Pricing

The Rise of the Paperback Novel

24 January 2015

From Kirkus:

I’m going to . . . take a look at the bigger picture that helped to shape the science fiction genre by looking at one of the biggest innovations to change publishing: the introduction of the mass market paperback novel.

Up to around the late 1940s, just about all of science fiction could be found on the magazine racks. Magazines, such as Argosy, Weird Tales, Amazing Stories, Astounding Science Fiction, and countless others graced newsstands with their brightly colored, provocative covers. There were some exceptions: Edgar Rice Burroughs had financed the print runs of collected editions of his novels, but this was a rare exception. Science fiction novels really didn’t exist.

Neither did the bookstore, at least in terms of how they are structured today. Prior to the 1950s, books were sold through independent bookstores, which sold books in limited numbers, according to John B. Thompson in his book Merchants of Culture: The Publishing Business in the Twenty-First Century, “the bookstores tended to cater to an educated and cultivated clientele—the so-called ‘carriage trade.’ ” These stores were frequently located only in major cities, and largely focused on books as upscale commodities for a consumer base which could afford such luxuries. Science Fiction pulps weren’t sold through bookstores, nor were other genres like Westerns, Mysteries and Romances. The magazines carried with them a certain stigma, to the point where people were afraid to be seen with them.

. . . .

In 1935, a new innovation in publishing began to change everything: the Penguin paperback book. English publisher Allen Lane found himself waiting on a train platform, where he found little to read beyond magazines and poor-quality reprinted novels. He believed that there would be a market for a line of high quality paperback novels and nonfiction, sold in places where books weren’t typically sold. Once he returned home, he and his partners began to plan out a new imprint to publish paperbacks. They hit the streets, looking to sell their product to the unconventional locations, eventually landing a contract with Woolworth’s, a major department store.

. . . .

What set Lane’s Penguin books apart was different from the style of cover: It was the price and distribution that ultimately allowed his books to sell in vast numbers. The line grew immensely, allowing Penguin Books to become even more successful, and the low cost of the paperbacks required Lane to print in huge volumes—hundreds of thousands of copies. As World War II began to restrict paper supplies in England, Penguin was granted larger paper rations and managed to survive as its competitors floundered, unable to meet demand or compete.

. . . .

The paperback novel concept didn’t remain within the U.K.: In 1939, it came to the United States when publisher Robert De Graff founded Pocket Books in partnership with hardcover publisher Simon & Schuster. He took out a full page ad in the New York Times on June 19, 1939, proclaiming that his new line of books would “Transform New York’s reading habits.” Like Lane, de Graff bypassed traditional bookstores and went to magazine distributors who already had the network and infrastructure in place to put books in drug stores, newsstands, grocery stores and numerous other locations. De Graff’s paperbacks were cheap. Compared to hardcovers, which sold at $2.75 ($46.72 in 2014 dollars), a Pocket Book would sold for merely a quarter ($4.25 in today’s dollars, well under the current price for a mass market paperback).

. . . .

De Graff’s secret to success came not in the content which was available, but for his ruthless cost-cutting. He sought out reprint rights from hardcover novels, which publishers gave him for next to nothing, believing that this venture would have little impact on their own hardcover lines, all the while he planned massive print runs to bring the cost of each copy down to an unimaginably low price.

. . . .

The major publisher’s perception that their products were only valued by the wealthy was a self-fulfilling idea: The masses didn’t buy hardcover books, while the wealthy did. However, hardcovers were expensive and out of reach for most Americans, especially at the end of the Great Depression, and thus only available to those with money. Pulp magazines, a refuge for science-fiction stories, which were bought in larger quantities by the poor and middle classes in America, were largely thought to be of lesser quality, in terms of the physical book, but also that of the content. Now, with an outlet for cheap books, the American public came out in droves to purchase them.

Link to the rest at Kirkus

Don’t Blame Readers If Books Are Being “Devalued”

24 January 2015

From BookRiot:

If you hang out on the bookternet at all, you have no doubt seen one or more pearl-clutching declarations that books are losing their value–especially ebooks, which you can get for as little as NINETY-NINE CENTS (omg)–which is putting literature in great peril. After all, if writers can’t make a living off of writing, how, HOW will we carry forth with our grand literary traditions? Usually, these declarations are followed by impassioned pleas to support your favorite writers by paying “fair value” for their hard work and sacrifice.

