isn’t a bookselling company, they’re not that invested. Borders died off thanks to mismanagement and over expansion. Barnes & Noble floundered around with some of the same problems of over expansion as Borders, and now are selling off the Nook arm to Microsoft, which is not good news for Amazon. (On the other hand, Microsoft is not being brilliant lately.) Some publishers are doing direct selling (which they also do with print,) but it’s a small operation. And it wouldn’t have happened at all if the market had been opened to more vendors. So we’ll see where it all goes. But Amazon does not own the plain, just large pieces of it.

    I would expect e-book prices on the publishers sites to be higher than on Amazon because of the initial infrastructure costs of setting up the operation. But after that, they will probably decrease. They aren’t going to try to out-price Amazon. It’s simply trying to develop more venues.

    where was this level of outrage last year when Barnes and Noble was doing the same thing to Simon and Shuster? A brief google search shows some good news reports, but nowhere near the number that this current dispute has engendered, and to be honest, nowhere near the level of vitriol either.

    They didn’t do the same thing. Amazon killed the buy button on titles they had in stock and pre-orders, which is a very quick leverage tactic. The pre-orders particularly mess up the BookScan stats, which other booksellers base their ordering on, so Amazon was messing up the authors’ opportunity to get orders all over the place. (This is what pissed the bestselling authors off, and not just for themselves — that pre-order issue hit mid-list authors way harder than them.) Barnes & Noble instead just shrank their ordering amounts from Simon & Schuster. This also would effect sales and ordering stats — it’s just a lot slower. And it didn’t stop people from buying the books from Barnes & Noble fully. Amazon has used this tactic too; it’s hardball, legal and effective, but not as dramatic.

    As for the vitriol, well, first off, back in the 1990′s when Barnes & Noble did the predatory superstore kill off the indies thing — plenty of vitriol. But now it’s a struggling company and the business media don’t care. Amazon is still the hot mama and they do care. And Amazon is known for ruthless stuff. They’ve taken out small presses, other companies that sell other things or services. And because they don’t pay sales taxes in the U.S. and can undercut on prices with free shipping, they have major damaged entire main streets of small towns in retail, leading also to lower property values and unemployment. They played a role in making Best Buy super shaky as well and they are pushing into the tech market with all sorts of devices and phones. So a lot of people hate Amazon for reasons that have nothing to do with books.

    Whereas, Barnes & Noble only sells books, which most people don’t care about, and B&N did not go on a big media campaign about the negotiations. But mostly it’s just that folk are fed up with Amazon’s business tactics. And investors want profits, so Amazon is consolidating revenue, leading to more hardball tactics. But again, the negotiations with Hachette aren’t focused on e-book prices, so all the screaming about e-book prices is largely irrelevant.

    Again, long, sorry. I’m actually going out of town, so more questions maybe Scalzi or others will answer or I’ll catch you on the later side. (I’m gambling that Amazon and Hachette settle their dispute before the Christmas season, but I could be wrong.)

  268. “They didn’t do the same thing. Amazon killed the buy button on titles they had in stock and pre-orders, which is a very quick leverage tactic. ”

    They did that with Macmillan in 2010. This time around they removed the preorder button. A button that the vast majority of self published authors do not get. Big difference there

    “The pre-orders particularly mess up the BookScan stats, which other booksellers base their ordering on, so Amazon was messing up the authors’ opportunity to get orders all over the place.”

    What did booksellers do before the preorder button then?

    “Barnes & Noble instead just shrank their ordering amounts from Simon & Schuster. This also would effect sales and ordering stats — it’s just a lot slower. And it didn’t stop people from buying the books from Barnes & Noble fully.”

    They shrank the order amounts to zero. Shuster went so far as to tell authors not to do any promos at a Barnes and Noble, but Howey has a story where he was promoting Wool at a BN and they had three copies of his book for sale. And the Barnes and Noble/Simon Shuster fight went on for 9 months.

    “So a lot of people hate Amazon for reasons that have nothing to do with books.” True, but then complaining is not an effective business strategy, is it?

    “Whereas, Barnes & Noble only sells books,” Um, have you been inside a Barnes and Noble lately? They started selling more than books quite a while ago.

    “But again, the negotiations with Hachette aren’t focused on e-book prices, so all the screaming about e-book prices is largely irrelevant.”

    Then Amazon is lying when they said “A key objective is lower e-book prices.” All the posts I’ve read the past week that say a big part of the contract dispute is about e-book pricing are all wrong? If they are, what are they arguing about?

    Also, I note that you still have not answered my questions regarding ebooks on Harper Collins.

  269. @Kat Goodwin, thanks again for replying. I think I largely agree with what you’re saying other than some semantic niggles that aren’t worth going into, but there were a couple of points that jumped out…

    “Well, you see, we have this system in print called hardcover and paperback? And it’s been working pretty darn well, yeah, for a long time.”

    I get the hardback, trade paperback and mass paperback tiers for book printing, and I don’t think that system’s broken. But that system works because the higher price point gets you a better product – better paper stock, a stronger cover, and yes, also an earlier release date (just because I personally don’t like the practice doesn’t negate the fact that it’s generally seen as a point of value). I just don’t see how that applies to e-book pricing, where pretty much the only point of difference is the date.

    “Mr. Konrath prices e-books at $3.69. Why doesn’t he price his e-books at the lower $1.99? Wouldn’t he sell more if he did that right off the bat (and Amazon’s fees would be lower)?”

    I thought Amazon charged higher fees for list prices below $2.99? According to https://kdp.amazon.com/help?topicId=A301WJ6XCJ8KW0, if you charge less than USD2.99 (or AUD3.99!) then you’re not eligible for the 70% “royalty rate”, at least for KDP. If he couldn’t expect to sell more than twice as many books at lower than $2.99 then he wouldn’t even make the same amount, unless he’s able to negotiate a better rate.

  270. MrTroy, you don’t always get a lesser physical product at a lower price with print. Wait a while on a big bestseller and you can, quite often, purchase a hardcover (i.e. the exact same book) for a price at or below TPB. More than once I’ve purchased HC at MMP prices. (I imagine that sometimes it’s easier/more cost effective to sell off the overstock in the stores and write off the loss than to collect up the overstock from multiple stores for returns.) And speaking of MMP, more than once I’ve found different editions of the same paperback, at different price points, sitting next to each on the same shelf. Also, consider how the price changes between price points in print and ebooks: $29.99 -> $14.99 -> $7.99 vs. $11.99 -> $7.99 -> $3.99. That reduction in materials quality is reflected in those steeper drops in price.

