Passive Guy

Disruptive Innovation Theory Revisited

26 August 2014

From Off White Papers:

Perhaps it was on the limb-strewn battlefields during the Franco-Prussian war in the 1870s that one disruptive innovation gained great favor with a whole generation of adherents. Young doctors on the frontlines readily embraced Dr. Joseph Lister’s new and rather simple technique for combat triage using anti-septic surgery for life-saving amputations and skin piercing compound bone fractures. Previously almost any large incision resulted in death from infection caused by unsanitary conditions.

Lister’s carbolic acid concoction was easy to use and quite effective at getting the job done even in the field of battle. It prevented infection from what turned out to be airborne microbes. Unfortunately the U.S. medical establishment did not embrace Lister’s radical idea of germ theory even when presented with incontrovertible evidence. They defended the long-standing medical wisdom that bad air or miasma were the source of infection, and not invisible microbes. Germ theory was outright rejected. While there was ample documentation and statistics provided by Lister to the AMA and the establishment, it would take a public outcry after the assassination attempt and the unfortunate, and probably avoidable, death of U. S. President James Garfield to create a serious enough crisis to challenge the entrenched thinking of the old guard. A paradigm shift was at hand.

The medical establishment’s resistance to Lister’s technique is an instructive narrative in trying to better understand innovations that, on the face of things, should catch on and spread rapidly. Yet in certain domains, where entrenched worldviews, attitudes and values are deeply woven into the societal architecture, innovation can come to a grinding halt. This is particularly noticeable in those domains with multiple stakeholders whose identities and livelihoods are being challenged by the threat of innovation. In those situations where simply getting well-defined jobs done a product or service’s utility is the main driver. But in those domains where stakeholders’ identities are being challenged the identity function can often overwhelm the more straightforward utility of the innovation. In turn, the predictive power of disruptive innovation theory is diminished.

. . . .

Inherent in every product or service is both a utility function and an identity function. Understanding each of these functions and the interaction between the two might shed light on some of the anomalies observed in the original theory. It appears that in utility-centric products and services such as mini-mills, semi-conductors, disk drives, MP3 files, Wikipedia, Amazon and the like, the original theory does keep its predictive potency. Consumers and non-consumers with no vested interest in anything other than “getting the job done” will change behaviors quickly and readily with little anxiety. They are simply focused on the product or service’s utility—and the incumbent will be disrupted. All you need to think about is how quickly we “consumers” (or the new “non-consumers” as the case may be) migrated from vinyl to cartridge to cassette to CDs to MP3s on our iPods; from Encyclopedia Britannica to Wikipedia; from Borders to Amazon.

In utility-centric innovations water runs downhill; there seems to be very little consumer resistance to successful adoption and diffusion. Resistance to change, however, does often come from within from industry incumbents whose jobs are dependent on maintaining the existing business model and power dynamics. As Upton Sinclair said “never expect someone to understand change when their livelihood depends on not understanding it.”

. . . .

ITunes successfully introduced modularity to the consumer who could now buy singles rather than an entire album to the dismay of most record industry executives and to the occasional artist protestation. The interdependence created by having to buy 16 songs when you only really wanted four might have been highly profitable for the record companies but over-served the consumer at a cost substantially higher than purchasing the four singles. No wonder, as the original theory neatly predicted, disruption in the music industry was fast and ugly.

In high-identity domains, however, products and services are almost always highly interdependent and successful modular architecture is elusive. Even when the consumer is over-served and the price too expensive, and modular solutions are “good enough” resistance is still encountered.

Link to the rest at Off White Papers

“in certain domains, where entrenched worldviews, attitudes and values are deeply woven into the societal architecture, innovation can come to a grinding halt. ”

Sounds like traditional publishing.

For PG, understanding the difference in disruptive innovation for products that present a utility function vs. those that present an identity function was useful.

He would suggest that for most readers, books serve a utility function. Whoever can provide the reader with a book that pleases the reader most efficiently will get the reader’s business.

On the other hand, for publishers and agents and booksellers and many traditionally-published authors, books are definitely the basis of identity and serve an identity function. “Literary culture” is a pure identity construct.

Clearly, the value of the identity as an author whose books are the product of a well-known publisher outweighs the increased monetary value that self-publishing presents to a significant number of traditionally-published authors. Hence, some tradpubbed authors feel impelled to vociferously trash indie authors to protect the value of their identity. Indie authors are breaking the rules that underlie that identity.

The identity function is also prominent in the rapturous descriptions of the joys of purchasing physical books in an physical bookstore. For a reader who finds a basis for identity in being a “book person,” as well as for booksellers and producers of physical books, the physical-bookstores-for-physical-books meme, complete with deep conversations concerning the merits of one book over another, Amazon is anathema. Clicking “Add to Cart”  just doesn’t bring on the rapture for these people.

