New e-book pricing scheme a surprising assault on the wallet
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It repeats a claim about a quote from the original article while providing no source to back it up: The whole agreement was actually launched at the behest of Apple’s Steve Jobs, who had wanted to create an e-bookstore for the iPad but didn’t want to compete with Amazon.com’s cheap titles, according to the story.
Given the recent SNAFU over misquoting Google, I’m wary of jumping down Mr. Jobs’ long-dead throat on the basis of a quote of a quote of a source without being able to read the original transcript.
One thing I’m interested in understanding, for instance, is the basis of Apple’s “fear” of Amazon’s prices. I remember from the music business that Amazon did undercut Apple’s prices, but it wasn’t because Apple was unable to make money at a lower price point. It was because the music labels forced Apple to maintain higher prices and then allowed Amazon to offer the same tracks at a lower price in order to generate competition that would give them the leverage they needed to negotiate higher music prices from Apple in the future.
Which they got, and now they can offer a sliding scale of prices, with some tracks being $1.29, something that Jobs and Apple resisted.
So now I’m reading that Apple is trying to price fix all books at the same price, and I am mightily interested in knowing the full story. Perhaps the problem isn’t that Apple is trying to maintain artificially high prices, but that it is trying to prevent publishers from shackling it and it alone with higher prices.
The WSJ article is behind their paywall, so it wouldn't be linked to anyways.
The European Commission and U.S. Department of Justice are trying to find out just what was in the agreements publishers made with Apple about e-book pricing:
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/1...
At the time that iBooks was announced, there were many stories on this issue, and I read that the agreement Apple entered into with the book publishers was that they could set their prices however they wanted, they just couldn't charge more on the iBookstore than they charged elsewhere.[1]
Apple gave them pricing flexibility, provided that they didn't do what you point out the record companies did.
The book publishers liked this, and wanted the same terms from Amazon. They figured they could just go with Apple if Amazon didn't comply. Amazon rolled over, and ever since their PR agency has been floating stories like this one to make out like Apple is behind the rise in ebook prices.
Apple isn't. Apple just wanted the iBookstore to be competitive and offer low prices.
[1] The reason Apple lets publishers set prices is the same reason Apple lets app developers set prices. The iBookstore is open to just about anyone, even very small publishers. Apple isn't in the business of pricing retail products like this, and figures if the producer of the product sets the pricing, then the market will be more efficient. The notable exception to this, of course, is the music industry, which was the first part of the iTunes store, and which Apple had to work to keep prices down. Also in the TV and movies section they work to keep prices down. Maybe they could have dictated pricing for books, but if they had, it would have been to keep prices down, not up, like they did for the other categories. The "price it whatever you want" model worked on the appstore to provide a vibrant community where great apps can be had for $0.99. Its not unreasonable to expect Apple expected something similar in the iBookstore.
But Apple did want higher ebook pricing than $9.99, because Amazon was selling some (many?) ebooks for below cost and Apple didn't want to do that. They want the lowest price that they can comfortably take their 30% profit from.
>Apple just wanted the iBookstore to be competitive and offer low prices.
And if it hurt the consumers, well, fuck 'em. And Apple didn't even end up being very successful with iBooks. So everyone lost except the publishers. But at least it wasn't Apple's fault, right?
I don't think this is an accurate characterization. Apple [apparently; I have no inside view of their pricing policies] is happy to sell a 99 cent song, and is perfectly happy to feature free e-books. What they did NOT want is to sell a book for $9.99 while paying the publisher $12.50.
Of course, a free e-Book is also effectively sold below cost by Apple, but that's as far as their flexibility goes.
Apple doesn't care about selling content, they care about selling hardware. Within that line of thinking, anything bad for Amazon's stranglehold on books is a good thing for Apple since it reduces the friction of switching from a kindle to an ipad. You could easily make the argument that Apple pulled this move thinking "Whats bad for Amazon is good for us" and totally screwed everyone else (publishers and customers) in the process. Apple's move was certainly unscrupulous and quite possibly illegal.
And that goes for this reply as well. By answering your reply I’m adding noise, not signal. Which is why this deserves a downvote as well as your query.
I disagree. A person's motivation for dissent is extremely pertinent.
Pre-iBookstore, Amazon was offering a 65-35 revenue split, with the fat end going to Amazon. There are certainly pros and cons to each approach, but Amazon wasn't protecting anything but their own interests and profitability.
