stevenehrbar: (Default)
[personal profile] stevenehrbar
Dominion, by Fred Saberhagen, is a direct-to-paperback release from Macmillan, under the Tor imprint.  The price is $6.99.  Serpent Moon by  C.T. Adams and Cathy Clamp , is another direct-to-paperback release from Tor, for $6.99.  Both were released February 3rd, 2010.

That sure looks like proof that Macmillan can, in fact, currently edit, typeset, and otherwise prepare a book, then sell it for a profit at a retail price of $6.99.  Which would pretty strongly suggest that they could edit, typeset, and otherwise prepare an ebook, and then sell it at a profit for a retail price of $6.99.  It's not like an ebook has any of the printing, warehousing, and distributing costs of the paperback; surely it isn't more expensive to make than a paperback?

Maybe, of course, the author royalty on the book is razor-thin.  So we then could, say, add an additional $3.00 to the price, to represent a compensation to the author equivalent to a 12%-of-retail-price royalty on a $25 hardcover.  That would bring us to a price of $9.99 for the ebook as high enough to make a profit for Macmillan and definitely reward the author.

Interestingly, ten bucks is the same price Amazon was using as a standard, and that Macmillan is saying was way, way too low for an ebook.

Oh, well.  I'm sure on the $12.99 ebook sales they're paying authors a royalty in excess of $3 a copy, right?  Right?

Date: 2010-02-05 05:43 am (UTC)
From: [identity profile] fadethecat.livejournal.com
They can afford to sell those books at that price because other books are being sold at higher hardcover prices.

They can afford to take on brand new authors where it's too risky to release them immediately in hardcover but it's worth giving a paperback release a try because of the higher margins on hardcover books.

You did read the actual releases from Macmillan, right? The ones that discussed windowing? And that they were explicitly willing to offer books at no-more-than-9.99 if Amazon would accept said windowing, to avoid cannibalizing hardcover sales? You know. The hardcover sales that let them take a risk on putting out those direct-to-paperback novels. A large percentage of which never actually sell through sufficiently to cover what it cost to put them out, much less make a profit.

Date: 2010-02-05 05:47 am (UTC)
From: [identity profile] fadethecat.livejournal.com
If I may expand slightly, part of what's so infuriating about all this is how many people look at Macmillan, which says "We'd like a range of $6-15, starting on the high end to coincide with hardcover releases, and then dropping as time goes on to go with the paperback release, or if you like we can cap at $9.99 and just release a while after the hardcover comes out," and immediately start screaming that the company wants to sell all books ever for $15 forever. Because, see, that's the beauty of the system if you don't want to spend $26 on a hardcover book (like I just did today) or $15 on a brand new ebook release that comes out on the same day as the hardcover.

You can wait.

And the price goes down.

Sort of like waiting for a movie to come out through Netflix instead of seeing it in theater. Less money for less rushed service! It's almost like getting free shipping if you're willing to wait several days for the package, instead of paying more for second-day air!

Macmillan actually proposed a pricing model that would give the authors a greater cut than they already have. And is actively discussing ways to raise the royalties that authors get on ebooks, above current admittedly dreadful industry standard.

But god knows it's a crime for people to not be able to get the lowest possible price on every single book in all formats the instant it's released.

Date: 2010-02-05 06:38 am (UTC)
From: [identity profile] lhn.livejournal.com
On the other hand, pre-Kindle, most of the publishers (Baen excluded) seemed happy to charge the undiscounted hardcover price for ebooks, sometimes well into their paperback run. Since in the age of Amazon and discount bookstores, no one pays the undiscounted discount price for the hardcover itself, one might be forgiven for being concerned that their pricing model this time around will be aimed at protecting the hardcopy market more than expanding the ebook market.

Time will tell. But now that publishers have decided to take over pricing to the consumer (which is their legal right), it will be interesting to see if they do better than the music industry at protecting their own interests, let alone the consumer's. As I just posted in a similar thread elsewhere, if the price/DRM inconvenience is higher than the inconvenience, risks, and moral freight associated with piracy, and slates or readers become ubiquitous, they could wind up with a generation that's no more likely to pay for a book than for a newspaper subscription.