    While you are correct about the KDP policy on the 70% return (I prefer to think of it as a 30% commission, which isn’t unreasonable for consignment sales; 65% is outrageous), I think Kat’s point was to point out that even those defending Amazon aren’t following through completely on the logic of Amazon’s PR. As well the should not be. Chasing sales in a race to the bottom is seldom good business.

  271. I love Amazon. They’re the best thing to happen to books and literature in decades. I love that they are starting to force the oligopoly of publishers to reconsider the terrible terms they present to authors in their contracts, and I love that they’ve unlocked a new distribution path that isn’t slave to the big 5. I love their imprints and how they’re changing the way big 5 authors look at publishing.

    I do understand why you don’t like them, and that they threaten your ability to get large advances based on reputation and one good Heinlein-esq book, but that’s life. Soon, advances will be a thing of the past, and you might as well get used to that now because this “war” is over.

    The battles will still happen from time to time, but people will never go back to print. Bookstores will never come back to the way they were in the 80′s and 90′s (or the 2000′s), and Amazon isn’t going to go anywhere. And while it’ll be sad to see you pull all your books off their website in protest (which is what I assume you’re going to do since you’ve felt the need to speak out against them so often, and to continue supporting them would be hypocritical), you have to live by your convictions.

    BTW, this… “If you entertain the notion that Amazon is just 30% of the market” is laughable. Amazon is nearly 80% of the digital market and close to 60% of the print market in the US.

  272. James

    Strangely enough, books are sold all over the world, and your apparent belief that global sales are trifling by comparison with the US market suggests that you are remarkably ignorant of the publishing industry.

    Equally, the stuff about ‘nobody will go back to print’ suggests that your professed love of books hasn’t helped you much when it comes to actually grasping that people want different formats of books for different reasons; there is a considerable difference between the sort of books I acquire to go on holiday with, and the books in my library at home. Equally, there is a considerable difference between the books I acquire when I am on holiday – illustrated texts about archaeological sites are the obvious example – and the ebooks I take with me.

    All in all, nobody cares whether you love Amazon or not, and nobody cares whether you are so ignorant as to believe that fiction sales in the US are what global publishing is all about. Printers are in no danger of going out of business in the foreseeable future…

  273. Ah, Stevie… Silly boy. The US book market is by far the largest market in publishing, followed by the UK/commonwealth and Germany. Do you not know that? Well, don’t worry, I’m happy to educate you. Amazon dominates the industry in the US (which was my point), and they are a massive player in the UK and Germany, and growing larger every year thanks to a loyal customer base that is driving the sales of digital books on a global scale.

    I never said printers will go out of business, and I hope Amazon’s fight to save the publishing industry insures that they’ll be around for generations to come. I do however doubt the people running the corporate NY publishers know what they’re doing, and left on their own with no competition, they will kill the publishing industry. They were off to a very good start in the 2000′s when the chain stores had all but killed the indie stores, and publishers had switched their focus to blockbuster doorstop genre fiction and celebrity biographies. Thankfully Amazon stepped in and introduced the Kindle and saved many publishers from bankruptcy. Now they’re making a profit, and it’s all thanks to Amazon and the digital format.

    While “nobody” cares whether I love Amazon or not, it’s also fair to say that nobody cares whether you or Doug Preston or Stephen King or Stephen Colbert hate Amazon or not. It doesn’t matter. People aren’t going to stop shopping there, and digital books aren’t going to go away. You might as well get used to that fact and prepare for it, because like I said before, these little skirmishes between Amazon and Big 5 publishers are nothing but noise. The war is over. The market for digital books is huge and stable and spreading and nothing anyone says is going to make any difference.

  274. James–nice tactic in re-framing by using the phrase “Amazon’s fight to save the publishing industry” like that’s the real issue or even reality.
    I see a Soviet-style poster with flags and banners and people standing proudly with one leg forward and the caption “The People Valiantly fighting the Oligarchy”.
    And I apparently missed the part where everyone wants digital to go away.
    As a disclaimer–I don’t have a digital reader. I love the feel and heft of physical books; I’ve never really found a reader I liked (don’t want a Kindle) and I already have too many books to get to as it is.
    I figure one day I’ll get there but I’m not in any big hurry. Until something I HAVE TO READ is only available digitally.

  275. James

    You really do have a penchant for uninformed assumptions; I’m female, I’ve lived in the City of London, which is the centre of the business and financial markets here in the UK, for over 30 years, and I buy a lot of books, both here and abroad, across a wide variety of subjects and in a wide variety of formats. It’s been a while since I last went mano a mano with a balance sheet, but during the course of my career I dealt with many thousands of businesses, starting with small shops and moving on to multinational corporations and global financial institutions.

    This probably explains why I lack your misty eyed approach on this, but it is unusual for people in the UK in general to have the attitude towards Amazon that you possess; over here we tend to realise that it’s a business, and businesses are in it to make money. Amazon’s business practices are known to be somewhat sordid; its treatment of its staff in the ‘fulfilment centres’ is notoriously bad, and its abuse of other people’s trademarks is equally obnoxious. Fortunately, Lush Cosmetics had the money to take Amazon to court, and it won its case, but Amazon continues to bully smaller businesses.

    http://www.theguardian.com/technology/2013/dec/01/week-amazon-insider-feature-treatment-employees-work

    And then there’s the fact that many people here don’t view Amazon as a bookseller at all because many people using Amazon don’t buy books; it sells vast numbers of things to vast numbers of people, but buying books is fairly small fry. If people are either uninterested in reading books in the first place, or read very little, then it doesn’t really matter what the price is, or what the format is; the research which has been done on this:

    http://www.bookmarketing.co.uk/uploads/documents/expanding_the_market_final_report.pdf

    suggests that pricing itself is not a significant factor. What is significant in people who do buy books is that deep discounting on a small number of titles results in distrust because the general public doesn’t realise that these books are being sold at a loss, and therefore question why other books are not similarly discounted. That reduces the market rather than expanding it, and Amazon is the prime proponent of deep discounting on small numbers of titles.

    Note that this is real research, carried out by qualified people with the results available to all; Amazon, by contrast, just plucks numbers out of nowhere and expects us to believe them. You are, of course, free to believe whatever you wish but you are unrealistic in imagining that everybody shares your infatuation, and even more unrealistic in believing that our host doesn’t understand his business…

  276. Setting aside the issue of James apparently having confused the type of discourse appropriate to ‘a discussion of the business dispute between Amazon and Hatchette’ with that of ‘my sports team is better than your sports team’, his numbers are not quite right.

