Amazon

How Amazon Brought Publishing to Its Knees — and Why Authors Might Be Next

31 July 2014

From Mashable:

Morgan Entrekin is happy with the relationships he’s developed with Amazon. As the president of independent publisher Grove/Atlantic Books, he witnessed the industry change as Amazon’s introduction of the Kindle helped publishers like him embrace the digital revolution that has battered other industries.

It’s the future that he’s worried about.

“Right now [Amazon] is allowing me a perfectly fair margin, but what happens when they have total control or twice as much of the market share than they have now?” he said.

Entrekin’s sentiment isn’t unusual. Amazon’s skirmishes with various publishers had been obscure to most until May, when the ecommerce giant began to block preorders of upcoming Hachette books. Since then, the dispute has been a public one, especially by Amazon’s usually tight-lipped nature.

The relationship between Amazon and publishers started out as mutually beneficial. Amazon brought publishers into the digital age, and publishers were happy to provide the content in return for a new revenue stream.

As e-books grew and brick-and-mortar businesses like Borders struggled, the business dynamics between Amazon and publishers changed. Publishers like Hachette — after being boosted by Amazon’s investment and innovation — are now uncomfortably reliant on the ecommerce site and looking for ways to maintain a grip on an evolving industry but finding none.

. . . .

“We have to give a tremendous amount of credit to Amazon and Jeff Bezos and his team for the investment that they were willing to make in those years,” Entrekin said. “They did it in an orderly manner, in a way you could trust, and it’s helped us.”

There was a time when e-books were just a small part of the overall market, but now e-books are reaching parity with print. In 2013, some 457 million e-books were sold vs. 557 million hardcovers, according to the Association of American Publishers and the Book Industry Study Group. (Paperbacks were not included in that estimate.)

The sales growth magnifies publishers’ unease with the with the $9.99 price point that CEO Jeff Bezos had decided on — a number that had no basis in economics but rather in psychological pricing, according to Brad Stone’s defining book on Amazon, The Everything Store. Amazon recently defended that price in a blog post, claiming it is better for consumers, publishers and authors.

The $9.99 e-book introduction came after publishers had already seen the prices of books fall as chain stores like Barnes & Noble and Borders drove out independent sellers through lower pricing.

. . . .

By outsourcing the innovation to Amazon, publishers were subject to its preferences — including that $9.99 price point.

“[Amazon] put downward pressure on prices because Amazon was always trying to lower e-book prices. Publishers were always trying to prevent that from happening because it lowered the perceived value of books,” said Arun Sundararajan, a professor at New York University who specializes in digital economics.

. . . .

Whether publishers can figure out how to manage a $9.99 price point and Amazon’s market dominance may end up being a footnote in history if self-publishing continues to grow.

Authors, attracted by the prospect of keeping 70% of sales as long as they price their books at or below $9.99, have begun to sign up with Amazon, skipping publishers altogether.

. . . .

Advocates of self-publishing, like author Hugh Howey, argue that the royalty opportunities are too great to pass up, and that publishers will need to transition into a different role to remain relevant.

“I think today’s successful self-publishing groups will become tomorrow’s boutique publishing agents. The advantage of worldwide distribution through e-books and on demand is already outweighing the advantage of being in a bookstore for three to six months,” Howey said. “And the financial difference between royalties is so massive that more and more authors are discovering this, which allows for colleagues to discover it. I really think in 10 years, you’re going to see a lot more people self-publishing.”

Link to the rest at Mashable 

Kindle Unlimited Titles Off the DBW Ebook Best-Seller List

30 July 2014

From Digital Book World:

Kindle Unlimited’s effect on the best-seller list has indeed grown.

Kindle Unlimited titles have been removed from the Digital Book World Ebook Best-Seller list due to an inability to sort out retail purchases from Kindle Unlimited “reads” when creating the list.

After discussing several possibilities with Amazon as to how to include titles that had robust sales but also had reads on the new ebook subscription platform counted toward Amazon Kindle sales ranking, no solution was found.

. . . .

If “reads,” where the user isn’t paying to purchase a book each time, are counted toward best-seller rankings on the Kindle list and they are unable to be separated out from regular purchases, then it would be unfair to include those titles on the list.