However, pursuing the book-person identity as a reader requires access to a bookstore and a decision to devote time to the browsing/discussion/purchasing pursuits instead of competing pursuits like making a living, family life, GOT or actually reading books.

PG suggests that the Amazon vs. the rest of the world battle will be fought and won with readers and that, for the vast majority of readers, books serve a utility function. For utility-focused readers, the combination of ebooks and Amazon’s convenience and pricing are the clear winner, disrupting and replacing the traditional world of books.

The book identity group is simply unable to impose its will on the online Amazon market at least in the United States. We do see organized attempts by book identity people to hamstring Amazon with pricing, taxation and other impediments in some non-US jurisdictions, but PG believes any success in these attempts would be a Pyrrhic victory because interfering with the tremendous reader benefits of ecommerce coupled with ebooks with lower prices would result in fewer readers buying fewer books.

No one has compared Jeff Bezos to Joseph Lister, but PG suggests Amazon’s efforts to make books cheap and easy to purchase is, in its own way, just as life-saving for literature and reading in the 21st century as carbolic acid was for the wounded combatants in the Franco-Prussian War.

And ebooks smell a lot better than carbolic acid does.

Amazon ignites culture clash over France’s beloved bookstores

24 August 2014

From The Seattle Times:

Like many of the bouquinistes, the booksellers who line the banks of the Seine in the French capital, Bernard Terrades is a bit brusque.

Terrades specializes in thrillers, and he speaks in the clipped, precise patois of the literature he sells. And he regards the rise of Amazon, currently at the center of a heated French debate over e-retailing, as more than a little sinister.

Terrades fears that online bookselling, which Amazon.com dominates in France, is robbing the country of its culture.

“It’s completely empty,” Terrades said. “There is no connection with customers. People have lost the curiosity to go out and find books.”

All of which makes Terrades’ decision to sell books through Amazon’s marketplace wrenching. When online shoppers happen upon his digital storefront on Amazon.fr, they’ll never hear him wax on about the exploits of Hubert Bonisseur de La Bath, the superspy creation of Terrades’ favorite author, Jean Bruce. Instead, they’ll see the uniform, lifeless Web page where Terrades sells his books alongside thousands of others.

“It really hurts me to do it, but I don’t have a choice,” said Terrades, whose Amazon sales account for about 20,000 euros ($26,477) a year, roughly 20 percent of his revenue. It’s what enables him to employ a part-time staffer to keep his bookstand and bookstore alive.

Like many French, Terrades is torn over Amazon. It has become a fixture in French literary life, a force that can’t be ignored. It’s so powerful that the French government recently passed legislation with no other goal than to thwart the Web giant. Dubbed the “anti-Amazon law” by the French media, it went into effect July 10 to combat what Culture Minister Aurélie Filippetti called Amazon’s “dumping” of low-cost books in France in order to protect independent bookstores. It prohibits online retailers from discounting books or offering free shipping.

. . . .

“They come to Europe and they try to use the same business model,” said Kiran Girotra, professor of technology and operations management at INSEAD, a top European business school based in Fontainebleau, just south of Paris. “[It] hasn’t worked as well.”

That is a risky place for Amazon to be, perhaps more so than for most companies. Meteoric growth has always been the fuel that powers Amazon’s financial engine. Wall Street has long been willing to give the company a pass on slim profits, or even losses, as long as revenues continued to soar.

But Amazon’s international operations grew just 14 percent last year, to $29.9 billion. Many companies would be happy with that, but it’s just half the pace of its more mature North American unit, which grew 28 percent, to $44.5 billion. The weaker international performance, which also includes sales from emerging markets such as China and India, dragged Amazon’s overall growth down to 22 percent, a sharp drop from the 27 percent posted in 2012.

. . . .

The battle in Europe is as much cultural as it is financial. In France, the government moved to protect independent bookstores, as it has for years, because books hold a revered spot in a country that’s produced literary giants such as Voltaire and Proust.

In Germany, Amazon warehouse workers are fighting for a union contract because unions are deeply revered as part of the country’s fabric. And in the United Kingdom, lawmakers from across the political spectrum have chastised Amazon’s tax strategy for not paying its fair share.

To some extent, Amazon is battling cultural currents.

“These are uncontroversial issues,” said Girota, co-author of “The Risk-Driven Business Model,” which praises Amazon’s skillful shifting of strategy to adapt to evolving market challenges in the United States. “These are part of the broad social contract.”

Amazon, never averse to conflict, continues to battle its opponents in Europe. Executives say the clashes haven’t curbed sales; instead, they blame the slower growth on Europe’s moribund economic recovery. And they insist customers there want the same things its U.S. customers crave: low price, wide selection and shopping convenience.

“I don’t see people in Europe waking up in the morning saying I’m not going to shop at Amazon because I don’t like them,” Xavier Garambois, vice president of Amazon’s European retail operations, said in an interview at the company’s European headquarters in Luxembourg.