  277. (John, please delete this posting if my information is hopelessly out of date or wrong)

    Dear folks,

    With the caveat that I haven’t looked into the intricacies of the economics of mainstream dead-tree publishing in at least a decade…

    The couple of people who are insisting on arguing theoretical economics with John (and you know who you are) remind me a lot of that physicists’ quip, “Assume a spherical cow of uniform density rolling along a frictionless plane.”

    There are circumstances in which such an assumption can be a highly useful approximation. There are times when it does not reflect the real-world behavior of cows especially well.

    Book publishing has so many non-spherical cows isn’t funny. It’s why John simply dismissed the criticisms instead of taking them apart. Way, way too many cows needing to be dissected, where do you even begin?

    I will dissect one, a really big one. Mainstream book publishing is a highly subsidized business. Considering that the number of copies sold may vary by a factor of almost 1000, there isn’t a lot of variation in price for books of comparable bulk and construction. Maybe a factor of two, which is quite significant when you’re looking at market demand, but far less than you’d expect from economies of scale.

    Why is that?

    It’s because a very large fraction of the books published simply don’t make money. If the typical book doesn’t sell out its first printing and/or earn out its advance, it’s a loss for everyone. The author, of course, doesn’t manage to make a living wage off of that advance, but neither does the publisher. In fact, they are likely to of lost money when you take into account the fixed overhead and initialization costs for publishing a book.

    I don’t know what the fraction of those books are today. It used to be the majority of them. I bet you someone like John or Teresa Nielsen Hayden can tell us if it still is. Whatever it is, the situation is that if you’re a new author or a not-yet-successful author, you’re not making good money, and you know that! But, neither is your publisher. Where they make their money is on the minority of successful authors, who will sell out their print runs many times, and also get much bigger print runs (lowering unit production cost). Those are the cash cows for the publishers, and they are what keep publishers afloat while they’re losing money on all those didn’t-sell-out-first-printing efforts.

    It’s also worth noting that a pretty decent percentage of the really successful authors — the ones who are getting seven-figure advances — also end up seeing royalties on top of those advances. Their books sell really, really well. Really big cash cows of non-spherical form.

    This is not necessarily an ideal way to run a business. But is the way it is. Believe me, most publishers would love it if they could guarantee that they only published best-sellers. That’s a nut they haven’t cracked yet. They do spend a lot of time trying to figure out how to maximize the sales on those cash cows. With varying degrees of success, to be sure, but figuring out the price point for books is one of the variables they can control to aim for that maximum.

    This is why Amazon’s arguments are so problematical. First, they are removing one of the controls that publishers have for making their cash cows more profitable. Amazon might know better than the publishers; publishers are highly fallible. But that hasn’t been demonstrated, and that’s why it raises concerns. Their arguments also involve sphericizing many cows. By looking at aggregate averages, even if their numbers are correct, they aren’t ensuring that this will make a publisher more profitable. You would need a much, much more detailed analysis to even begin to estimate that, on just a theoretical basis.

    If you want to know what happens if publishers can’t make a ton of money off of those cash cows, take a look at specialty presses and academic presses. Typically, their selling price for a comparable chunk of dead tree is much, much higher than what you’re paying, mainstream, for a first novel from some new novelist. That’s what the pricing looks like in a non-subsidized market. Kind of like what would happen to airline fares if the airlines weren’t counting on business and first class and last-minute travelers to bring in a lot of the money they don’t make on coach class seats (a very imprecise analogy, so don’t dig too deeply into it).

    That’s the best case. The worst case is that publishers just end up publishing fewer new and low-tier authors, because they simply can’t afford to.

    Or, you know, it might turn out that Amazon is right about this and it’s going to work out much better for everybody. But you can’t tell it from the numbers they’ve published, and that’s why this effort to unilaterally restructure and control book marketing is of concern to so many people.

    As for the ancillary argument that the dead tree book market is indeed a dying business and eventually it will all be virtual, so who cares … It may be true. I’d even be willing to venture that it’s 90% true. But right now, it’s kind of like when someone says to Death “Am I going to die?” and Death says back “Yes. Just not today.” Unless “eventually” means within the next year or three, I’m not as much concerned about that right now. I’m figuring out how to make a living this year, and next year, and if I’m really farsighted maybe five years into the future. Eventually, we’re all dead; doesn’t mean I’m going to give up acting like I’m living. Or live as though I’m going to die tomorrow.

    pax \ Ctein
    [ Please excuse any word-salad. MacSpeech in training! ]
    ======================================
    – Ctein’s Online Gallery http://ctein.com 
    – Digital Restorations http://photo-repair.com 
    ======================================

  278. I mentioned the case brought by Lush Cosmetics against Amazon, and, for the benefit of anyone unfamiliar with the sort of tactics adopted by Amazon in their legal disputes, I draw your attention to the case report:

    http://www.bailii.org/ew/cases/EWHC/Ch/2014/1316.html

    which follows on from Amazon’s loss of the case reported at:

    http://www.bailii.org/ew/cases/EWHC/Ch/2014/181.html

    The judge started by noting that:

    ‘I handed down judgment in this action on 10 February 2014 and am now called upon to adjudicate upon the form of order. The parties have been unable to agree upon any of the matters of substance, in particular on the form of and territorial extent of any injunctive relief, upon the extent of any Island Records v Tring disclosure (relevant to the election of an inquiry as to damages or an account of profits), upon whether and if so in what form there should be an order for publicity of the judgment as an enforcement measure, upon the appropriate basis and order as to costs, upon whether the Claimants’ costs should be reduced by reason of the fact that for a period an exclusive licence was not registered, upon the extent of any CPR 31.22 order in relation to alleged confidential information, upon whether there should be permission to appeal and upon whether there should be a stay pending any appeal.’