Had those titles been included, they would have elevated several Amazon Publishing, self-published and back-list ebooks onto the best-seller list, including MockingjayThe GiverRhett by J.S. Cooper,Harry Potter and the Sorcerer’s Stone and more.

Link to the rest at Digital Book World and thanks to Richard for the tip.

 

Amazon’s Latest Volley

30 July 2014

From John Scalzi:

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.

. . . .

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.

. . . .

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.

Link to the rest at Whatever and thanks to Ben for the tip.

PG will quote himself in a comment he posted last night:

Does Barnes & Noble have a say in the prices it charges for books?

Amazon’s a retailer. Retailers set prices.

If Hachette wants to set prices, it should open its own store.

But, of course, Hachette experimented with price-fixing. Now it’s hooked. Let that be a lesson to all of you young people – just say no to price-fixing.

Amazon Calls for Hachette to Cut E-Book Prices

30 July 2014

From The Wall Street Journal:

Amazon.com Inc. on Tuesday described its dispute with the Hachette Book Group as a battle for lower consumer prices on digital titles and a bigger payday for writers.

In a posting on its website, Amazon said that it would be willing to accept 30% of digital book revenue, the same percentage it currently receives from Hachette, if the publisher agreed to lower digital prices on many of its titles to $9.99 from between $12.99 and $14.99.

. . . .

In the blog post, Amazon said that its internal data showed that when a book is priced at $9.99, it sells nearly twice as many copies as when it is priced at $14.99. It argued that, as a result, total revenue at $9.99 is more than when the book is priced higher. “At $9.99, the total pie is bigger,” stated Amazon.

A spokeswoman for Hachette didn’t respond to requests for comment.

. . . .

In its Tuesday posting, Amazon suggested authors should receive 35% of the e-book retail price. Many authors today receive 25% of net revenue on e-book sales, a point of contention for some who consider it too small.

. . . .

The Authors Guild, at least, didn’t appear to be mollified. It criticized Amazon’s suggestion for lower retail prices. “Lower e-book prices aren’t necessarily the best thing for writers,” said Roxana Robinson, president of the Authors Guild. “We get a percentage of the price as a royalty. You also have to take into consideration the price of the hardcover. Yes, it’s cheap to make a digital book but it’s expensive to present a book in hardcover.”

Link to the rest at The Wall Street Journal (Link may expire)

The Author’s Guild continues its never-ending quest to provide the most bewildered and unhelpful comments on the subject of Hachette/Amazon. PG wonders if they’re consciously trying to retire the Clueless Trophy.

Update re: Amazon/Hachette Business Interruption

29 July 2014

From The Amazon Books Team:

With this update, we’re providing specific information about Amazon’s objectives.

A key objective is lower e-book prices. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. With an e-book, there’s no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market — e-books cannot be resold as used books. E-books can be and should be less expensive.

It’s also important to understand that e-books are highly price-elastic. This means that when the price goes up, customers buy much less. We’ve quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000.

The important thing to note here is that at the lower price, total revenue increases 16%. This is good for all the parties involved:

* The customer is paying 33% less.

* The author is getting a royalty check 16% larger and being read by an audience that’s 74% larger. And that 74% increase in copies sold makes it much more likely that the title will make it onto the national bestseller lists. (Any author who’s trying to get on one of the national bestseller lists should insist to their publisher that their e-book be priced at $9.99 or lower.)

* Likewise, the higher total revenue generated at $9.99 is also good for the publisher and the retailer. At $9.99, even though the customer is paying less, the total pie is bigger and there is more to share amongst the parties.

Keep in mind that books don’t just compete against books. Books compete against mobile games, television, movies, Facebook, blogs, free news sites and more. If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive.

So, at $9.99, the total pie is bigger – how does Amazon propose to share that revenue pie? We believe 35% should go to the author, 35% to the publisher and 30% to Amazon. Is 30% reasonable? Yes. In fact, the 30% share of total revenue is what Hachette forced us to take in 2010 when they illegally colluded with their competitors to raise e-book prices. We had no problem with the 30% — we did have a big problem with the price increases.

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.

One more note on our proposal for how the total revenue should be shared. While we believe 35% should go to the author and 35% to Hachette, the way this would actually work is that we would send 70% of the total revenue to Hachette, and they would decide how much to share with the author. We believe Hachette is sharing too small a portion with the author today, but ultimately that is not our call.

We hope this information on our objectives is helpful.