Link to the rest at The Seattle Times and thanks to CG for the tip.

The real problem, in PG’s eyes, is that the traditional guardians of literature both in the US and in Europe were presiding over a long decline in that business as the Internet and its myriad attractions were rapidly gaining an audience, particularly, but not exclusively, among the young.

Books were a stagnant business, headed toward a backwater. Bookstores were closing before Barnes & Noble and Borders exerted commercial pressure on them to close. Then Borders cratered.

PG says that Amazon saved books both as a commercial proposition and as a moving force in culture from the inept and blinkered grasp of a publishing business that, while once diverse and energetic, had become more and more concentrated into large media conglomerates which are surely among the most anti-creative organizations ever conceived by humankind.

Ebooks and a superb ebook store have reinvigorated both the purchasing of books and the culture of books. Millions of people who had given up visits to physical bookstores have regained their enthusiasm for reading via tablets and ereaders and an enormous range of choices in reading material that the corporate publishers deemed too non-commercial, not something you could put on the front tables at Barnes & Noble.

Amazon gave an Internet with an endless range of choices an internet bookstore with an endless range of choices. Books are much better off in this environment than they were in a world of narrow curation and bottom-line publishing.

Simply put, the literary, bookselling and publishing establishments were killing books with an exclusionary and elitist attitude coupled with an accountant’s obsession with quarterly profits. Amazon has opened the gates to an enormous democratic wave of authors and their books. Readers everywhere are responding to this wave with their dollars, euros and pounds.

And now, what the establishment can’t accomplish in free marketplace, it is trying to achieve with corrupt backroom political deals.

Amazon’s awful war of words: How an iron-fisted PR strategy went off the rails

21 August 2014

From Salon:

Since 1948, Highlights for Children (“Fun With a Purpose”) — a magazine most of us have only ever encountered in pediatricians’ waiting rooms — has featured a cartoon called “Goofus and Gallant.” Intended to teach kids the basics of courteous behavior, it stars two boys who illustrate the right and wrong way to behave in various situations. “Goofus and Gallant” has gone on to inspire some dark adult imaginings, but never before has it seemed so perfectly applicable to the book business.

That’s because lately Amazon has become the Goofus of publishing news, the surly, inconsiderate and gauche kid who never seems to get anything right. This is not to say that Amazon is any less powerful in the marketplace or less likely to triumph in its ongoing war against book publishers. But on the P.R. front, in its most recent battle against the Hachette Book Group, the online retailer has stumbled again and again.

. . . .

Amazon has long been a tight-lipped operation, refusing to release hard information to the press (which to this day has never received figures on just how many Kindle e-readers the company has sold) and communicating through the rather arcane medium of the forums on its own site. This strategy, however, was patently inadequate to the sudden onslaught of high-profile bad press. It kept coming, too, zeroing in not just on the company’s dealings with book publishers, but also on its impact on the economy and its own workforce.

. . . .

All of these criticisms forced Amazon to respond in a fashion to which it was not accustomed: via public statements issued to the press and direct communication (i.e., email) to customers. Its lack of experience in such communications showed. When Publishers Weekly approached the retailer for comment on a conversation between Grandinetti and Preston in which Grandinetti reportedly asked Preston to quiet his protest, an Amazon spokesperson accused Hachette of using its authors as “human shields,” a highly untimely bit of hyperbole. Another spokesperson told the Guardian that Preston was “entitled” and an “opportunist.” Of course, Preston had himself described Amazon’s behavior as “thuggish,” but public relations is not a rational art; insults that sound merely intemperate from the mouth of a novelist in a shed (a New York Times article on the petition came with a photo of Preston standing in his “writing shack”) register as ominous and bullying as part of the official response of a gigantic corporation.

. . . .

Yet Amazon does have its partisans — specifically, the authors who use its self-publishing programs and whose books are published by its imprints. Nearly 8,000 of these signed a verbose petition at Change.org calling for Hachette to capitulate. (If there were ever a document to suggest that self-published writers are insufficiently edited, it’s this one, even though it begins with a promise to be concise.)

This is Amazon’s core constituency, one whose loyalty is fueled by gratitude for the technological innovation that has permitted them to publish their e-books and also by loathing for the publishing “oligopoly” that has denied them publication the old-fashioned way. The Readers United letter, with its misquoted Orwell, its bitter asides (“Well … history doesn’t repeat itself, but it does rhyme”) and its vaguely conspiratorial/messianic tone (“the powerful interests of the status quo are hard to move”) may sound like “full-out crazy town” to Eldritch, but it is the native tongue of the indie author community.

Amazon much resembles a political party that hasn’t figured out how to recalibrate its rhetoric to appeal to voters outside its base. Its pronouncements come in Amazonspeak, a language bred in a corporate echo chamber and the cheerleading threads of its self-publisher forums. Hence, its incessant harping on the fact that Hachette is owned by the “$10 billion global conglomerate” the Lagardère Group — itself dwarfed by Amazon’s own $90-billion valuation.