    Amazon’s scorched earth approach in which it refuses to agree to anything, notwithstanding the fact that Lush had won, was a calculated attempt to exhaust the mental and financial resources of that company. The Judge took a distinctly dim view of it: eg

    ‘The matters which impress me here are a) Lush has established liability by the application to the facts of what I consider to be now well established law, b) Amazon has made some changes to its website but, to my mind significantly, has done nothing to the content of its web pages to address the Google France test other than to remove some explicit references to Lush. Moreover, it has not put forward any evidence to the effect that making clear to consumers that the products it returns, in response to searches for Lush, are not Lush products is something that it would be difficult or problematic for it to do. I infer that the reason that no such evidence has been put forward is that such would be easy to do but that Amazon would prefer not to do it, would prefer its customers to try and work out the true position for themselves (and if they fail so to do, then that is the customer’s problem, not Amazon’s). Whatever be the correct inference, it cannot be the case that putting the injunction into effect pending appeal will damage Amazon in such a way that there will be no appropriate remedy if it succeeds on appeal, and c) the damage of which Lush complains in the action is of the kind which is very difficult to quantify and very difficult to repair. For these main reasons, and subject to Lush providing a suitable cross undertaking in damages, I refuse the stay of injunctive relief.’

    The Judge wasn’t quite frothing at the mouth, but he was certainly not a happy bunny, and it was obvious to him that Amazon had no interest whatsoever in the customers at all, other than as people to be duped out of money.

    I realise that not everyone shares my passion for balance sheets and Court reports, but there is a fun side to it; watching a highly competent Judge ritually disembowel an entity, which thought it was above the law, brings a smile to my lips. Actually, that’s not quite right; it’s more of a bwahaha than a smile but since nobodies going to hear it I can always deny it!

  279. I realise that not everyone shares my passion for balance sheets and Court reports, but there is a fun side to it; watching a highly competent Judge ritually disembowel an entity, which thought it was above the law, brings a smile to my lips.

    Hm. Sort of like the Dover creationism case….And Judge Jones did it in fairly simple English, too.

  280. @docrocketscience: “I imagine that sometimes it’s easier/more cost effective to sell off the overstock in the stores and write off the loss than to collect up the overstock from multiple stores for returns.”

    @ctein: “Considering that the number of copies sold may vary by a factor of almost 1000, there isn’t a lot of variation in price for books of comparable bulk and construction.”

    I know you were talking very specifically about dead-tree publishing ctein, but aren’t these both issues that can to some degree be discounted in the digital publishing realm?

    Of course there are always going to be upfront costs completely separate to the author creating a manuscript; you can always identify which books scrimped on editing, and unfortunately even ebooks benefit from good quality layouts (though I guess typography can be skipped)… but not having to choose on the size of a print run for a first book, as long as both author and publisher are willing to weather digital-only or perhaps print-on-demand sales, would surely allow the risk equation to be at least tweaked?

  281. I don’t know why I’m doing this, as I really do have to get on a plane tomorrow, but oh well:

    Ian:

    A button that the vast majority of self published authors do not get.

    Well they should ask Amazon for one if they want one. Amazon is perfectly able to give them one, and with e-books, it wouldn’t be an issue of whether the author publisher could get the stock there in time and at the right price, process returns, etc. Actually, I’m rather surprised that Amazon hasn’t done pre-order buttons for self-pub authors. Are you sure they haven’t? I suspect Hugh Howey gets one.

    On the extra plus side, Amazon would never use the remove the pre-order button with the self-pubs as a tactic because Amazon already has a contract with the self-pubs that says that Amazon can do whatever it wants whenever it wants with them. To raise fees, they don’t have to negotiate; they just raise fees, which they’ve been doing.

    What did booksellers do before the preorder button then?

    Before online ordering, they just took pre-orders at the stores, and still do. They base ordering decisions on lots of different factors, such as the publisher’s official print order, but in more recent years with Nielsen bringing in BookScan which all the big players use, they have more information about sales track records, including pre-orders. And they keep hoping it will be a magic formula with past sales predicting with assurity future sales. That doesn’t work well in fiction and not even non-fiction. But Amazon likes to tout their algorithms anyway. But they don’t release all the info to BookScan.

    True, but then complaining is not an effective business strategy, is it?

    Oh actually yes, very much so. That’s why they are doing it and Amazon is doing it right back. It’s a negotiation and PR ploy. Towns have been rallying people around buying local, for instance.

    They started selling more than books quite a while ago.

    Yes, they do and may end up a department store some day. But their main business is books. Whereas Amazon is a department store, and a tech company selling tablets and smartphones, and a movie studio, and a software and data analysis company, and a business services company, and……On its retail arm, books are almost entirely insignificant. So it’s a different business focus.

    Then Amazon is lying when they said “A key objective is lower e-book prices.” All the posts I’ve read the past week that say a big part of the contract dispute is about e-book pricing are all wrong? If they are, what are they arguing about?

    They are lying and they are not. They want control in the market of e-book prices, and they want to be able to undercut competitors and the competitors be contractually unable to compete on prices. Certainly they would like lower prices for the bestsellers so they can get rid of that annoying Apple!

    But as we’ve said about fifty times, the main dispute between Hachette and Amazon is about how much in revenues Amazon gets in fees from print and e-book sales and co-op advertising fees and various terms they want from Hachette to be able to do business with them. Remember again, most e-books are already below $9.99. So Amazon’s moaning about the horrible price of e-books in the media is pretty much like a lady pretending to have the vapors.

    Also, I note that you still have not answered my questions regarding ebooks on Harper Collins.

    I did too. I explained why HarperCollins was selling e-books, that it was on a limited basis basically to open up the market and have flexibility, etc., and why prices would at their website be higher than they do with big vendors, at least at first. Whether the publishers are going to go full hog on selling e-books is something we’ll have to see in development. Overall, they’d rather not. But a lot of small presses — because they were squeezed on terms and fees by Amazon — are trying to sell direct instead.

    Mr. Troy:

    I just don’t see how that applies to e-book pricing, where pretty much the only point of difference is the date.

    The date and that you get the book in the tech medium you want and can put on your devices as a special service. Print books are done once they can go to print, whatever the binding. But also putting out an e-book means more staff or service producing and proofing the e-books for being e-books. Errors in e-books has been a big problem. And you have to pay people to do it. The self-pubs do their own stuff for free, but they’re only putting out a handful of their own books. The publishers put out thousand of titles a month. And people don’t work for free. So to get the e-book first out, and to get an e-book which requires extra effort and cost for the publisher to do, you pay initially more — on hardcover bestsellers. On mmpaperback titles, you may not initially pay more. Plus they do have sales. Quite simply, people pay the higher price if they want an e-book version as soon as they can get one. Others wait till the price drops. Again, there’s nothing magical about $9.99. Amazon simply arbitrarily picked it as the price point. But it’s not necessarily the market price point that actually makes anyone money on hardcover bestsellers.