Thank you,

The Amazon Books Team

Link to the rest at The Amazon Books Team and thanks to lots of different people for the tip.

A couple of messages:

  1. Amazon knows more in its little finger about pricing ebooks than Big Publishing and its corporate overlords would know if they spent all year thinking about it.
  2. Speaking of math, Amazon is on the side of authors at least twice as much as Hachette is.

As we watch the responses to this message, we’ll see who really cares about the welfare of authors.

 

Uncovering the Inner Workings of the Author Earnings Report

27 July 2014

From Good Ereader:

Ludicrous accusations have come out from various corners of the publishing industry, some of which are rabidly anti-Amazon and anti-self-publishing, claiming that the information in the notorious Author Earnings reports is flawed at best, and intentionally misleading at worst. The reports, which claim to only be interested in helping all authors make sound decisions based on a clear look at ebook sales data, are updated quarterly with different facets of bookselling.

Some of these allegations state that the “data is beyond bad,” and even well-known figures in the industry have called into question the very existence of the so-called Data Guy who assembles the numbers. Phillip Jones, editor of The Bookseller, was quoted in an article for The Guardian as saying, “The fact that we don’t know who this ‘Data Guy’ is or where he’s come from suggest that we should take the Author Earnings report with a large pinch of salt.”

Hugh Howey, bestselling author and much of the driving force behind the Author Earnings report, spoke with Good e-Reader about some of the accusations that have been hurled at the reports and their creators.

“Amazon might be surprised at how much writers love having access to information,” Howey explained in the interview. “They have to be good businesspeople. We’re curious about what works, so the more we can provide information, the better.”

One key point Howey made in reference to Amazon’s new pricing tool, KDP Pricing Support, is this: “While Amazon’s been fighting with publishers to get ebook prices down, I also think that a lot of self-published authors aren’t pricing their books high enough. What Amazon wants is to sell as many books as possible, and that means finding the most efficient price between where traditionally published authors and self-published authors price their books.”

. . . .

“In all the punditry, there’s a lot of analysis of the book industry and it’s all focused on gross dollars: how much are bookstores making, how much are publishers making? But if authors are making a very small cut of a lot of those numbers, how is it helping authors to know the percentage of those dollars that are in print? That’s why we chose [Author Earnings] for the name of our website, because we wanted to focus on, ‘How much are the artists getting paid?’”

. . . .

That data has been called into question, though, often by sources who see it as faulty but haven’t really explained why other than the argument that Author Earnings’ reports are free to the public and some companies charge for their data, causing some critics to wonder how thorough and accurate this information can be. Howey’s explanation of the information almost seems too simple, even to him, but it involves a tremendous amount of number crunching of the available data.

“If you believe that Amazon ranks books according to how well they’re selling, then there’s no flaw you could find with what we’re doing. We’re doing what you could do with a pencil and a web browser. Anybody could go through all these web pages for all the books and write down on a spreadsheet what the list price is, who published the book, and what its overall Amazon ranking is. With that information, you could figure out, okay, if a third of these books are self-published and only forty percent are traditionally published, and you do that for 120,000 books, that’s incredible. And we know that self-published authors are making seventy percent and traditionally published authors are making seventeen and a half percent, so even though the price for self-published books is lower it’s more than made up for by the royalty. The reason you haven’t seen anyone tear the methodology apart is because there’s nothing to it. It’s as simple as counting books on the bestsellers’ lists.”

. . . .

“I’ve provided the data to download. Everyone wants to know what’s going on with Amazon, and our last data report was 120,000 titles. Every ranked book on Amazon has all the information right there if you want to go through and do some additional crunching on it. You can’t crunch it and come up with any other result than self-published authors are taking this huge chunk of income from writers’ market share. You can play with the variables all you want and it does not change the outcome.”

Link to the rest at Good Ereader

Book Publishing Needs Socialism to Save It

27 July 2014

From Book Marketing Buzz Blog:

Let me just state up front that I love America and wouldn’t live anywhere else but, I also believe there’s room for a blend of socialism and capitalism to exist in a democratic society, and when it comes to how books are sold or treated, I prefer what the French and other advanced nations do.

They protect books and the printed word. I applaud them—and so should you.

Here in the U.S., thanks largely to Amazon, books have become commoditized. You can buy clothes based on price—or a desk or the hotel you vacation at. But books should not be purchased based on price alone.