That's not something I want to see happen. I value the services of editors for their gatekeeping function, and I've seen what manuscripts look like before copy editors and proofreaders get to them. But the fact that I want journalism to continue isn't making newspapers' business models look any more viable, and over a decade of suing grandma hasn't succeeded in enforcing the idea that music is supposed to be paid for all that effectively. Insofar as anything has reclaimed the paid music market, it was Apple strongarming the music publishers into cheap, simple pricing (and then dropping DRM), the way Amazon tried (but failed, thanks in part to Apple) to strongarm the book publishers.

That model isn't going to happen for books, evidently. The publishers will get to make their own decisions, and again, that's their right. They know their costs and expected profit margin, and I don't. And unless they open their books-- which they have no particular obligation to do-- I have no real knowledge about their cost structure. (Or why the prices they charge have been going up faster than inflation all my life. It used to be explained in terms of rising paper prices and the collapse of the independent distributor system, but now apparently paper and distribution aren't important components of the overall cost, so I'm back to not knowing.) I also have no opinion about what the "right" or "fair" price is. I just know the price that I'm willing to pay before I go with the library, or substitute a free 19th century classic from Gutenberg, instead, which is all I really need concern myself with.

More important to them than one idiosyncratic reader like me is the price at which a substantial number of users start trying to figure out how to get the bootleg version instead, which is entirely orthogonal to their costs of production. Maybe they can do better at figuring that out than some of their predecessors to this dance did. (Though consumer pricing is precisely what publishers haven't had close control of in recent decades, between discounting and the secondary market, so they don't have a lot of experience.) I guess we'll see.

Date: 2010-02-05 02:43 pm (UTC)
archangelbeth: An anthropomorphic feline face, with feathered wing ears, and glasses, in shades of gray. (Default)
From: [personal profile] archangelbeth
If Amazon had only been strongarming the ebooks, I'd have no gripe. Them pulling the physbooks is what made me go, "Oh, bad form, bad form!"

The other thing that makes me want to kick Amazon and say, "You, son, are no Apple iTunes!" is this: http://www.musicbizacademy.com/articles/dl_newmedia.htm says "Pursuant to the iTunes agreement with the record labels, the iTunes share of income is $0.29 cents out of each $0.99 download."

The Amazon Kindle contract for "publishers" (aka self-publishers and others), here, says: "Provided you are not in breach of your obligations under this Agreement, we will pay you, for each Digital Book sold to a customer (i.e., an end user) through the Program, a royalty ("Royalty") equal to thirty-five percent (35%) of the applicable List Price for such Digital Book, net of refunds, bad debt, and any taxes charged to a customer or applied with respect to sales to a customer (including without limitation any value added or sales taxes). If your List Price for a Digital Book is higher than permitted under Section 5.3.1 above, we will be entitled to deem it modified so that it is equal to the maximum List Price permitted when calculating Royalties due to you under this Agreement."

Or, at best, they get 65 cents out of ever $1.00 and you get 35 -- pretty much the reverse of an iTunes sale.

When I was wittering over their original 30% royalties, I got told that actually, ebook royalties could be much better. I think it was Steven Marsh who said it, and the implication is that, for stuff on e23 (or at least not SJ Games stuff), the publisher is getting 80% of the price.

I think MacMillan is wittering around a bit as well (and anyone talking about typesetting being a cost for a linear-text ebook needs to be beaten with the "NO! USER CONTROLS THE HORIZONTAL! USER CONTROLS THE VERTICAL! USER CONTROLS THE FONT!" stick), since -- as you point out -- Baen has been chugging along for years now on eARCs at $15 (with typos! they openly state this is an ARC with typos!), webscriptions at 4 for $15 (also with typos in the first chunks!), and then books for $4-$5 (at least, Bujold's are in that range).

[Non-linear texts, such as poetry, gaming books, or other technical writing, do of course need typesetting. Ignore typesetting e.e.cummings at your own peril!]