Link to the rest at Salon and thanks to Patricia for the tip.

People who are associated with Big Publishing have the idea that the public is fascinated with stories about Big Publishing.

In this case, the author of the Salon piece appears to have published a book with Hachette, a fact she fails to note in her piece. So if she’s fascinated by Amazon/Hachette, everybody else must be similarly fascinated.

The New York Times is also fascinated, but, despite its reputation, the NYT doesn’t reach a very large number of people - 1,865,315 daily; (including 1,133,923 digital) according to the best info PG found on the web. For comparison, the population of the United States is over 318 million.

So, even if every subscriber to the NYT cared about Amazon/Hachette (a vanishingly unlikely prospect), NYT articles about Amazon/Hachette would reach about one-half of one percent of the population of the US.

For comparison with NYT circulation, 11.8 million people watch Duck Dynasty. Almost ten times as many people pay attention to the Robertson family as pay attention to the NYT. If Phil Robertson ever weighs in on Hachette’s side, maybe Amazon would be worried. (For overseas visitors, you probably won’t understand Duck Dynasty. It’s an American thing.)

Let’s take this one item at a time:

1. Nobody cares about Hachette.

2. Amazon is the single most admired brand among US consumers.

3. Amazon is still growing at a rapid pace, so US consumers, including US readers, are voting for Amazon with their dollars.

4. Barnes & Noble’s sales are shrinking and it is closing stores on a regular basis. Indie bookstores (bless their hearts) can’t and won’t make up for the sales decline at Barnes & Noble. The value for an author in signing with a traditional publisher, including Hachette, in order to get his/her books into bookstores is on a steep and steady decline.

5. The traditional model of publishing is in a downward spiral. How fast it’s going down is up for debate, but the overall share of books sold by tradpub is shrinking.

6. More importantly, tradpub is leaking authors to self-publishing. The share of royalties paid to authors by tradpub is declining and the share of royalties paid to self-pubbed authors by Amazon and others is increasing.

 

 

Amazon Responds to German Authors’ Protest

19 August 2014

From Publishers Weekly:

Over the weekend, the New York Times reported on a letter of protest, from authors in Germany, about a terms dispute between Amazon and the local publisher, Bonnier. The dispute, the Times noted, mirrors the issue Amazon is having with Hachette in the States and, just as U.S. authors have spoken out about the situation here, German authors have now responded with their own open letter to the tech giant.

. . . .

[A]n Amazon spokesperson said the company issued a response late Friday. Amazon’s response reads:

“For the majority of their titles, Bonnier have chosen to set terms that make it significantly more expensive for us to buy a digital edition than it is to buy the print edition of the same title. This is a poor choice because 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, and no transportation. E-books can and should be less expensive than print books, and this should be reflected in the terms under which booksellers buy their books from publishers. The fact is Bonnier’s terms are out of step with other major German publishers. We are working diligently with Bonnier to reach a new agreement more in line with typical industry terms in Germany.”

Link to the rest at Publishers Weekly

PG wonders if the 1% authors have stopped caring about their readers. Or perhaps, they’ve reached the point where they take readers for granted.

Low-priced ebooks allow more books to reach far more readers than any conceivable print-based system. For all their virtues, physical libraries don’t have nearly the reach that the Internet and smart phones have.

Publishers and 1% authors are delusional if they don’t believe that books compete with other entertainment options like movies and television and videogames.

Books priced high to support the profit margins of huge media conglomerates and their 1% managers will invariably lead to less reading and fewer readers. Mercedes prices for ebooks will certainly destroy literary culture.

Indie authors seem to be the only authors who are really thinking about their readers and their ebook pricing reflects that.

Amazon focuses on readers and other individual consumers because it’s not Tiffany. It rises or falls on purchase decisions made by the 99%.

Amazon would go broke if it made its business decisions to please 1% purchasers. Or 1% publishers. Or 1% authors.

Inkshares Looks to Marry the Old with the New

19 August 2014

From Publishers Weekly:

In early 2013, Thad Woodman, a manager at an economics consulting firm, reached out to Larry Levitsky, previously the publisher and general manager of the computer book publishing division of McGraw-Hill, about developing a startup that would combine the services of a legacy publisher—editing, marketing, design, and distribution—with the ever-growing model of crowdfunding. That company, Inkshares, was incorporated in April 2013, with Levitsky as CEO and Woodman as chief product officer.

“It occurred to Thad that there had to be a better model [than traditional publishing],” said Adam Gomolin, who joined Inkshares shortly after Levitsky, as chief legal officer, “one that is more remunerative for authors, more sensibly disperses risk, and does not diminish quality in an age of already abundant digital content.”

. . . .