. . . .

[T]he Hatchette-Amazon battle is now being waged and the repercussions of it could dictate the fate of publishing’s long-term viability. However, in other countries, books are a much healthier product.

In France, where Amazon only owns 10-12% of the book market—but 70% of online sales, Amazon is contained because of laws passed to protect and support bookstores and publishers.

The law says online sellers can’t offer free shipping on discounted books. Further, booksellers can’t offer more than a 5% discount off a book’s cover price.

I wish it were that way here.

In Germany, books can’t be discounted. In fact, six of the 10 biggest book-selling countries have versions of fixed book prices—Japan, Italy, Spain, South Korea, Germany, and France.

Link to the rest at Book Marketing Buzz Blog and thanks to Karen for the tip.

Just a reminder that PG doesn’t necessarily agree with everything he posts here. He tries to include a variety of opinions.

My Independence Day: An Open Letter to Jeff Bezos of Amazon

27 July 2014

From author Michael Stephen Fuchs:

Dear Mr. Bezos,

I have been an enthusiastic Amazon customer since early 1996, and thus consider myself to be one of your first. A couple of years later, you guys sent me a nice mousepad with one of my orders. I added up what I had spent with Amazon to that date, and it was already thousands of dollars, so I wrote back and suggested that, for that kind of customer spend and loyalty, I deserved at least an Amazon t-shirt. You sent me a t-shirt. I’ve been in love with Amazon ever since.

. . . .

And that was prior to Kindle Direct Publishing (KDP).

As it happens, I have been a fiction writer since 1994. Eventually – after literally thousands of rejections – I got picked up by Macmillan, who published my first two books in 2006 and 2007. The second sold less well than the first – so they unceremoniously dropped me. (*) That was it. Dream over.

And then along came KDP. And in December of 2012, I had the first month of my life when earnings from my writing actually paid my bills – thanks utterly and entirely to KDP. My earnings have gone up from there, and I have been writing full-time ever since. And I have now achieved my dream of being a jobbing novelist.

ALL THANKS TO YOU AND KDP.

And I have, not at all incidentally, been freed from the cartel practices, unconscionable contract terms, and not to mention soul-crushing rejection and frustration, of the Big Six publishers in London and New York, and the literary agency system. Now I write books for my readers, who buy them. Now I am free.

ALL THANKS TO YOU AND KDP.

Thank you very, very, very much indeed. And please don’t ever change it (KDP). And sod Hachette.

Link to the rest at Dispatch from the Razor’s Edge

Here’s a link to Michael’s books

Apple Secretly Acquired “Pandora For Books” Startup BookLamp To Battle Amazon

26 July 2014

From MacRumors:

Apple has acquired BookLamp, a “Pandora for books” startup that aimed to provide personalized book recommendations to readers via specialized algorithms, reports TechCrunch. BookLamp first shut down in April.

BookLamp was known for its Book Genome project, a book discovery engine that analyzed the text of books to break them down by various themes and variables to let readers search for books similar to books they liked.

For example, analyzing The Da Vinci Code, the search engine would break it down to elements of 18.6% Religion and Religions Institutions, 9.4% Police & Murder Investigation, 8.2% Art and Art Galleries, and 6.7% Secret Societies and Communities, and then it would be able to recommend a book similar to The Da Vinci Code based on that data.

. . . .

BookLamp also provided content analysis services to a number of e-book distributors like Amazon, Apple, and other publishers, screening books for categorization and providing a platform for publishers to screen manuscripts. The acquisition will see Apple ramping up its focus on books, according to one source with knowledge of the acquisition.

Part of the reason that Apple made the move to acquire BookLamp was because of this long list of clients. “At first Apple and BookLamp talked about growing their contract, but then they talked more from a strategic standpoint,” a source says. “What Apple wanted to do was, instead of contract, they wanted to make sure whatever work was done was done just for them.”

And what is that work? The details are not clear yet, but the source says, “in broad strokes, the goal that [founder Aaron] Stanton and three of the folks he was working with from the original BookLamp crew is to beat Amazon at their own game.”

Link to the rest at MacRumors and thanks to Simon for the tip.

Passive Guy has no idea whether BookLamp will go anywhere for Apple or just disappear like some Apple acquisitions do.