And yeah, what's up with the "oh, paper costs are driving up the price" argument suddenly going away? What's up with that? If it was, "Our copyeditors demand a living wage," that'd be a different kettle of fish, but I've always heard, "It's the paper."

Date: 2010-02-05 03:34 pm (UTC)
From: [identity profile] lhn.livejournal.com
I could be wrong, but my recollection is that 35% is a much higher percentage of the sale than the publisher gets from a physical book, which goes through two or three levels of markup. (Which is another factor in the question of what price publishers need to cover their costs, of course.)

That doesn't mean they have to take it: who gets how much of the benefits of disintermediation is pretty much a pure matter of contract negotiation (which includes hardball tactics like threatening to take the football and go home). There's nothing wrong with Amazon saying "we want most of it, since we're providing the disintermediation", and there's nothing wrong with a publisher saying "without our product, you don't have a sale, so give us more or no deal"-- that's what both sides pay lawyers to work out. (And, of course, what both sides make public statements to influence. From where I sit, it looks like the publishers won that part of it, since I see more sympathy for Macmillan than Amazon, but I don't know how representative that is.)

Amazon's real problem seems to have been timing-- if they'd tried this a year ago, they might have been successful. Now that everyone and his cousin is coming out with ereaders and big players like Barnes and Noble and especially Apple make it questionable that Amazon will retain its iTunes-like dominance over the ebook market, their leverage was much reduced. I can wish that the negotiation had stayed primarily about who kept how much, while recognizing that it's critical that ebooks be priced low enough to avoid piracy going mainstream. But one consequence of failed strongarm tactics is that the other side will want to make sure that it's harder to repeat them in the future if, e.g., Amazon manages to remain central after all.

Which isn't all that unlikely-- they already have an iPod app that can be retrofitted to the iPad easily enough, they can go cross-platform to other devices more easily than Apple can if the iPad doesn't completely take over the market, and right now people associate Amazon with books more than they do iTunes. I don't discount Apple's market savvy, but their becoming as big for books as they are for music doesn't strike me as a slam dunk.

Date: 2010-02-05 06:06 pm (UTC)
archangelbeth: An anthropomorphic feline face, with feathered wing ears, and glasses, in shades of gray. (Default)
From: [personal profile] archangelbeth
Oh, 35% is higher than many royalties for physical media. However, it's not the same rate that Apple iTunes was handing over to the record companies. (Thus, the difference in "Okay, you don't want our very generous offer? Fine. Whatever." Versus Amazon's, "You don't want us to keep gouging you, plus we get to do whatever we want with your price? Sucks to be you. We won't carry your physical books, either.")

And it's not even close to the same rate that, well, the e23 manager at the time (not SMarsh, I see now from records) quoted at me as being what they considered an industry standard.

(Further, there are several ereader apps available for the iPhone/iPod Touch, and the iPad'll add Apple's own... I dunno if Amazon is going to be that "go-to" for books if they keep limiting their selection like this. Though it's true Apple will be coming from a serious underdog position.)

Date: 2010-02-05 06:24 pm (UTC)
From: [identity profile] lhn.livejournal.com
My understanding is that Amazon's rolling over means that they won't be limiting their selection. (Granted, the Macmillan titles aren't back yet, but all the announcements from both sides indicate they will be.)

On the other hand, it doesn't sound as if any vendor will be able to compete on price (since the publishers will be setting that themselves). So I don't know on what basis they'll compete. Maybe convenience, multiplatform options, and who can get their devices with their store as the default into the market fast enough.

I wonder if the agency model forbids offering rebates, points to be used for future discounts, coupon codes, or other marketing gimmicks, or if it just specifies list price and how much the publisher expects to receive from each transaction.

Date: 2010-02-05 07:58 pm (UTC)
archangelbeth: An anthropomorphic feline face, with feathered wing ears, and glasses, in shades of gray. (Default)
From: [personal profile] archangelbeth
If they've kicked everyone's books out once, they'll probably try it again if they think Macmillan gave enough ground. Naughty Amazon.