. . . .

I want writers to make money. I really do. I love reading. There are a few hiccups to the “customers need to realize that books are worth more” angle, though. Such as, that’s not how economics works, at all.

Reading is a buyer’s market, y’all.

According to Merriam-Webster.com, a buyer’s market is “a market in which goods are plentiful, buyers have a wide range of choice, and prices tend to be low”. Basically, what happens in a buyer’s market is that the supply exceeds demand, buyers have a bounty of options and sellers have to compete for the buyer’s attention. Sound at all familiar?

In a buyer’s market, the seller has little advantage that would allow them to dictate prices. If one seller decided to raise prices, customers would just go to their competition. In the book world, a reader can’t throw a stone without seeing a publisher or author vying for attention; books are literally being given away for free to try to gain an audience.

. . . .

If books are becoming “devalued,” it’s not because readers have magically lost respect for the written word; it’s because we can choose from thousands upon thousands of books and obtain them while we lounge on the couch in our pjs. Rarity breeds value, and books ain’t that rare. If only ten titles came out a year, people would pay a whole lot more to get one.

There are exceptions. For big-name authors like King, Rowling, or Gaiman, the demand for their books transcends price differential–to an extent.

. . . .

As a reader and a customer, I’m tired of being scolded for what the market is naturally doing.

Link to the rest at BookRiot

E-book prices stable following VAT hike

5 January 2015

From The Bookseller:

E-book prices have remained stable five days after a new law came into effect charging an extra 20% VAT on e-books from 1st January.

A survey of e-books by The Bookseller shows e-booksellers and publishers appear to have cushioned the impact of the VAT price rise on e-books at least for now, five days into the new rule.

As of 1st January, a European Union law, dating back to 2008 came into effect, charging customers VAT on digital “services” according to the country in which the consumer is located, as opposed to the country they are sold from. The new rule means companies such as Amazon, Apple, Nook and Kobo, whose European headquarters are based in Luxembourg, now have to apply a 20% VAT levy on e-books sold to customers in the UK, when they had previously paid only the 3% Luxembourg fee.

A survey of 168 e-books taken across-genres and from frontlist, mid-list and backlist and ranging from large to independent publishers (including those on agency), Amazon-published and self-published authors has found little change in prices from 23rd December to 2nd January and from 2nd to 5th January. The price stability suggests retailers, perhaps in conjunction with publishers, have worked together to cushion the extra tax costs.

. . . .

The pattern was the same across other retailer websites.

Link to the rest at The Bookseller

Publishing Sales Execs Consider the Future of Book Pricing

27 December 2014

From Publishing Perspectives:

Around the world the picture changes from country to country with regard to book pricing, with some countries that might appear very free market – such as Japan and South Korea – opting for versions of retail price maintenance (RPM), and others that one might think are more controlled – like Switzerland – operating a free market. Europe is a mass of contradictions, with Norway having RPM, but Sweden not, and Hungary in discussions to bring in the German model.

The situation is fluid too; the information here is based on an International Publishers Association report earlier this year, but it seems that the question of pricing is frequently under review, from country to country. In Poland for example, which currently has no RPM, the Polish Chamber of Books has just drafted a bill that is set to introduce fixed prices for new book releases for 18 months after publication. Mexico, which brought in limited fixed prices in 2008, is concerned over the lack of enforcement.

. . . .

“In Germany, the online retailers take advantage of the fact that they can discount English language titles, but not German ones. So for example, the English language editions of Ken Follett are much cheaper than the German edition. As a result, we are seeing worrying signs of bricks and mortar retailers reducing space for English language books because they know it’s difficult to compete with the online giants.”

Former Random House International Director Simon Littlewood notes that in Japan books are prized as a physical object above any other. “Japan has a net book agreement. The role played by books in Japanese culture is very important. Books are printed on lovely paper, they are delicate objects and the public demands that the publishing values are very high. It’s part of Japanese culture – the design, the quality of paper. They wouldn’t produce anything as shoddy as a mass market paperback.”

. . . .

