Pricing

Two Wrongs Don’t Make a Right

18 August 2014

From Hugh Howey:

But three lefts do.

And what of Orwellian triple-speak? That’s like double-speak, except you circle back around to the truth again. I’m seeing some bizarre protestations about an Orwell quote making the rounds among the anti-Amazon crowd. When Amazon sent a letter to KDP authors asking them to help talk sense into Hachette, one of the points detractors seized upon was a quote from George Orwell about paperbacks. From the letter:

The famous author George Orwell came out publicly and said about the new paperback format, if “publishers had any sense, they would combine against them and suppress them.”

The quote was taken out of context, pundits and bloggers cried. The rest of the letter from Amazon was dismissed because of a single fact that seems to have been gotten backwards. In reality, they said, Orwell thought cheap paperbacks were great. He flat out says so. Can’t you hear the sarcasm dripping from his voice? He wasn’t really suggesting collusion.

Except he was. And he wasn’t being sarcastic at all. An intrepid researcher tracked down the origin of the quote, and Orwell was indeed suggesting, just as Amazon portrays, that he and others of his time thought cheap books would destroy the trade. Great for consumers, sure, but bad for everyone else.

. . . .

Publishers today—like Orwell was in his time—are terrified of affordable literature. Amazon’s point is that they were wrong, and that cheap paperbacks helped grow the entire pie of reading and enrich everyone in the industry. It bears mentioning, I think, that one of the pundits who twisted Orwell’s wording to suit his needs also freely admits that he encourages publishers to jack ebook prices up as high as possible to protect the print trade.

Another thing lost from this debate is that $9.99 is not the ideal price point for all ebooks. In fact, most ebooks would generate more revenue at even lower prices. $9.99 is like a speed limit. Exceed it in rare emergencies, but also feel free to drive slower where appropriate. Among the 120,000 ebooks we’ve analyzed at AuthorEarnings.com, $4.99 ends up being the bestselling price point by far.

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

Up Against Amazon

15 August 2014

From the Independent Book Publishers Association:

Amazon doesn’t just take orders. It is used to barking orders at publishers and getting us to salute. But bullying only goes so far, and I’m thankful that a single large publisher, Hachette, stood up to it and that The New York Times ran an editorial about its strong-arm tactics.

I’ve been sitting on my own Amazon story for a while, after having receiving a threatening phone call from its legal department when I refused to agree to a unilateral change of terms. But with all the publicity and debate about Hachette, I thought other publishers, as well as Berkshire Publishing’s friends, colleagues, and customers, might like to know about our experience and why I believe that Amazon is destroying healthy competition in the publishing world.

. . . .

My fight with Amazon began when it decided to go after traditional “short discount” publishers (academic presses as well as presses like Berkshire Publishing) with a unilaterally imposed change in business terms announced only in a “case note” within their order-processing platform. This platform is normally used to inquire about the availability of certain books and is used by customer service staff.

A colleague of mine whose staff was puzzled enough to pass the “case note” along to him asked Amazon to contact him directly by telephone or email, saying that business terms were a matter for our company’s executive team. Amazon refused to talk—communication would take place only through the “case.”

Berkshire Publishing had sold print through Amazon.com since 2006. Although it originally demanded a 40% discount—four times our standard—I decided that we should make books available through any major platform that individual readers and libraries use. Our authors like knowing that their books are readily available worldwide. And we reach some people who would never otherwise know about our titles. In fact, I was recently at a meeting in Beijing and showed a copy of our book This Is China: The First 5,000 Years. Two of the people there started whispering and giggling, and finally one spoke up, “I have that book. I ordered it from Amazon!”

Amazon’s demand in 2012 was for an additional 5%, bringing the discount to 45% (some academic presses had been at 25%, so the change to 45% meant a reduction of 80% in their net income from Amazon sales). Bookstores generally get a discount of 30-40%. Amazon has been getting 50-55% from the big trade presses, and the current battles are in part over further discounts that Amazon is demanding to increase its marginal profit.

. . . .

Amazon is destroying competition and innovation because it is not letting the market determine winners and losers, but is instead making the selection itself, deciding arbitrarily where to take its pound of flesh and shore up its feeble margins. Publishers (and authors) would be fine if they were actually competing with one other for sales without Amazon sucking the life out of every transaction.

Finally, what happened? Are Berkshire Publishing titles available through Amazon? Dear reader, I capitulated after four months. It wasn’t fair; it wasn’t good for anyone but Amazon, but I was losing sales that I needed and I gave in.

Link to the rest at the Independent Book Publishers Association and thanks to Karen, who points out that this brings into focus the area where independent publishers and independent authors are NOT aligned for the tip.