Inkshares functions on an “all or nothing” model—a project doesn’t move into publication until it has raised the critical mass of funding, determined by Inkshares, required to cover the costs of editorial, design, and an initial 1,000-copy print run. If a book isn’t funded successfully, contributors are fully reimbursed.

. . . .

Gomolin described the Inkshares concept as an amalgamation of two popular platforms for independent authors. “If we can’t help you crowdfund, we’re CreateSpace,” said Gomolin. “If we can’t edit, market, or design, we’re Kickstarter.”

. . . .

Inkshares sets the price of the book, and, once it’s published, writers receive 70% of net receipts, for both physical and digital titles. Inkshares will release titles in print and digital, and writers can opt to publish in digital only, which has a lower funding floor. The company is currently negotiating with Ingram Publisher Services on a distribution agreement.

. . . .

All of the money raised by authors on the platform goes to editorial, design, production, and marketing. “We don’t make money unless a book sells,” said Gomolin. “Just like a traditional publishing house.”

Inkshares sets the price of the book, and, once it’s published, writers receive 70% of net receipts, for both physical and digital titles. Inkshares will release titles in print and digital, and writers can opt to publish in digital only, which has a lower funding floor.

. . . .

Though Gomolin said that Inkshares will inevitably hire more editorial staffers, at present, the startup utilizes a team of freelance editors, many with experience at traditional publishing companies.

. . . .

Goldenberg worked on children’s lists at Houghton Mifflin Harcourt and Clarion Books, and designed and directed art for five Caldecott Medal–winning titles. “I am a dyed-in-the-wool printed book devotee and once vowed never to get involved with anything that lived online,” said Goldenberg.“But working with Inkshares has been exciting.”

Keller also worked at Houghton Mifflin Harcourt for nearly 10 years, as both a children’s editor and managing editor. Speaking to Inkshare’s different acquisitions model, Keller said that she “liked the challenge of making a book the best that it can be, knowing that it already has readers behind it.”

With a traditionally published author penning its first title, editorial and support teams made up of industry veterans, and the potential for a major distributor to handle its list, the aim of Inkshares, according to Gomolin, isn’t to abandon all that has been built by the existing model, but rather to integrate new ideas into what works in legacy publishing. “We’re not going to boil the ocean,” predicted Gomolin. “And we’re not out to overthrow publishing. Everyone [at Inkshares] has a very romantic conception of reading that was incubated by the great writers and the great editors of legacy publishing. But there is a clear need that has been validated by crowdfunding.”

Link to the rest at Publishers Weekly

So, Inkshares utilizes Kickstarter, freelance editors and designers and Ingram – resources that are already available to indie authors and have been successfully used by many – to publish a book and keeps 30% of the revenues the book generates (or perhaps more, read this contract carefully).

PG also expects that Inkshares will keep all the money from the Kickstarter campaign, ostensibly to pay for “production costs”. What could go wrong with that?

PG didn’t excerpt a paragraph in the article mentioning that one of the financial backers of Inkshares is a rap star.

PG has heard that the model is based on the author doing all the work to promote the Kickstarter campaign and raise the money. And of course the author also has to write the book.

PG suggests this project is one of the answers to the question, “What happened to all the people who have been downsized by tradpub?”

The Inkshares website explains it all:

Our model is simple:
Authors pitch,
the crowd funds,
we publish.

PG suggests a better model:

Authors pitch,
the crowd funds,
the author publishes
and keeps all the money.

However, the author will have to do this without a rap star.

We. Don’t. Care. How. Traditional. Publishing. Works.

16 August 2014

One of the standard put-downs of indie authors and their way of doing business repeated by “experts” on publishing is that indie authors should be ignored because they don’t “understand” how traditional publishing works.

We. Don’t. Care. How. Traditional. Publishing. Works.

Knowledge of traditional publishing is becoming more irrelevant to authors with every passing day. Authors don’t need to know anything about traditional publishing to earn six or seven figures per year from their writing.

These days, the more authors understand about how traditional publishing really works, the less they want to be involved with it.

P.S. – Indie authors don’t understand how steam locomotives work either.

Why Do Some Self-Published Authors Care How Hachette Prices Its Books?

12 August 2014

From Digital Book World:

One of the most confusing things to me about the Amazon-Hachette contract dispute saga is why do so many indie authors want so passionately for Hachette, a competitor, to lower its prices?

Isn’t it against their self-interest?

Don’t indie authors, who generally price their books lower than traditionally published books.

. . . .

 The idea behind the argument is that if I see a book by a big-publisher author I don’t know in a genre I like for $12.99 and see another book, perhaps self-published, by another author I don’t know in a genre I like for $4.99, I may decide to buy the $4.99 book instead because of the price difference.

. . . .

 I’ve reached out to some of these folks to see if they can tell me why they want one of their competitors to lower its prices. Apologies to them and to you, readers, if I’ve missed where they’ve already written it up. (So far, I haven’t heard back. If I do, I will let you know and update this post.*)

Link to the rest at Digital Book World

As PG and many others have pointed out approximately forever, if BigPub priced its ebooks at $49.99, indie authors selling ebooks at $2.99 would sell more ebooks. DBW has not made a profound discovery here.