Mike Abbott, European Sales Director for Europe at PRH, who lives in France, is a keen observer of his adopted home too. “Books are seen as a cultural rather than a commercial product,” he says. “I think there’s a greater respect for authors and reading than there is in Anglo Saxon countries. The state intervenes in cultural matters – there’s an attitude that this is what the state is there for, to protect and support culture. Liberté, egalité, fraternité – the freedom of choice in where you buy books, an equality of price and a brotherhood of shops if you like. I think there’s a gap between the Anglo-Saxon world and continental Europe – the latter is more unified in its cultural attitudes.”

Link to the rest at Publishing Perspectives

Amazon hints at e-book price hike on Jan 1st

17 December 2014

From The Bookseller:

Amazon has warned that e-book prices will rise come January following a change in VAT law in an email to self-published authors. On 1st January Amazon will “make a one-time adjustment to convert VAT-exclusive list prices provided to us to VAT-inclusive list prices” resulting in a rise in the list price of thousands of e-books.

From 2015, VAT will be charged at the rate where the customer resides, rather than where the servers are based, meaning e-books bought by UK readers will be charged a rate of 20%, as opposed to the 3% levied by Luxembourg, where Amazon is based. The Kindle Direct Publishing team has contacted authors published on its KDP platform explaining that when the new law comes in on 1st January, Amazon will make a one-off adjustment to the prices of e-books already published, increasing, for example, a £5.00 list price of a book to £6.00 to account for the 20% VAT rate.

The one-off price-change example implies e-book prices will rise when the law comes into effect in January. In the run-up to the change, there continues to be speculation about how retailers and publishers will handle the change, with some tax experts warning that price hikes were inevitable.

. . . .

Amazon has also explained that e-book royalties would be calculated on the list price of a book minus VAT. And following the new law, minimum and maximum list prices for the 35% and 70% royalty plans on KDP will change to also include VAT. However, the retailer assured   authors that titles scheduled to run in the Kindle Countdown Deal in the UK marketplace during or after 1st January would still be eligible to finish that promotion, even if the list price does not fit the new requirements of being priced between £1.99 and £15.99, including the VAT.

. . . .

Other retailers have been less clear about what will happen to prices. A Kobo spokesperson said:  “We will continue to work closely with our publisher partners, both agency and wholesale, to bring our customers the best possible offering.” Nook did not want to make a comment about what would happen to prices.

Authors have expressed concern that the move would either impact their royalties, or, if prices rise, sales. Mark Edwards, author of several books including Because She Loves me (Thomas & Mercer), currently at Number 2 in the Kindle Chart, said he was concerned about the new VAT law’s impact. He said: “My concern as an author is that the amount of royalties we earn is going to decrease unless the price of e-books go up. But if that happens, sales might decrease. My feeling is that prices won’t go up, so authors will lose out on royalties.” He added: “Nobody wants e-book prices to rise because this could harm sales and discourage readers. It’s hard enough to make a living as an author and it’s going to be even harder now that more of the money readers spend on e-books will go to the government and less to the people who write, publish and sell them.”

. . . .

At the time, Richard Asquith, vice-president of global tax at online accounting service Avalara, said he expected retailers to adopt the “Ryanair-style” model of adding VAT at the till. He said: “Companies are getting much better at protecting their margins. If they don’t increase prices on 1st January they will do it soon [after]. Otherwise it’s a huge dent in their business model. It’s inevitable that it will come.”

Link to the rest at The Bookseller

Jeff Bezos’ Lemonade Stand

15 December 2014

From the New York Times’ Bits blog:

Philip K. Dick’s “The Man in the High Castle” is about what the title character calls the “terribly, terribly disruptive” nature of reality, so it is awesome that the terribly, terribly disruptive Amazon has now filmed this classic science fiction tale. The pilot will appear early next year from Amazon Studios. Any member of the Amazon Prime perks club can watch it free.

Nothing in life is truly free, of course, even from Internet companies that proclaim their generosity. As Amazon loads the benefits on top of Prime — including costly original programming like “High Castle,” older movies, a streaming music service and an e-book lending library — the conventional wisdom is that these customers will return the favor by ordering much more from Amazon. Come for the movie, stay for the vacuum cleaner, diapers and marmalade.