While PG almost reflexively takes the side of the little guy/gal in any battle, he would suggest that Amazon is exquisitely attuned to the market, much more so than any publisher.

 

Kindle Unlimited and Kindle Stuffing

6 August 2014

From author Michael Bunker:

In the final days of the Roman Empire there were plenty of people still arguing (and from real evidence I might add) that the Roman Empire was still in power. The problem is that the conclusions they were drawing from the evidence was incorrect. The Ceteris Paribus fallacy had most people convinced that because the Roman Empire still ruled, then it would continue to do so for the foreseeable future. Even though the empire’s days were numbered.

I keep telling people that the days of Kindle Stuffing as a means of launching a new career are numbered. There is still a place for .99 and free books, but the days when new authors could count on cheap or free to get their names out there in a big way and to perhaps break out from the crowd… well, I suspect those days are generally over.

Authors don’t realize that readers have changed. Even this early in the e-book revolution, there has been a fundamental change in reader behavior that almost everyone is missing. In one of my last articles, I likened it to what happened with dollar stores. Anytime a once rare, pricey, or difficult to acquire commodity becomes abundant and inexpensive, buyers will gorge on it… for a time. Set a hungry man free in a field of strawberries and see what he does. But have that man live in a field of strawberries – where there is no scarcity, no seasons, and no cost – and you’ll see that he behaves differently in regards to strawberries. Sure, he’ll still eat them now and then, but the gorging will stop. Quality and value always assert themselves when price and/or scarcity is removed from the equation.

. . . .

[R]eaders, if you take the time to talk to as many of them as I do, will tell you that they are reading fewer and fewer of the cheap and free books they stuff into their Kindles. And of the ones they do try, they are reading less of the book before giving up. In many cases they are giving the book 2-3 pages (in many cases far less than 10%) before they decide to go on to the next book.

. . . .

So how does the launch of Kindle Unlimited prove my point?

1. The fact that Amazon saw it as necessary to provide unlimited FREE book loans to readers means that they are choosing to compete in a new delivery method that is going to revolutionize how readers receive titles. More and more books are going to be consumed via these membership services. And we have evidence that will allow us to predict reader behavior.

NETFLIX

. . . .

2. The fact that, unlike the Kindle Online Lending Library, Amazon has instituted a 10% read threshold before author payment is secured, proves my point even more. Amazon knows that the more free books are available, and when scarcity is removed as an issue, more readers are going to graze shop rather than committing based on a cover and a blurb. If the reader doesn’t read past the 10% threshold, Amazon doesn’t have to pay the author. This makes sense for Amazon, but it should tell you something about reader behavior and how it has changed.

Scarcity has been removed. The binge is over. Most newbie authors who count on the 2011 method of marketing and promotion to build a career are going to fail miserably.

Link to the rest at Michael Bunker and thanks to Sharyn for the tip.

Here’s a link to Michael Bunker’s books

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.

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.

Why Amazon Terrifies Publishers: Let’s Look At Royalty Statements

22 July 2014

From Forbes blogs:

Like many authors, I’ve been struggling to decode all the noise coming from Amazon and traditional book publishers, in hopes of figuring out which side is right in this long-running quarrel. The breakthrough moment for me came earlier this month, with the arrival of a new royalty statement from my New York agent.

Clearly, there’s a tug-of-war going on right now about what books should cost — and how the revenue should be divided between authors, publishers and retailers. The immediate battleground involves Amazon’s pricing of e-books published by Hachette, one of the publishing industry’s “Big Five” players. Amazon wants lower prices and leaner terms for Hachette; the publisher prefers the opposite.

While the battle rages on, distribution of Hachette books on Amazon is getting snarled.

. . . .

I’ve been writing books since the early 1990s. That’s provided opportunities along the way to write for three of the Big Five publishers, as well as to see Amazon emerge as an important marketplace for my own books about everything from Wall Street to talent selection. To date, both sides have provided fair terms and good value for what they do. But it’s a fast-changing world, and the message hit home for me when I got a new royalty statement for my very first book, “Merchants of Debt.”

. . . .

The Beard contract wasn’t my favorite, because the $34.95 price to buyers seemed quite steep, and because my royalties per copy were only 15% of the purchase price. But that 15% royalty rate has long been the norm for print-publishing contracts.

. . . .

Then, in 2013, my agents, Inkwell Management, arranged to have Merchants of Debt republished as an e-book. We created two versions: a full-length e-bookpriced at $9.99, and a condensed version, priced at $3.99. In each case, e-tailers such as Amazon or Apple’s iTunes store get 30% of sales revenue; Inkwell gets 21%; I get 49%.

