So, is Macmillan losing money on Dominion?

[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?

Comments

[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."

[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.

[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.)

[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.

[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.