    I thought Amazon charged higher fees for list prices below $2.99?

    It looks like they’ve simplified it now to two tiers, instead of multiple tiers, one where they get 30% and one where they get 65%. To get the 30%, you have to price your Kindle version 20% below the price of any physical print or other form of the e-book (which lets them control the e-book price throughout the market.) They also get to charge additional fees as “delivery costs.” It looks like on below $2.99, you can’t get the 30%, which means they are nickel and diming the short fiction writers. But at $2.99, you can get the 30%, but only if you keep the price below the $9.99 marker. Beyond that and you go back to 65%. They used to give more incentive to do $2.99, from what authors told me, but it looks like they are smoothing it out.

    Note that they are calling it a royalty payment, which it is not, since the author doesn’t grant Amazon a license that Amazon is exploiting. What they should say is that Amazon’s fee is 30% or 65%, deducted from revenues. This is rampant throughout the self-pub market and it’s a dodge that unfortunately keeps a lot of self-pub authors from actually learning the business that they are in.

    James:

    Thankfully Amazon stepped in and introduced the Kindle and saved many publishers from bankruptcy.

    Wait, is Amazon trying to save the publishers from bankruptcy or drive them into oblivion? The conspiracy theories are crossing the streams! Bow before Gozur! Seriously, you’ve gone so far beyond fake math that you are into the ether of your own science fiction story. (Oh, and Stevie is not a man.)

    Scalzi likes Amazon just fine, they are one of his business partners. It is not required that you are for or against every business practice of a company you do business with, with no middle ground. If the e-book market is good sized and stable (which it is though sales are leveling off,) that’s basically a good thing for publishers. Nor has it required them to radically change how they do business. Nor are any of your figures and pronouncements about publishing history particularly correct.

    We can be excited that Amazon boomed up the already existing e-book market without thereupon believing Amazon is Jesus. I have a relative who works for them now, and she’s not even this obsessing.

    Ctein — you get a cookie. Stevie — you get a whole cinnamon roll for giving me a link on book price data so maybe I don’t have to explain it over and over.

    Have fun with James, everyone. I will be curious to hear if robots are going to take over writing books soon. (That would actually be fun.)

  282. Amazon wants to get the lowest price for it’s customers. Not out of altruism but because Bezo’s believes putting the customer first is the way to win. He also believes if he pushes the prices way way down his competitors will not be able to compete with his level of efficiency

    Both of these things actually ARE good for the customer and the anti-amazon lobby needs a better rallying cry then “paying more for books is good for you” or “amazon the evil monopoly”.

    Amazon does not give a rats ass about its suppliers, they either keep up or get out of the way, either way amazon is fine with that and belives the customer will be fine with it too provided it gets them a cheaper product

  283. Unholyguy

    The contents of the law suit between Amazon and Lush Cosmetics cited above make it perfectly clear that Amazon is not putting its customers first; the judge specifically commented on that in his judgement.

    You can aver otherwise until you are blue in the face, but you can hardly expect people to accept your unsupported assertions when they are flatly contradicted by the evidence.

  284. Dear Kat,

    Thank you! Yummy cookie!

    As always, your analyses are brilliant.

    I’m getting on a plane late tomorrow, too. London? Maybe I’ll run into you at WorldCon, then.

    ~~~~

    Dear MrTroy,

    Overly simplifying a complicated subject…

    The easiest way to think of digital publishing (from the publisher/economic perspective) might be to think of it like what you do when you produce a paperback after the hardback edition. The changes you need to make and the redesign and re-layout are similar issues. Of course, as with the hardback edition, you don’t have the incremental cost per copy. Well, you do, but it’s vastly, vastly smaller.

    So, yes, the risk equations do end up getting tweaked. How much is another matter. The “people costs” of producing the book are far higher than most people imagine. Even if you’re self-employed, unless you’re an attorney you probably don’t realize how much time you spend on your business. Remember that for a publisher, every single bit of activity is a “billable hour.” As an approximation, assume that each person-minute expended at a publisher costs the publisher one dollar (it will be different for different publishers and different parts of the country, and even more different for different kinds of businesses, but it’s a good starting point). So, you pick up the phone (how 20th century!) and call your editor just to confirm that your paper manuscript arrived okay (last century, ‘member). Okay, the small handful of minutes it took her to take your phone call, answer it, and then get her head back into the space to be working on whatever she was working on, that’s a handful of dollars out of the publisher’s budget. E-mail your editor one contractual query or suggest a change in the terms? Several people will have to think about that, and there are double digits of dollars that are gone.

    This is just the side stuff. Of course there is the reading of the manuscript, the editing, the copyediting, the proofreading, the design and layout, the sales and marketing decisions, etc., etc. It really adds up!

    Beyond that, for paper books, there’s the cost of printing each copy, both set-up and incremental, which doesn’t apply to digital (well, some setup does, but the incremental cost is incredibly small). On a typical first printing, I have no idea how the costs typically break down– what fraction goes for people costs and what fraction goes for physical production costs. It would be interesting to have a rough number for that. Maybe one of our resident experts will come up with one. My totally uninformed male-answer-syndrome guess would be that the majority of costs are the people costs. But you should not take that to the bank.

    Somewhat related to this, another thing I don’t know is the distribution of sales among the “unsuccessful” books––those that don’t sell out their first printing/earn out their advance. I don’t know what the average percentage sold, relative to break-even, it is. I don’t know if the distribution is Gaussian, Poisson, or multimodal. All of this is important when judging what happens to that large fraction of books that don’t make money for the publisher. For example, if lowering the e-book cost increases the publisher’s revenues by 25% on those books, but the average shortfall was 50%, it means they’re still losing money. Less loss per book, yes. But if a forced lowering of the price cuts the revenues from the previously-discussed cash cow significantly, that may not be a net win.

    None of which is to say that Amazon is wrong and the publishers right… Or vice versa. Repeating John’s frequent mantra. They are businesses looking out for their own interests, which are not the same, and they are known to be fallible.

    What it does mean is that simplistic analyses of what’s going to happen based upon those spherical cows are nothing more than political talking points.

    Personally, I feel like John does: Anything that reduces my ability to negotiate terms is likely to be a bad thing for me. I may well be entirely wrong in that perception, but it leaves me very uncomfortable.

    pax \ Ctein
    [ Please excuse any word-salad. MacSpeech in training! ]
    ======================================
    – Ctein’s Online Gallery http://ctein.com 
    – Digital Restorations http://photo-repair.com 
    ======================================

  285. I’m really beginning to wonder if some of the people posting in this discussion are even reading the things Kat and John are actually saying. Nobody in this discussion has said “paying more for books is good for you” or “Amazon the evil monopoly”, or even “Amazon must be destroyed”! The hyperbole is strong with you folks.