You can probably guess what’s happened to sales trends. Overall sales of the book have more than tripled, and nearly 90% of the sales are coming from e-books. We’re still talking about small amounts of money, but the checks now pay for getaway weekends, rather than an occasional lunch or two. Customers are getting a much better deal. And the e-books’ royalty formula means that I make almost exactly as much on a $9.99 e-book as I would have on a $34.95 paperback.

. . . .

Amazon believes it has figured out how to keep its book business vibrant in such changing times. I’m starting to think that the old guard’s ferocity in the current Hachette-Amazon tussle reflects deep anxieties — perhaps even outright terror — about what to do next.

Link to the rest at Forbes blogs and thanks to Hugh for the tip.

The French Do Buy Books. Real Books.

10 July 2014

From The New York Times:

One of the maddening things about being a foreigner in France is that hardly anyone in the rest of the world knows what’s really happening here. They think Paris is a Socialist museum where people are exceptionally good at eating small bits of chocolate and tying scarves.

In fact, the French have all kinds of worthwhile ideas on larger matters. This occurred to me recently when I was strolling through my museum-like neighborhood in central Paris, and realized there were — I kid you not — seven bookstores within a 10-minute walk of my apartment. Granted, I live in a bookish area. But still: Do the French know something about the book business that we Americans don’t?

I was in a bookstore-counting mood because of the news that Amazon has delayed or stopped delivering some books, over its dispute with the publisher Hachette. This has prompted soul-searching over Amazon’s 41 percent share of new book sales in America and its 65 percent share of new books sold online. For a few bucks off and the pleasure of shopping from bed, have we handed over a precious natural resource — our nation’s books — to an ambitious billionaire with an engineering degree?

France, meanwhile, has just unanimously passed a so-called anti-Amazonlaw, which says online sellers can’t offer free shipping on discounted books.

. . . .

The French secret is deeply un-American: fixed book prices. Its 1981 “Lang law,” named after former Culture Minister Jack Lang, says that no seller can offer more than 5 percent off the cover price of new books. That means a book costs more or less the same wherever you buy it in France, even online. The Lang law was designed to make sure France continues to have lots of different books, publishers and booksellers.

Fixing book prices may sound shocking to Americans, but it’s common around the world, for the same reason. In Germany, retailers aren’t allowed to discount most books at all. Six of the world’s 10 biggest book-selling countries — Germany, Japan, France, Italy, Spain and South Korea — have versions of fixed book prices.

Even with the state’s help, French bookstores are struggling.

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

Let’s see. 1. The French “secret” is that publishers set book prices. 2. No discounting is allowed. 3. Bookstores are struggling.

Could it be that many French readers can’t afford high prices? Or that, in the face of high-priced books, more and more French people are choosing alternative low-priced entertainment options?

PG says you can’t trust traditional publishers with a nation’s literary legacy. Only authors are worthy of that trust.

Smashwords CEO on Why He as an Indie Author Supports Hachette Against Amazon

10 July 2014

From Digital Book World:

Mark Coker, the CEO of self-publishing distribution business Smashwords and an indie author himself, is rooting for Hachette in its current business dispute with Amazon.

Unlike many indie authors, Coker is rooting for Hachette to prevail against Amazon because he believes that a Hachette loss now would make it harder for big publishers to eventually switch to the old “agency” model of selling ebooks (where the publisher sets the price and takes 70% of the proceeds) and that the agency model is good for indie authors.

. . . .

Coker believes that the agency model:

1. Has allowed indie authors to price ebooks lower to consumers, creating a favorable price comparison with traditionally published ebooks, while still earning a large royalty.

. . . .

3. Benefits authors (giving them more sales channels to pursue), publishers (same as authors) and readers (who get more choice when it comes to how and where they purchase ebooks).

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

Amazon Finally Defends Itself Against Accusations That It’s A Bully Pushing Around Hachette

3 July 2014

From Business Insider:

Amazon has finally delivered a full defense of its actions against book publisher Hachette.

Russ Grandinetti, Amazon’s SVP of Kindle content, told the Wall Street Journal that Amazon is acting “in the long-term interest of our customers.”

. . . .

Farhad Manjoo, who is typically reserved and level headed, wrote at the New York Times, “Amazon is confirming its critics’ worst fears and it is an ugly spectacle to behold.” Manjoo espoused the conventional viewpoint that Amazon was being a bully against Hachette.

The Journal says the dispute between the two companies comes down to revenue sharing and promotion. Amazon wants more revenue from e-books. Hachette doesn’t want to give up more money because it will cut in to its profits.

. . . .

“This discussion is all about e-book pricing,” Grandinetti tells the Journal. “The terms under which we trade will determine how good the prices are that we can offer consumers.”

Link to the rest at Business Insider

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