However, to PG the DBW thesis feels like a back-handed suggestion that indie authors ought to shut up and let “real authors” and Hachette set the topic of the debate as “Amazon: Threat or Menace?”

Indie authors jump into the discussion because they recognize that Amazon is the innovator, the true friend of both readers and authors while Hachette and its co-conspirators are champions of the retrograde.

Indie authors jump into the discussion because they understand that Preston, Patterson and the rest of the 1% authors are not at all representative of the typical bigpub author and that bigpub establishes an iron code of silence among authors who don’t agree with the party line on pricing or anything else.

Indie authors jump in because they understand that the memes Hachette is trying to sell, “Authors love us and they hate Amazon” “Big Publishing is a friend to authors and Amazon is an enemy” are totally incorrect, cynical lies backed by the enablers of traditional publishing.

Indie authors understand that Amazon has made it possible for more authors to earn a living from writing today than at any other time in history. Indie authors know that increasing numbers of traditionally-published authors are finding a way out of their traditional publishing contracts so they can have the freedom to write and publish their books in their way and that Amazon is making this possible. Trashing Amazon is one way tradpub tries to keep its captive authors from fleeing the plantation.

Indie authors understand that Hachette and other publishers were relentlessly raising the cost of books, pricing them farther and farther out of the reach of middle-class readers, before Amazon came along and demonstrated that you can sell more books and make more money by offering books for a fair price.

Traditional Publishing, the self-styled guardian of literary culture, was in the process of driving the book business into the the ditch before Amazon came along. If literary culture is going to be saved, PG suggests Amazon is a more likely savior than the media conglomerates that control Old Publishing.

Indie authors have jumped into the discussion to call baloney on the corporatist claptrap of a selfish cartel that treats a tiny number of authors well and oppresses the rest.

In short, indie authors have discovered a better way to be a successful author and they want to spread the word. They support Amazon because they choose the smart side instead of the dumb side of the Hachette/Amazon dispute. They choose the future over the past. Indie authors are the future. Hachette is the past.

Amazon and the Myth of Perfect Pricing

11 August 2014

From publisher Andrew Wheeler via The Antik Musings of G.B.H. Hornswoggler, Gent.:

For the “world’s most consumer-centric company,” Amazon has real trouble actually talking to people. Their corporate communiques tend to be written in clotted, hermetic language; are few and far between; and appear only when posted on obscure corners of their own site. Amazon’s managers and leaders are never quoted in the media, except for an occasional Bezos sighting. And both customers and suppliers struggle to connect with a human being at Amazon at all times.

And yet Amazon has a universal reputation for making customers happy, driven primarily by low prices and lenient return policies — in this, as in so many other things, they’ve been using their investors’ money to buy customers for almost two decades now. It has definitely been a successful strategy: they outcompeted, outlasted, and outgrew their Web 1.0 rivals to become the dominant online retailer and one of the world’s top retailers, period.

. . . .

This is what’s behind Amazon’s current simmering conflict with Hachette: Amazon wants to be able to continue as it’s gone (discounting to equal or better the competition’s prices; expensive loyalty programs to lock in customers; aggressive expansion into new devices, new business models, and new territories; benign neglect from The Street and an ever-soaring stock price) and also generate more cash. The easiest way to generate more cash, as Walmart discovered before them, is to squeeze your suppliers: once you’re that big, they’re more dependent on you than you are on them, so you’re likely to win that squeeze.

Amazon, though, wants to be loved. It’s not enough that they force their suppliers to pay to have buy buttons that work, or pay to have their products actually show up in searches, or pay for an Amazon employee that the supplier can actually talk to and get results from. (Though Amazon has been forcing their suppliers to do all of these things for a long time. And Barnes & Noble forces their suppliers to do similar things, as do Walmart and your local grocery-store chain.) Amazon is an Internet-era company, so they need the world to admit that they are right and that their way of doing business is better and more special than anything the world ever saw before the Glory of Bezos was unfurled.

. . . .

So Amazon’s boosters remain who they have always been: the few self-publishers who won that particular lottery and have made a lot of money because of Amazon’s terms and market. (Every publishing ecosystem is a lottery, and only a very few writers are ever big winners in any of them — the trickier question is which ecosystems are better for the vast majority of authors who will never hit big.)

But they keep trying. Even after a couple of failed “offers” to Hachette, for both sides to give away their profits to compensate authors, they keep trying. (Those offers were very carefully chosen — Amazon is full of smart, sneaky people, and their tactics are routinely brilliant when they don’t have to account for the preferences of small groups of individual, grumpy authors — to do the maximum damage to Hachette, cause the minimum damage to Amazon, and seem the most generous possible offer to authors. Unfortunately for Amazon, the authors realized this.)