    Once again, the majority of ebooks on Amazon are priced at 9.99 or lower, including trade published books. I’ve lost count how many times this has been reiterated. Amazon is trying to tell a manufacturer how they can price their goods, regardless of what the overhead cost is to the manufacturer. You know who else does that? Wal-Mart. I guess they are both great if all you care about is low prices. And by the way, Amazon’s customer service quality has been going downhill in the last year. So, they are even losing the edge they had in that regard.

    I’m a customer of Amazon, but that doesn’t mean I agree with a lot of their business practices. I also don’t believe that lower means better for me as a consumer. When a retailer tries to force prices so low that it becomes impossible for a manufacturer to make a profit, then it’s always the little guy who gets screwed. People lose their jobs, because a company has to make up for those losses somewhere.

    I don’t think publishers are the be all end all, but I also don’t get this knee-jerk reaction to see any criticism of Amazon as, “I hatez the Amazon! Die!”

  286. Stevie the example you are citing is a trademark infringement case where Amazon is refusing to hack it’s search engine to not return links to competitors of a cosmetics company named “Lush”. Am I understanding that correctly? This company Lush does not want to be carried by Amazon

    If that is your smoking gun, it seems pretty weak to me, regardless of the rhetoric from the judge? Or am I missing something somewhere? I mean really, who cares?

  287. Jennifer, what exactly is it that Amazon has done wrong that I (as a consumer) should care about?

    - I don’t care about two huge multinationals squabbling over contracts.
    - I don’t care whether Amazon sets a price ceiling that some authors may not like, other then in general I like the idea of things being cheaper and middlemen getting squeezed
    - I don’t care about book publishers at all really

    In general, the only possible appeal to anyone is that all of this is somehow bad for authors. I do care about my authors getting paid. However, Amazon says this is good for authors and publishing houses say it is bad and no one is bringing any data so in general, I am back to not caring again. if anything I probably trust Amazon more then the publishing houses as the big 5 seem greedy and stupid to me

    Hence my response of the lack of a rallying cry against amazon’s practices

  288. And that’s where we differ. I care about Amazon’s practices and the effect this will have on other retailers, jobs, and competition. I have the right, as a consumer, to view Amazon as greedy and I don’t trust them. But, trying to paint everything as a “side” is ridiculous.

    When you said, “Both of these things actually ARE good for the customer and the anti-amazon lobby needs a better rallying cry then “paying more for books is good for you” or “amazon the evil monopoly”, it certainly sounds like you do care, and are picking a side. Anti-Amazon lobby? FFS, take it down a notch.

    We don’t have to care about the same things, but don’t paint all consumers with this broad brush, as if we all believe what Amazon does is fine and dandy.

  289. Unholyguy

    I care as a consumer. The Company cares as a producer. The Judge cares because his job is to uphold the law.

    Had you actually bothered to read my posts and the two Court Cases cited you would understand that they represent an excellent example of the thoroughly nasty way in which Amazon seeks to grind down competitors, and screws their customers.

    What Amazon was doing was palming off trash, profitable trash, no doubt, but trash all the same, whilst leading its customers to believe that they were getting the real deal, hence the abuse of Lush trademark. Selling items under false pretences is generally recognised as coming very close to, if not over the border to, criminal activity.

    As the Judge made clear, it was never suggested that it would be difficult in any way for Amazon to make the true picture clear to its customers; since it hasn’t done so the only logical conclusion is that it doesn’t want to. It wants to keep selling profitable trash to people it has conned into believing they’ve got the real deal.

    This may be your idea of customer service but it sure as hell is not mine. I’ve just spent 24 days tootling around the Med and Black Sea; at least the guys lining up to sell us genuine fake wallets, not to mention the genuine fake watches, were perfectly honest about the fact that they were fakes.

    We have now reached the point where street sellers in small towns in Turkey are more honest about their products than Amazon is…

  290. I read this article on the Lush/Amazon thing, I would never trust a judge to understand or rule fairly on anything involving technology.

    http://www.theguardian.com/money/2013/nov/30/lush-amazon-trademark-court-battle

    what do you mean by ” whilst leading its customers to believe that they were getting the real deal, hence the abuse of Lush trademark”. Was amazon changing the representation of the competitor products, or were the competitors themselves making their products appear like Lush?

    In general a store search engine is going to algorithmically whatever they have avaiable that is closest to the thing you are looking for, that part is working as intended

  291. – I don’t care whether Amazon sets a price ceiling that some authors may not like, other then in general I like the idea of things being cheaper and middlemen getting squeezed

    You mean that you like the idea of middlemen being squeezed as long as it isn’t Amazon, the ultimate middleman.

  292. Dear unholyguy,

    Umm, but it’s not a technology case. That isn’t the issue before the court.

    Blaming it on the search engine is kind of like blaming it on a “computer error.” A human being writes the search engine and determines what it does and doesn’t do. It may very well be working “as intended.” Whether that working and that intent is legal or not properly falls within the scope of the courts.

    I do not have an opinion in the case, not having read it closely enough, but an assertion that the software is doing what it was written to do is very much not to the point.

    pax / Ctein

  293. I read this article on the Lush/Amazon thing, I would never trust a judge to understand or rule fairly on anything involving technology.

    And I would never trust a tech guy’s comprehension on anything legal. They get the law wrong FAR more often than a judge gets technology wrong. (Exhibit 1: Patents…..)

  294. It’s kind of like the recent European “:right to be forgotten”. which sounds great in theory but is pretty unworkable in practice.

    You are basically asking Amazon to re-engineer the way the way their search engine works to protect some small soap manufacturer who thinks they own the word “Lush” and that they are somehow getting ripped off if Amazon bounces them to products like their product

    Have you actually read the claims? It’s basically “we don’t like how search engines work”.

    The judge in the case, John Baldwin QC also seems to be a pretty famous patent lawyer, who seems to be still actively practicing as a patent lawyer in addition to being a judge. Must be nice tow ork both sides of the bench, how is that even possible?

    http://www.8newsquare.co.uk/members-of-chambers/John+Baldwin

  295. Dear unholyguy,

    Seems to me you have the cart before the horse. We are not required to live our lives by what is convenient or simple to program.