I have zero problem with Apple forcing a renegotiation of terms between publishers and Amazon. I have serious qualms about Apple totally disrupting what was a very healthy trend towards reasonably priced ebooks.
Amazon was most certainly protecting publishers from themselves regardless of the split behind the scenes. When you compel people to pirate content there is nothing for anyone to split. Apple disregarded this entirely because at the end of the day they don't really care if people pirate, they just want to make sure the content is available on their hardware.
The instant that I start getting sticker shock when looking at the price of ebooks, I'll do what I've been doing for years. I'll pirate the material.
This battle was lost a long time ago, but these guys just keep trying to fight it. I thought it was proven by now, with the latest example being Louis CK, that people will pay for media if the price is right. Meanwhile, it will always be free for those who really want it. I'm not going to argue about the moral implications of piracy, but it is a fact that it exists and isn't going anywhere.
When will these people learn that all their "Gotcha!" distribution and sales mechanisms are working against them?
I buy tons of ebooks for my long commute, and if they're going to make it hard for me to keep buying them, well... I just won't.
You'd think they'd learn, but nope.
Sometimes I prefer using the hardcopy over ebook format or just switch whenver necessary (say family member is using the reader). I can also then lend the book to non e-book enabled friends.
I've given up paying for locked down e-books (see Kindle, iBooks). If there is DRM, I will end up either unlocking it or finding an unlocked version.
In some jurisdictions there are general laws regarding format shifting. Such laws were intended to allow people to rip mp3s from CD and the like (for personal consumption of course). Indeed IIRC we in the UK are possibly going to be allowed to rip CDs and DVDs legally in the next couple of years (!).
What I think is that purchasing the book gives one a right to read it. Producing an ebook of the text for personal consumption should be fine and so by extension, IMO, there is nothing immoral about downloading the text of a book when one has paid to read that text. Indeed format shifting in books should be an allowed use.
Of course the actual ebook is going to have "company dress" and typesetting and what-have-you that's going to be protected by copyright. So one will probably need a service where you send your paperback, it gets the binding cut, is scanned and an ebook is made of the text. Of course then you can optimise by the company offering the service buying the paperback from the publisher for you, so you just get an ebook delivered with a receipt saying you bought the book.
And then the idiocy of this is apparent because a book is being created digitally only to be published and bound then scanned back to create a digital copy ... at this stage the publishers should assent to saving forests, ink, energy, water, etc., and allow the ebook to be sold at a reasonable price ...
[I've blogged to this effect before, http://alicious.com/on-ebook-copies-a-quick-opinion/]
Doing some back of the envelope estimates I can't see how the marginal cost of a book could be over a couple dollars or so for the typical novel or mass market non-fiction book, including shipping it to the bookseller. Add in some more for the costs of storage of the physical book while it is waiting to be sold, and the costs of handling at the seller--and I still can't see it going over a few dollars.
Thus, I don't see why it would be surprising for publishers that sell a hardback for $20 to expect to sell an e-book for $15 or so.
Of course, it is possible that if they sold e-books for a lot less, it would so greatly expand the market that they would come out ahead overall. However, I don't think that is likely--I don't think most people's amount of reading is determined by the price of books.
Aren't those worth something too?
Paying 2-2.5x the price for a restricted digital version with no gift or resale value is not worth it except in limited cases (e.g. Hitchhiker's Guide to the Galaxy purely based on its weight).
If I lived someplace like Portland, with Powells, I'd probably be less enthusiastic about my Kindle. But English language books delivered instantly to Italy at US prices is a dream come true.
What other reasons do I need besides cost and true ownership? What an odd response. Do you think i have some ulterior motive for ditching a device I paid $260 for?
I literally handed a book to a friend last night. She doesn't own an ebook reader. Now she has the book and can hand it off to someone else.
My father doesn't own an ebook reader and I give him plenty of books. Although now that I think about it I should probably just give him my kindle so he can increase the font size (an actual use case!) and stop leaving reading glasses all over his house.
Your response is essentially "Just torrent the book" because stripping the DRM off an ebook and emailing it someone is just the same as that person going to the pirate bay for content.
That is, you or I or parfe may completely agree that e-books shouldn't have DRM, and that removing said DRM shouldn't be illegal, but doesn't mean parfe is willing to consciously violate the law, no matter how objectionable he finds said law.