Now, they’re going back to one of their favorite tactics: the naked unsupported statistic, carefully deployed. Their latest salvo against Hachette — again, remember that their real audience is Hachette authors; they’re trying to demoralize the rank and file of the opposing army and force a capitulation — relies on declared Amazon experience on the sales of ebooks to “prove” that $9.99 is the best price for an ebook.

. . . .

But note what Amazon is ignoring: primarily, the existence of other formats of that same content, with varying prices and varying responses to ebook discounting. (And secondly, the existence of a market outside of their own site — though any damage to sales elsewhere due to their pricing changes would clearly be a feature rather than a bug.) That $14.99 ebook is likely also a $19.95 trade paperback or $24.95 hardcover. Presumably, Amazon can track the effect of sales on Amazon of print editions correlated to changes in ebook pricing, but they say nothing about such sales.

Link to the rest at From The Antik Musings of G.B.H. Hornswoggler, Gent. and thanks to Scott for the tip.

PG notes the standard tradpub tropes:

1. Amazon doesn’t “support” its statistics.

Well, you’re the publisher. Are you seeing something different in your analyses the relationship of pricing to sales than Amazon is seeing? If you are, explain where your data differs.

No analyses? No clue? English majoritis?

2. Ebook to Paperback to Hardcover.

Even publishers admit they’re making more money from ebooks than they are from the paper variety. But they keep talking about their problems balancing the pricing of ebooks with two kinds of paper books. PG suspects that a cold-eyed analysis of the true costs of creating those paper copies by someone not steeped in publishing would result in a conclusion that it’s time to start phasing out paper. But that would be a math major thing, not an English major thing.

More importantly, as far as the rest of the world is concerned, the worry about pricing correlations and conflicts is publishing narcissism. Maybe publishers are trying to impress us with the complexity of their business and how smart they are to be able to handle it.

The reality is: Nobody. Cares. About. Your. Pricing. Problems. Including Amazon.

3. Indie authors aren’t really making money.

Author success is all about winning the lottery. Tradpub or Indie, it’s all the same. A long-shot.

There are very, very, very few indie authors who are making more than gruel money from their writing. Every indie success story you read about is just a one-in-a-billion chance.

Hybrid Authors

8 August 2014

Traditional publishing and its various supporters and cheerleaders love hybrid authors.

For one thing, the definition of a hybrid author is flexible. Is someone a hybrid author if they’ve done nothing but self-publish for ten years but still have old tradpubbed books available for sale? Is someone a hybrid author only if he/she is actively publishing traditionally at the same time he/she is self-publishing?

The definition has significance because much of the data on the size of the self-publishing market excludes those who are deemed hybrid authors. These data limit self-published authors to those who have not now nor ever had a traditionally-published book.

In a great many cases, the exclusion of hybrid authors from the self-published category paints a far rosier picture of the health of tradpub than is warranted.

PG knows quite a few authors who still have traditionally-published books for sale (including some who are still under contract to deliver one or two more manuscripts) who intend to do nothing other than self-publish in the future. A subset of this group is actively trying to get out of existing contracts and regain rights to its tradpubbed books.

So here’s a question PG will be asking himself whenever he sees data on hybrid authors: What percentage of these authors has any serious intention of continuing to work with traditional publishers?

For those who are gathering data and looking for a provocative headline to help promote their research, PG suggests asking hybrid authors a series of questions about their current and future publishing plans.

Plot Thickens as 900 Writers Battle Amazon

8 August 2014

From The New York Times:

ROUND POND, Me. — Out here in the woods, at the end of not one but two dirt roads, in a shack equipped with a picture of the Dalai Lama, a high-speed data line and a copy of Thoreau’s “Civil Disobedience,”Amazon’s dream of dominating the publishing world has run into some trouble.

Douglas Preston, who summers in this coastal hamlet, is a best-selling writer — or was, until Amazon decided to discourage readers from buying books from his publisher, Hachette, as a way of pressuring it into giving Amazon a better deal on e-books. So he wrote an open letter to his readers asking them to contact Jeff Bezos, Amazon’s chief executive, demanding that Amazon stop using writers as hostages in its negotiations.

The letter, composed in the shack, spread through the literary community. As of earlier this week 909 writers had signed on, including household names like John Grisham and Stephen King. It is scheduled to run as a full-page ad in The New York Times this Sunday.

. . . .

“Jeff Bezos used books as the cutting edge to help sell everything from computer cables to lawn mowers, and what a good idea that was,” he said. “Now Amazon has turned its back on us. Don’t they value us more than that? Don’t they feel any loyalty? That’s why authors are mad.”

This latest uproar in Amazon’s three-month public battle with Hachette comes at a vulnerable moment for the Internet giant, which is rapidly transforming itself into an empire that not only sells culture but creates it, too.