But there is another, more hidden group paying for “High Castle”: people who buy physical books on Amazon. The retailer’s expansion of Prime benefits, as well as its myriad other projects, appears to be fueled in part by fattened margins on all sorts of books beyond the top best sellers.

Say, for instance, “High Castle” is terrific and you wanted to read something else by Mr. Dick. There are quite a few novels to choose from and Amazon has them all. But the deals are often less than compelling.

“Dr. Bloodmoney,” “Confessions of a Crap Artist,” “In Milton Lumky Territory,” “The Penultimate Truth,” “Time Out of Joint,” “A Scanner Darkly” and 15 other Dick novels were all discounted 10 to 17 percent late last week.

. . . .

 These are not the sort of bargains that made Amazon into the biggest bookseller in the world. In 2001, the retailer announced with much fanfare that it would discount by 30 percent books selling for $20 or more.

. . . .

 Sales boomed. “It’s Adam Smith economics that volume will go up when prices go down,” Amazon’s chief executive, Jeff Bezos [said].

. . . .

Although Amazon does not reveal its pricing strategy, that blanket 30 percent discount seems a thing of the past. Customers today also pay sales tax in much of the United States, which equates to a price increase of as much as 9 percent.

Mr. Bezos is apparently now using a different measuring stick than Adam Smith economics. Books are helping pay for the company’s expansion, he suggested in an interview this month.

. . . .

 “It’s like we built this lemonade stand 20 years ago,” he said. “It’s become very profitable over time, but we also decided to use our skills to open a hamburger stand and a hot-dog stand and so on.”

. . . .

 If Amazon seems to have changed its business practices, its message is still the same. It talks the way it did a decade ago, when it was still relentlessly driving down prices. In the confrontation with the publisher Hachette over e-books last summer, the retailer made the crowd-pleasing point that it was on the side of readers against the fat-cat publishers that wanted to line their pockets.

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

PG didn’t check Amazon’s prices for all the books mentioned in this article, but, for those he did, the author was citing hardcopy prices, not ebooks.

PG speculates that ebooks are much more profitable than hardcopy books for Amazon. Since most indy authors make a large portion of their money from ebook sales, this sounds like a win-win.

Ebook Tax Rises to Hit Publishers, Retailers, and Writers

28 October 2014

From Chris Lynch: Hack of All Trades:

Following a European Commission ruling dating back to 2008, e-books are to be taxed in the European member state in which the consumer is located, at the tax rate of that country, as opposed to the country from which the product is sold. The move prevents Amazon, Nook and Kobo from applying the low 3% tax on e-books sold to European countries, just because their headquarters are in Luxembourg. Instead, the e-book retailers will have to apply the standard UK VAT rate (20% at the time of writing) to e-books sold into the UK.

. . . .

Some publishers are already threatening a “revolt” if Amazon tries to pass the additional costs on to publishers. Speaking to The Bookseller Alessandro Gallenzi, founder of Alma Books, said: This isnt a thorny issue, its a hornets nest. Who will take the hit? I dont know. Amazon has so far been absorbing it; I doubt itll do the same moving forward. However, if it tried to force it on publishers there will be revolt and Amazon knows that.

. . . .

From a practical standpoint, there isn’t any good news for writers here. If you’re working with a traditional publisher who ends up with higher costs, or deeper discounts, as a result of this change then you will see your royalties squeezed. If you’re an independent, expect to have to work even harder to market your book as prices creep upwards.

If Amazon are smart about this they’ll protect their KDP exclusive writers for as long as possible from this VAT change, making their platform more profitable for their indie authors and slipping another knife into the ribs of traditional publishing houses.

. . . .

The downside is that UK consumers, publishers, and creators have been working, some even thriving, under a system where the largest retailers were operating in a tax structure that was, at best, a loophole. Like it or not, its hard to paint this as a tax rise; it’s the closure of a loophole. Readers may love their cheap eBooks, but the gravy train may be coming to an end.

. . . .

Despite the ruling, booksellers across the spectrum have long argued that digital books should attract the same 0% VAT rate as physical books in the UK. An Amazon spokesperson said: Amazons view is that the same reduced VAT rate should be applied for both p-books and e-books.

Link to the rest at Chris Lynch: Hack of All Trades and thanks to Nirmala for the tip.