    If the law says what you’re doing with a computer is illegal, it’s just too bad for you if it’s not easy for you to fix the code to make it legal. It’s not my problem; I’m not required to acquiesce to your convenience.

    If, in fact, Amazon is illegally infringing on Lush’s commercial rights, it’s Amazon’s problem to fix it. Or make appropriate compensation. Law does allow for situations where physical remedy is difficult or impossible (in the US, you can, as a general rule, sue to obtain damages, but not to obtain specific performance (there are exceptions)). But it does not let you say, “Aww geee, it’s just too hard to not break the law, so we can break the law and not be penalized for that.”

    Whether the plaintiff’s LEGAL complaint has merit is the question. If the way they “don’t like how search engines work” proves to be a legally valid complaint, too damn bad for search engines.

    And this is getting into rather serious thread drift from the topic at hand. Maybe we should wrap it up before John does that for us?

    pax / Ctein

  296. Unholyguy

    They don’t think they own the word Lush, they do own the word Lush. For someone who is lecturing us on how businesses do business you are remarkably ill informed about the real world.

    As for John Baldwin, oddly enough we like Judges to have the highest level of expertise in their field, which is why they are appointed on either a full or part time basis. Henry Carr, who appeared for Amazon, is also a Judge.

    Ctein, the interesting thing is that Amazon has not claimed that it would be difficult to jig their search engine, though I agree entirely that it’s irrelevant to the legal position. They are on a hiding to nothing on that aspect because their own witness admitted that people clicking on Lush legitimately expected to be taken to Lush products:

    ‘In my judgment, the average consumer is unlikely to know how the drop down menu has the content which it displays, but is likely to believe that it is intended to be helpful to him and is some consequence of other searches that have been carried out. In my judgment it would inform the average consumer that if he were looking for Lush Bath Bombs on Amazon, he would find them by clicking on that menu item. I reject the contention that the average consumer who was typing Lush into the search box would think that the drop down menu reference to Lush Bath Bombs was a reference merely to products which were similar to or competitive with the Lush product. Moreover, my conclusion is supported by the evidence of Dr Fliedner of Amazon who accepted without hesitation that a consumer would expect the brand he was searching for to be shown as the first result, and probably as the first few results, if it were available.’

    I do think this is relevant to John’s theme, which is that Amazon is a business, seeking to expand its profits; it also supports his theme that what Amazon says isn’t necessarily true. Amazon made strenuous attempts to exclude their own witness’s testimony from public knowledge; they failed, and so we know that Amazon was deliberately attempting to mislead consumers. If they will mislead us on bath bombs then they will mislead us on books…

  297. Agree this copyright stuff could be its own separate thread.

    Regardless of the merits of this particular case, if this is really the best example of Amazon supposedly not looking out for their customers seems pretty weak to me

    A copyright lawsuits about supposid confusion that a four year old would not be confused by, as it is exactly the way search on the internet generally works. Behavior that users actually want trying to help time find the nearest match for their desire that amazon has in stock

  298. Dear unholyguy,

    It’s about trademark, not copyright. That’s an entirely different thing.

    I’m nowhere as up on trademark law as copyright law, but I am up enough on it to be able to tell you that your remarks in this matter are entirely ignorant of the law in such matters.

    You’d really be best off dropping this. Maybe time to return to the real topic? Maybe?

    You can have the last word… if you must.

    pax / Ctein

  299. Just a thought on the Lush/Amazon thing (digression continued), I agree with unholyguy in that it’s not really Amazon’s problem to help Lush combat its trademark infringement. If a competitor is infringing on its trademark, go after the competitor.

    To introduce third-party liability on Amazon proposes massive chilling effects, in which every online marketplace that allows products from third-party vendors must ensure that they are aware of every trademark (and patent) held in every area that any of its products compete in, to ensure that none of them is infringing… which determination may only be possible by a judge anyway.

    Again, go after the infringing company, not the search engine or middle-man.

    Back on topic, a long but interesting read featuring actual debate on the Amazon vs Hachette debacle: http://jakonrath.blogspot.com.au/2014/08/michael-cader-of-publishers-lunch.html
    The first comment also links to Data Guy’s breakdown of daily gross takes across a large range of price points, though only for a single day. (insert spherical frictionless cow disclaimer here)

  300. MrTroy

    In the real world trademarks exist. Amazon is a business in the real world. You clearly haven’t read the judgements in the case, nor have you even read the extracts I quoted. Amazon is the infringing company, which is why Lush went after them.

    In the real world businesses who infringe on other people’s trademarks are penalised because that’s how businesses work in the real world. Lush won, Amazon lost.

    I find it extraordinary that people can be so ignorant of basic commercial facts, though I suppose it helps to explain the naïveté of those who actually believe that Amazon is on the side of the consumer…

  301. @Stevie,

    I did read your exerpt although did not previously read the case report. I’ve now read the summary of the case, and while I acknowledge and am not defending Amazon’s “scorched earth tactics” in which it refused to agree to anything, my opinion has not changed at all.

    I think the court case is a prime example of a judge taking strictly to the letter of the law and not considering applicability in the real world or any downstream effects from their judgement at all. There are unfortunately many (and growing) such cases, and just because the law falls in a particular direction that does not make the result either right or even sensical (not nonsensical?)

    Consider, if a customer enters a generic english word that happens to also be a narrow trademark into a search engine, even a search engine that is searching for commercial products within the domain covered by the trademark, I guess it’s technically possible (at least in the US) to simultaneously perform a trademark search on the term and not echo back the search term to the customer to avoid infringing the trademark on the search results page (I guess that would be serving the customer, according to the judge). If Amazon didn’t have a supply contract for Lush products, should it just display nothing? Or should it include products that self-describe as being “lush”, the generic english word rather than the trademark, but I guess not any products that include “lush” in their name because they are infringing on the trademark (even if the name is a phrase that happens to contain the english word “lush”)?

    Note further that the Lush trademark does NOT cover category US051 “Cosmetics and Toilet Preparations” or US052 “Detergents and Soaps”, so it seems to have taken an IP judge to actually determine that the Lush trademark fall within the scope of “beauty” products.*

    What about if I performed a search in the Beauty products for the term “velvety”, hoping to find something that feels nice? Should the search results be restricted to nothing because the “velvety” trademark is held by the Hung Mai Corporation and they don’t offer any beauty products under the velvety trademark (it’s an “Advertising and business” trademark, apparently in the export of wine)

    So, we have a judge, who is an expert in matters trademark, who considers that it would be easy for Amazon to respect the Lush trademark in this matter. Pity he didn’t give any advice as to how that might be possible or feasible.