Physical shops in prime retail places with appropriately paid staff are more expensive than essentially equivalent staffless operations (I'm talking per unit, retail side only). One of the reasons Borders folded was it overpaid on its leases.
Some numbers: "Retailer (discount, staffing, rent, etc.) – $12.58. That’s 45%."
Taken from: http://ireaderreview.com/2009/05/03/book-cost-analysis-cost-...
Now compare remote physical-book retail (Amazon) with ebooks, and you see the effects of the publishers' new pricing model. Your argument applies here, but doesn't describe the price difference.
Question is: what is, for the likes of Amazon, the difference in costs between distribution on paper and on bits?
Price is set by willingness to pay, and the price-point at which a company believes it can profit off those willing to pay it, is largely what drives costs.
Perhaps eventually a netflix or spotify-like e-book model will emerge, where you pay a monthly fee (or see ads in books) to get access to most any e-book. 24symbols is trying this, but apparently not nearly there yet. Amazon is working on it too http://mashable.com/2011/09/12/amazon-netflix-books/
You may not think you take value from the publishing ecosystem (discovery, marketing, editing, publishing, etc. of content, and reliable delivery, storage, security, etc. of retail), but you probably actually do. And, you know, even if you actually don't, you can just go right ahead continuing to buy 1.99 or 3.99 or whatever is the "right" price of ebooks either direct from author websites (although it's still really hard to get the margins down to zero unless you're meeting on street and paying cash and accepting delivery over a thumb drive or something) or from Amazon or B&N's self-publishing programs.
In any case, comments like this are really hard to square with how much criticism my employer (B&N: although I don't work on ebooks, and certainly this is my own opinion) has gotten from investors for the money they've put into NOOK and the ebook ecosystem.
Though I do love reading from the e-reader. I have it loaded up with the classics, but still buy in books in print.
I love the idea of electronic books though. But it should be easy for me to just hand one over to say a partner to read.
Kindle price: $18.99, paperback price: $16.50
That's pretty outrageous, if you ask me. The paperback has to be physically distributed, and I can resell the thing, yet I'm paying less for it.
So, that $20 book gets the publisher $10 in revenue.
Then, they had to print the book and ship it.
Plus, they don't get paid for the books that they print but don't sell. This is a surprisingly high number on some books.
Out of that they have to pay the author (usually 10% of the revenue, or $1) and the printing and shipping costs of ALL the books, not just the ones that sold (say $2-$3 per book sold).
Plus they have to pay to get the books a good placement on the shelves and pay for the people to go to all of the bookstores and arrange for them to buy the books.
That doesn't leave much.
Selling an e-book for $10 and getting 70% of that from Amazon or Apple seems like a good deal in comparison.
The real benefit of ebooks, though, is that publishing a book is way less risky when you don't have to sink a lot of costs into printing books.
Looking at this from the viewpoint of an author leads to an even more obvious answer...
Paperback retail price: $15 Amazon takes 40% of retail: -$6 Amazon charges you full cost of printing: -$2.72 Your cut: $6.28, or 42%.
Ebook retail price: $5 Amazon takes 30% of retail: -$1.50 Amazon charges you a "digital delivery fee": -$0.35 Your cut: $3.15, or 63%.
This method of calculation, if not the specific values, are standard. Note that this is a MUCH better per-unit that you'd get from a traditional publisher. Often they will take 15% of retail for their margin, but they have to sell copies to bookstores at 60% off retail. So a $15 book might net you a buck, while they take home three.
It's justifiable because they take the risk on printing large numbers of books, distribution, contacts, marketing, etc. But a justifiable deal and a good deal are not always the same thing.
A publisher would have to sell 6-8X more books than you can by yourself before you'd make the same revenue. Meanwhile they would own your copyright and other things like the right to publish a sequel.
Btw, those are the real prices of my book. It's not expensive, not cheap. Maybe I'm pricing the digital version too low, but figuring that out is part of the game.
I used the number 9.99 because for a long time it seemed to be the "standard" price for an ebook. Lately the costs have been going up pretty rapidly.
Pricing a product does take a lot of time and research. I haven't published a book before, but I have bought lots of ebooks. When I look at a book on Amazon, if the price of the ebook is at least 33% less than the price of a paperback or hardcover, I'll at least consider it. If there isn't a significant price advantage, I wouldn't ever purchase an ebook that is readily available on paper.