Amazon does not want to be seen as hostile to content creators, one of the four groups it says on its investor relations web page it is expressly set up to serve. But it also has to price their creations cheaply enough to draw hordes of consumers, while at the same time making enough of a profit to satisfy investors.

. . . .

Mr. Preston pointed out it was Amazon that put the authors in the line of fire in the first place. Russell Grandinetti, Amazon’s vice president for e-books, has called Mr. Preston twice in recent weeks, trying to get him to endorse the company’s proposals to settle the dispute, as well as to pipe down. The most recent proposal would have Amazon selling Hachette books again, but with Hachette and Amazon giving their proceeds to charity.

No thanks, Mr. Preston said. A proposal that weakens Hachette by cutting its profits was not in the interests of Hachette’s authors. But he took the opportunity to ask Mr. Grandinetti why Amazon was squeezing the writers in the first place.

His response, according to Mr. Preston: “This was the only leverage we had.” Amazon declined to comment.

“It’s like talking to a 5-year-old,” Mr. Preston said. “ ‘She made me hit her!’ No one is making Amazon do anything.”

. . . .

Amazon supporters point to a rival petition on Change.org. It is a rambling love song to the retailer. Signers sometimes append invective decrying the New York publishers for having the audacity to reject novels. “There is something wrong with a system that picks those who use their elitist ideas of art to choose who is published,” reads a comment.

The petition has 7,650 signatures. By comparison, a 2012 Change.org petition calling on Amazon to ban the sale of whale and dolphin meat drew over 200,000 signatures.

Mr. Preston is not one of those writers who checks his Amazon ranking on a regular basis, or even totes up his sales. He would rather be writing. But he recently thought he should get some numbers from Hachette. They came in the other morning, and they seemed worth sharing with his wife, Christine.

About half his book sales used to come from Amazon. But since the retailer started discouraging orders, his paperback sales are down 61 percent and his e-book sales are down 62 percent. His last novel, written with Mr. Child and published by Hachette in November, was “White Fire.” A week before publication, 25,000 Amazon customers had ordered a copy.

Link to the rest at The New York Times and thanks to Tom for the tip.

PG’s first impression is that this is a classic NYT piece full of status signaling. Refined people support authors like Preston and quaint little indie bookshops and understand that Amazon is irredeemably unfashionable.

Preston’s “little shack” in the Maine woods is complete with “a picture of the Dalai Lama, a high-speed data line and a copy of Thoreau’s ‘Civil Disobedience,’” where he “summers” signals that Preston is the right sort of person, one refined enough to focus on the finer things in life, as compared to the grubby capitalists in Seattle who are only interested in serving “hordes” of consumers who obviously are not the right sort of people at all.

“Consumers,” the Times carefully informs its readers, are beneath contempt, interested only in “cheap” books, certainly not the class of books the Times would ever review. Democracy is fine, but the rabble need to know their place.

The Change.org petition supporting Amazon “is a rambling love song to the retailer. Signers sometimes append invective decrying the New York publishers for having the audacity to reject novels.” Obviously the whole Change.org group are lower class, not the sort of people for whom the Times is meant. It goes without saying that New York publishers are exactly the right sort of people, holding back the teeming hordes from book stores and sensitive readers.

PG flat believes that either Preston or the Times author took the Grandinetti quote out of context.

It is far more likely that Grandinetti’s response, “This was the only leverage we had,” was describing the fight between Amazon and a financially failing Hachette, not a response to any question about “squeezing the writers.”

The Times got the quote from Preston, because Amazon could see a Times hatchet (Hachette?) job in progress and decided not to cooperate. This raises the possibility that an advanced case of ADS has boggled Preston’s mind completely and he entirely misremembers whatever Grandinetti had to say. Or perhaps, Preston passed on what Grandinetti should have said instead of what Grandinetti did say, all in the service of supporting the Times narrative.

Because, of course, Amazon treats writers very, very well, much better than Hachette does. Hachette is clearly the abuser of authors here, despite what its pet authors have to say.

When a self-published author sells an ebook on Amazon, Amazon will pay the writer 70% of the sales price, assuming the ebook is priced properly to maximize sales and profits.

When Hachette sells an ebook on Amazon, Hachette will pay the writer 17.5% of the sales price at most, which is then reduced to 15.8% after the agent’s commission.

Amazon pays authors on a monthly basis. Hachette pays authors every six months.

Amazon shows authors exactly how many books they’re selling, the sales price and how much they’re earning from each sale in nearly real time, including graphs that clearly help the author understand sales trends.

Hachette royalty statements are at least 90 days out of date when they arrive and largely impenetrable. Hachette doesn’t prepare its royalty statements with a quill pen, but they are a paean to the best of 1960′s mainframe computer technology.

PG could go on.

Former Hachette authors could go on for much longer.

Current Hachette authors who have complaints are advised to shut up if they want to keep receiving their insultingly small royalty payments.

 

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