    Obviously it’s not the judge’s job to determine how a business should operate, and there’s no particular reason why a trademark judge should need to understand any particular technology, let alone internet search technology… but the judge *should* have to consider whether a particular judgement will have the effect of upholding the letter and the spirit of the law, and whether upholding the law in this particular instance will have any chilling effects that are unintended by the law.

    * For those interested, the Lush trademark covers: IC 004 “Lubricants and Fuels”. US 001 “Raw or Partly Prepared Materials”, 006 “Chemicals and Chemical Compositions”, 015 “Oils and Greases”. G & S: Candles

  302. Kat,

    Was away for a few days, and I did miss your earlier reply about Harper Collins.

    Here’s what bothers me about the HarperCollins selling ebooks online. It’s not the klunky site, HarperCollins does books, not web design, so thats understandable.

    There’s no middleman here, this is HarperCollins selling direct, right?
    They are entering an already crowded retail field.
    Despite those factors, many their bestsellers are priced higher than $10.00. Many are in the $14.99 and $16.99 price point. Which makes me wonder, if this is what Random House is selling its own ebooks for now, given such a competitive environment, why would they lower prices in the future? To compete? If they wanted to compete, wouldn’t/shouldn’t their prices already be lower/comparable? If they want to compete against Amazon, or at least give a customer a choice, how is offering to sell a reader an ebook at a higher price point going to do that? Maybe it’s a reverse psychology thing? Sure, the Season of the Dragonflies ebook is $12.74 on Amazon, but by pricing it at $14.99 on their own site HarperCollins is making you think you’re getting a deal. “You’ll pay higher prices on Amazon, because if you bought from us directly we’d charge you even more!” doesn’t seem to be a sound business plan…then again, stranger things have occurred.

  303. @ Stevie

    “though I suppose it helps to explain the naïveté of those who actually believe that Amazon is on the side of the consumer.”

    You mean Hachette and the other publishers are? Collusion and price fixing are for the public good?

    I’m sure there’s no white hat vs. black hat going on here, and while I wouldn’t go so far as to say “A Pox on both their houses”, if one got the business equivalent of Chicken Pox and the other got the business equivalent of Shingles I’d be ok with that.

  304. I was just at a major week-long rocket launch. Two of the three rocket motor (and rocket kit) manufacturers had pavilions set up in Vender’s Row. Neither of them was selling anything; they were just showcasing products. I asked why, and they specifically said it was because they didn’t want to undercut their retailers who also were set up there. (Also, this way they avoid hassles with money-handling on the field.)

    I imagine if they had chosen to sell their products, they’d have been selling at the MSRP, even though their “competition” (read “distributors”) were selling on the field at discounted rates. Why? Because it does them no good at all to undercut the supply chain, which they want to be as healthy as possible.

  305. Yeah, I don’t see anything fishy with Harper Collins offering higher e-book prices on its own website, there are just too many reasons why they might want to do so, and some of the possibilities are actually really good reasons.

    Another couple of possibilities to add into the mix:

    * They’re being cautious about their etailer offering launch, and want to avoid their servers being overloaded by a mad rush to buy the books at cheaper-than-Amazon prices before they change their mind. By pricing higher, they’d expect a trickle-feed of purchases that they can use to test their workflow and make sure it all works before trying it under load.
    * KDP terms don’t let authors offer a price better than Amazon at other venues, perhaps Harper Collins wasn’t able to negotiate their way out of a similar clause? Maybe they could get a better deal on other parts of the negotiation by letting Amazon take this point, because it just wasn’t that big a deal before?

    On the supply chain idea, this also seems like a perfectly feasible and reasonable explanation, but I’d offer online hotel bookings as a counter-example. In at least the last five years, I have found that most of the time the best hotel price can be obtained directly from the hotel website. Hotel booking aggregators might be able to offer the same price, but only in rare circumstances do I see them offering lower prices for the same room – usually only in last-minute discounting cases. Travel agents have *never* been able to offer competitive hotel rates in my experience… plane tickets certainly, rail perhaps, but accommodation never. And yet the hotel supply chain seems healthy (to an outsider), despite hotels competing directly with their retailers.

  306. Hi John,

    Excellent article and I agree with much of what you say. The one area which I (as a reader) find that is not taken into account on pricing model discussions is my rights as a purchaser of a hardback or eBook equivalent.

    If I buy a hardback I get the book (it is mine), I can read it, put it on my shelf, lend it to a friend, sell it on the second hand market.

    If I buy an eBook from Amazon and many others I can read it, I can’t lend it without permission and its highly restrictive when you can, I can’t even let my family members read it unless their kindle / iPad is on the same account.

    What I buy for my money is not the same thing at all.

    I know in these discussions people always talk about the reduced cost of production of eBooks is less than for hardback books and as you say its not really relevant but what is (in my view) is the rights associated with the purchase. If I got the same rights then great but I don’t so I would expect a lower cost for the fewer rights that I have acquired.

    What that price is, is another whole can of worms.

    The other point you make about price differentiation on a bottle of water in s supermarket or a restaurant is I think not making the point you want it is making Amazon’s point. In the case of bottles water the wholesale price is pretty much the same for the supermarket or the restaurant (there may be a differentiation due to volume but it isn’t that great). But the price charged the consumer is not based on the “wholesale” price but on what the market would bear.

    In this case that would mean Hachette setting a wholesale price and letting amazon sell it at the price they want (wait a second that is what happened before Apple and Hachette et al decided to collude to increase the price – if that is what they did).

    Books have always been odd in the way they are sold and when the likes of Amazon and before them the big bookshops came along and cut the price they relied on buying books at a wholesale price and selling them at a variable margin to make money. But in many markets that was controlled and the price of books set for fear that small booksellers would disappear.

    Nothing has really changed but the consumer and the author are caught in the middle of this dispute.

  307. Been following the Hachette/Amazon sword fight for awhile and with great interest as my new startup lets content creators sell fan direct in-stream on social media, and with far more favorable rev shares than Amazon. I realize that is only good for a small % of your audience and folks like Amazon really come into play with their discovery and recommendation engines to drive new reader growth, but it’s a start.

    If anyone is interested in trying it out tweet us @socialEQ and we’ll connect.

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