I think that the best bet is to first decide how much money per book you want to have in your pocket once all is said and done. The amount of money you are comfortable receiving should guide your prices. Once you have a ballpark figure, you can tweak the price just a little to see if you can increase your volume.
It's, if I remember correctly, $0.15 per megabyte, rather than a flat $0.35. So this can be significant for books with lots of images.
I cannot, accept what happens so often on Amazon now -- the physical book is cheaper than the Kindle version.
Cheaper.
It is a slap in their own face too, since I refuse to pay more for a bag of electrons than for the physical book.
And it isn't a rare thing, it has happened twice on Amazon already - I imagine I can't be the only one who is pissed about it.
It seems in the first year, the price is usually $12.99-$15.99, but after a year or so, the price drops to $9.99.
I figure in 5 years we'll see several pricing tiers: $22.99- premium new book from a big name author
$17.99- premium book with a following (Eg: the next Twilight book in a series.)
$15.99- regular "hardcover" price for a new book.
$13.99- Discount hardcover price for a new book.
$9.99- The standard back catalog price for books published in the last 10 years, or which still have strong sales.
$7.99- Discount, pulp or paper back price (this is currently the common price on sci-fi paperbacks, or at least used to be, I suspect its higher now with inflation.)
$5.99- Discount book or pamphlets, like guides and introductions, or older less popular paperback type books.
$3.99- premium articles.
$0.99- Short articles
If the market is allowed to sort itself out, and ebooks become popular, this is the type of pricing we can expect, and this is the type of pricing you currently have in bookstores. A spectrum of prices to fit a spectrum of products.
This is good. It allows for experimentation with low prices, or high prices to try and make a viable business.
It would be really sad for book publishers to be locked into a pricing model that makes them increasingly irrelevant, and thus to have the book industry die the way the newspaper industry is dying.
But maybe its just that I don't mind waiting a year for books to get them for $9.99. And if I really want the book, I don't mind paying $22.99.
The convenience of having my whole library on my phone far outweighs any difference in pricing between physical and ebooks. Even if they're the same price, I'll still buy the ebook, though I think on the balance ebooks will be mostly cheaper.
That's probably part of it, yeah. Maybe we'll see that eroding with the spread of smartphones.
The problem there is that generating multiple versions of the ebook throws away some of the economic appeal. The segmentation between hardcovers and paperbacks is natural in the format: once the hardcovers sell out, and nobody's willing to pay hardcover prices any more, you need to make a cheaper edition, so you make paperbacks, which require you to spend effort on laying out the book again. With ebooks, once you generate the initial edition, there's no inherent need to invest in the book ever again. Once it stops selling at $20, you just cut the price.
To yield segmentation like this, there'd have to be a strong economic incentive, or else a cheap way of generating the multiple editions. Maybe if the high-end version had pictures, and the low-end version didn't; then you could build them both from the same source file.
I'm guessing time-limited DRM (built in to the reader which the book is produced for - the publisher keeps a private key and encrypts, gives you a public key for reading which is tied with some physical time variant aspect of the device).
Also they'll probably have locked fonts that are really hard to read so that poorer people can still give them money but will get headaches when they use the e-reader.
...
This is the kind of stuff where you need a price that does not "matter" on the wallet. Amazon and publishers are just too much greedy, the authors does not really make more money with that kind of pricing, it's still just the big guys that make(want) more money.
IANAL, but I deal with a lot of OEM and reseller agreements, and this exits the sniff test with the "Almost Certainly Illegal" bit set.
Publishers need to figure out how they can better provide value to authors and readers. Collaborating to keep prices up shows how screwed they are. They're kicking and screaming against a shift in culture and technology, where if they don't adapt they'll go extinct.
PS: Many programming books include a CD with same code etc, but again your not just buying a book at that point.
I'm not a fan of walled gardens. But if they are allowed to exist in our free market, than this ebook pricing change is not novel.
And Amazon isn't dictating terms on ebooks. You can install .mobi books you didn't get from them. You can even sideload apps onto the Kindle Fire.
Amazon (owner of Audible) gets it. If anything, the Kindle Lending Library is a pretty effective fire under the publishers' asses - even without factoring piracy in, they're competing with free.