However, PG believes if someone wants to compete with Amazon, tech innovation is the best way to do it.

Writers unite in campaign against ‘thuggish’ Amazon

26 July 2014

From The Guardian:

Nearly 900 authors across world back criticism of online retailer’s business tactics in ebooks dispute with US publisher Hachette.

They include some of the biggest literary names on the planet, among them Stephen King, Donna Tartt, Paul Auster, James Patterson and John Grisham; a Pulitzer prize winner in Jennifer Egan; and four from this year’s Man Booker longlist, Joshua Ferris, Karen Joy Fowler, Siri Hustvedt and Joseph O’Neill. Then there are first-time writers, historians, biographers – all of them part of an unprecedented campaign against the world’s biggest books retailer, Amazon.

. . . .

As the standoff continues, Amazon has been slowing down delivery of Hachette books, preventing pre-order and removing previous discounts.

It is “thuggish behaviour”, said the Maine-based thriller writer Douglas Preston. “I’m talking to so many young authors, struggling debut authors who have worked for years and years to get published and then Amazon does this and crushes their hopes and dreams of building an audience.”

Earlier this week Preston had nearly 900 names – also including Jeffery Deaver , Lee Child, Barbara Kingsolver, Clive Cussler, Anita Shreve and Philip Pullman – backing a letter that he intends to publish, full page, in the New York Times.

“I have never seen in my entire life authors coming together like this,” he said. “Ever. For any reason.

“Amazon has been throwing its weight around for quite some time in a bullying fashion and I think authors are fed up. We feel betrayed because we helped Amazon become one of the largest corporations in the world. We supported it from the beginning, we contributed free blogs, reviews and all kinds of stuff that Amazon asked us to do for nothing.

“We thought we had a fairly good partnership but i n the last half dozen years Amazon’s corporate behaviour has not supported authors at all.”

. . . .

“We’re not against Amazon as a company – we would like to see it sell books, be profitable and successful. What we object to is harming authors who have nothing to do with this dispute to gain leverage.”

. . . .

Philip Jones, editor of the Bookseller, said: “Everybody I speak to thinks this negotiation is pivotal to what happens next. We won’t know what the terms are when they eventually settle at but I think there will be a line drawn in the sand – a line we all have to live with.”

It is not the first time this sort of dispute has happened.

“The difference here is that Amazon is so big, so dominant that it has a much wider and chilling effect,” said Jones. “Particularly on the ebook market where if you are not being sold or actively promoted on Amazon you really are dead in the water.”

He too had never known writers so angry. “That’s the thing that’s different this time – we’ve seen writers take sides which is remarkable and deeply worrying for Amazon. Becoming widely known as book author-unfriendly is not a great place for Amazon to be.”

. . . .

Amazon has also had support from self-publishing authors. Hugh Howey, something of a poster boy for self-publishing, was one of those behind a petition on Change.org supporting Amazon for creating a level playing field and characterising Hachette as the bad guys. Under the title ‘Stop fighting low prices and fair wages’ it had, on Thursday, 7,367 signatures.

Amazon, launched by Jeff Bezos 20 years ago, is a difficult company not to use. It is also an easy company to dislike – the Guardian revealed in 2012 Amazon had paid almost no UK corporation tax despite recording £7bn sales.

. . . .

“It is a company that has managed to grow at the expense of companies that play by the rules. It doesn’t have to pay its taxes or go through any of the common practices that we demand of bricks and mortar companies. It sells its books as loss leaders in order to support nappies and batteries. An entire industry is being held hostage in Amazon’s pursuit of a wider market share.”

. . . .

A spokeswoman for Amazon made reference to statements Preston has made during the dispute.

She said: “Mr Preston says: ‘We have many loyal and committed readers. They listen when we speak. That represents power.’ He is completely missing the point. It’s not readers who should be listening to Mr Preston, but Mr Preston who should be listening to readers. And they have clearly expressed a preference for e-books priced less than $10.

“Even four years ago when readers expressed such a preference, Mr Preston responded by saying publicly, ‘The sense of entitlement of the American consumer is absolutely astonishing’. It’s pretty clear it’s Mr Preston who feels entitled. And what’s ‘astonishing’ is that he thinks readers won’t recognise an opportunist who seeks readers’ support while actively working against their interests.”

Link to the rest at The Guardian and thanks to Sharon for the tip.

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