Austrian minimum book price to apply to e-books, web sales

27 October 2014

From telecompaper:

Print books sold online in Austria and electronic books will be subject to the set price law.

. . . .

The law charges publishers and book importers with setting a floor for the price of books. From December, this law will apply in Austria for books sent from overseas, too.

Link to the rest at telecompaper

Speculation on the Amazon – Simon & Schuster Deal

21 October 2014

From Hugh Howey:

Whew. As a Simon & Schuster author, I have to say I’m relieved to see how quickly my publisher struck a deal with Amazon. According to several sources, the negotiations took just a few weeks and the agreement was reached with months left on the current contract. It’s a multiple-year deal, and both sides sound pleased with the results. Simon & Schuster retains the rights to set prices, and Amazon retains the ability to discount.

Everyone is speculating on the finer points of the deal and wondering why Hachette can’t come to terms with Amazon.

. . . .

Engadget reports that Simon & Schuster now has “a financial incentive to drop prices.”

The New York Times quotes S&S as saying that “with some limited exceptions,” the contract gives S&S the ability to dictate prices.

A financial incentive to drop prices. Limits on S&S’s ability to dictate prices. What does this deal entail?

Some commentators are hailing the deal as a return to Agency pricing, but I wonder if these are the same commentators who claim that self-published KDP authors employ Agency pricing?

Guess what? We don’t.

Our agreement with Amazon is something more like Incentivized Agency. If we set our prices between $2.99 and $9.99, we get 70%. If we set our prices outside that range, our split drops to 35%. According to our EULA, Amazon retains the right to discount our ebooks as it sees fit.

What does this mean? It means if we price our ebooks at $14.99, Amazon has plenty of meat left on the bone to discount our ebooks back down to $9.99. The customer gets a good price, and Amazon still makes a profit. That is, we the authors are punished for jacking up the prices.

Who wants to bet that this is what Amazon wants from publishers? The KDP agreement is what Amazon offers with practically zero negotiations back and forth. We should take it as their ideal agreement. The publisher (in this case, individual self-published authors) set the price. But it’s within a range that Amazon specifies, or else we lose margin.

So when Hachette cried foul back in May that Amazon was after a percentage of profits, that’s because they saw Amazon offering perhaps only 50% on ebooks priced above $9.99.

. . . .

There’s another advantage to this deal for Simon & Schuster. Pressure for higher ebook prices comes from print retailers, who don’t want to be undercut. Publishers aren’t stupid; they know they can sell more ebooks at a lower price and make money doing so, but they worry about harming existing partnerships. S&S can now price some ebooks high, knowing that Amazon has room to discount, and they can go to the buyers at their major accounts with the digital list price to show their support. That is, the blame for the eventual lower sale price will fall on Amazon, which brick and mortar outlets already loathe, and S&S gets to look like a champion. Meanwhile, they are giving up a percentage of margin to help Amazon discount. Everyone wins. Especially the customer.

Link to the rest at Hugh Howey and thanks to Patrice for the tip.

October 2014 Author Earnings Report

20 October 2014

From Hugh Howey:

The latest Author Earnings report is up. This is our first look at the effects of Kindle Unlimited — we’ll be diving in further in coming months. I wish our conclusions could be more . . . conclusive. To me, weighing all the benefits of KDP Select against the minus of exclusivity, my thinking is that KDP Select is great for those starting out and those selling at the very highest levels. For those in the middle, who might be getting traction on other outlets, the increase in sales does not seem to outweigh the percentage of the market given up.

. . . .

I’ve been able to experiment with KU without the exclusivity requirement. It’s not a permanent exclusion, and I’ve been leaning toward exclusivity and staying in KU once it expires. I’m now leaning the other way. Even with the potential of All-Star bonuses, I’m not keen on a system that rewards the top and bottom but leaves out the middle. What I’d love to see is for Amazon to drop exclusivity as a goal.

. . . .

So why not make KU elective for all authors? Why not set the pay scale by page rather than reward shorter length works? Compete for readers in all the other ways that Amazon excels (customer service, one-click, search, also-boughts, recommendations, reviews, etc.) and let authors publish their works far and wide.

Link to the rest at Hugh Howey

Here’s a link to Hugh Howey’s books

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