Maybe convenience, multiplatform options, and who can get their devices with their store as the default into the market fast enough.

Sounds good to me.

Actually, if Amazon could cut the price but still had to pay the publisher, that wouldn't over-bug me, probably. I can see where it would over-bug publishers, though -- they would rather not see returns (so they don't care if a store sells physbooks more cheaply), but for ebooks... It might create expectations. And Amazon's still eating even more of the pie than with its physical books (it demands a 55% discount, IIRC, for physbooks; not, effectively, a 65% discount).[1]

On the other other hand, I'm slightly suspicious of this long-term thinking theory. Are publishers that well-known for long-term thinking? >_>

Amazon selling for more than you list is a different matter; if it weren't Amazon being a virtual monopoly, the go-to for All Things Book, then it wouldn't be an issue. Don't like the price? Fine, order it elsewhere. I suppose if they had to list the "our price, suggested retail price" prominently, it wouldn't be an issue there, either...

Mmph. I want to see what Apple does for the iPad's bookstore. Right now, I feel like I've got grody old oranges and shiny vaporware, and I don't entirely trust that comparison.

Footnote 1: Actually, that's what this should be looking at. Amazon is NOT A PUBLISHER. It tries to claim both sides of the coin, mentioning "royalties" in their Kindle contract with self-publishers (and presumably big publishers as well?), but at the least, when dealing with Macmillan? Amazon is a STORE. It's not paying royalties, it's demanding discounts, and discounts steeper than the usual, for less work on Amazon's part, frankly. I do hear they put things in Kindle format, but once that's done, it's done; there's no stocking, no shipping, no taking-the-book-out-of-the-crate-and-shrink-wrapping-it-for-the-customer.

I have somewhat more sympathy for Macmillan, actually (though I've heard they give poor royalties to their authors), in that context.

Date: 2010-02-05 07:23 am (UTC)
From: [identity profile] stevenehrbar.livejournal.com
Serpent Moon is not a risky book from a brand-new author. It's the twelfth book from an established writing team, eighth in its specific series.

Based on the previous seven books from the same authors in the same series, its sales should be rather predictable. If it can't pull its own weight at those numbers, covering its own costs and turning a profit without subsidies from other books, there's no reason in the world to bother publishing it. The authors have had eleven chances already; if they aren't yet proved to be profitable to publish the way Macmillan is publishing them, giving them a twelfth chance would be stupid.

Now, it might well be that there are special circumstances that allow this particular book to be profitable without hardcover sales, windowing, or the like to supplement the profit on a paperback price $6.99. But Macmillan has not yet presented any explanation for this.

--

Dominion, apparently, was originally released in 1982, so including it above was a mistake on my part.

Date: 2010-02-05 04:00 pm (UTC)
From: [identity profile] fadethecat.livejournal.com
That sounds like a solid midlist series to me. Some series just don't sell well enough to release as hardcovers, but make enough money to keep being released as paperbacks. It's a great niche if you can get to it. There's a lot less midlist going on these days than there used to be, because publishers work on razor-thin margins. They have money to put out the paperback stuff mostly because of the liquidity given to them by the cash from the hardcover releases.

To wander into metaphorical comparisons for a moment: hardcover releases are the Munchkin for publishers. And having those out there is what lets them put out GURPS releases, which may turn a small profit, but are generally not enough to keep the company going on their own. Whether or not lower pricing would cut into the Munchkin profitability is sort of undefined at the moment, but I'm not about to blame them for being careful about it to start.

So saying "Why do you care about cannibalizing hardcover sales? You can make money just fine on paperbacks!" looks a lot to me like "Why is SJG putting out so many Munchkin releases? GURPS is so much more awesome!" Yeah, GURPS (and lower ebook prices--the metaphor is sort of shaky) is a fine, fine thing. But if you go kicking the big money-maker in the nuts, it's not going to mean More GURPS For Everyone! It's going to mean those less profitable things don't get made, because there's no cash free to pay the printer when you're not sure if GURPS Chicks On Ice is going to sell through.

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