Pricing

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

French Parliament Passes “Anti-Amazon Law” for Online Book Sales

1 July 2014

From The French Embassy in The United States:

On June 26th, French parliament members passed a law forbidding a combined 5% discount and free shipping on books.

After a final unanimous vote by the senate, the Parliament adopted the so-called “Anti-Amazon Law,” that will abolish free shipping for books purchased online and shipped to France.

. . . .

The “Anti-Amazon Law,” pushed for by the UMP, was created to prevent ecommerce sites like Amazon from stamping out the iconic network of independent French bookshops that currently struggle to compete.

“As we have just seen again, laws pertaining to the book economy always generate consensus, if not unanimity,” said French Minister of Culture Aurélie Filippetti. “This is a sign of our deep attachment to books in this nation, and it demonstrates the belief that France builds itself through its past and its future.”

Link to the rest at The French Embassy in The United States

PG’s headline would have been “French Parliament Passes a Law to Make Books More Expensive and Discourage People from Buying Them.”

But PG is not French, so what does he know.

Who’s Afraid of Very Cheap Books?

10 June 2014

From David Gaughran:

A common meme in publishing is that cheap books are destroying the world or literature, and that low prices are undermining the viability of publishing or writers’ ability to make a living.

I’ve long thought this position is nonsense – a narrative which plays on misplaced fears of change and a confusion of price and value, which is also based on flawed assumptions and analog, zero-sum thinking.

. . . .

Self-publishers are fond of 99c pricing for a number of reasons. It’s the lowest price you can set at Amazon, Apple, Barnes & Noble, and Kobo without making your book free, and it has an obvious impulse buy appeal to readers. This price point is particularly popular for the first in a series or a limited-time sale in conjunction with an ad spot, but some have used it more aggressively.

I launched my latest novel Mercenary at 99c (logic here) but plan to raise it to $4.99 this week.

. . . .

1. 99c doesn’t devalue books. How could it? Readers love cheap books! Do libraries devalue books? What about cheap paperback classics? Second-hand bookstores? Friends sharing books? All of these things encourage reading. Books reducing in price is a wonderful phenomenon that should be encouraged and celebrated. Unless you want reading to be a minority sport for the (shrinking) middle class.

2. A writer has a duty to herself and no one else. She shouldn’t have to make decisions for the good of the “industry.” What does Penguin Random House care for the average writer? Does it care if its decisions impact upon the ability of self-publishers to earn a living? Hell, no. Cheap pricing is a wonderful tool when used correctly and can greatly expand an author’s readership (and income).

3. Cheap books expand the pool of readers which safeguards the industry’s long-term health and makes writing as a profession more viable as a result. Self-publishers don’t have to pay for office blocks, printers, binding, storage, distribution. In a digital world, there are fewer up-front costs and far less ongoing costs. Why shouldn’t we pass on some of those savings? Let’s not forget that readers have been screwed by higher prices from large publishers since the consolidation wave of the 1990s.

Link to the rest at Let’s Get Visible and thanks to SFR for the tip.

Breaking Free – What Happened when I left KDP Select

7 June 2014

From author Nick Stephenson:

“KDP Select is evil”. “Free promotions are pointless”. “Nick, you’re an idiot”. These are things I hear on a daily basis, the latter usually being something I say to myself when I’m looking in the mirror. As for the first two, I talk to a lot of authors who have a strong opinion on the relative merits of signing up for 90 days of exclusivity with Amazon, and the words “shackled” and “dungeon” come up a lot. It’s the same for free days – half of authors think they’re a God-send, the other half would rather cut off their own limbs with a rusty spatula than offer their work gratis.

. . . .

The two main strategies for free books I see most often are:

A variety of titles signed up to KDP Select, with rotating free promotions on each book. This is pretty easy to do with the 5 free days you get to play with under the KDP Select contract.
Titles NOT in KDP select, and up on other vendors, with the first book in the series permanently free. This is also pretty easy to do.
There are pros and cons for both approaches, but last month was the first time I’d tried option number (2).

. . . .

[T]his was another month where I had a free promotion with Bookbub. You can see clearly that, while immediate results were lower than before, the residual effect is lasting much longer (and has carried over so far into June). Overall, the total income from the promotion is about the same, but the sales increase is far more consistent. And this is a good thing – I’d rather have a bunch of sales spread across a month, rather than just a couple of days. It helps with boosting visibility with Amazon’s algorithms (which largely discount anomalous spikes in favour of consistent performance) and helps keep things going when I’m not actively promoting or advertising.

Next month’s figures will be more illuminating – I’ll be able to see just how long the sales boost lasts. I’m expecting things to drop off pretty quick, but, so far, things are looking good. More importantly, this strategy has really opened up the UK market for me, as well as Nook and iTunes (Kobo is a bit of a graveyard). I’m looking forward to my other 3 titles dropping out of Select, so I can get them up on the other sites too. The non-Amazon-US avenues are now accounting for roughly 50% of revenue, which is cool, as I’m less vulnerable to sales fluctuations in one market – I’ve got others to back me up.

Link to the rest, including sales graphs, at Nick Stephenson

Amazon Is NOT the Vladimir Putin of the Publishing World

6 June 2014

From The Daily Beast:

Can you believe those…those…those…sons of bitches at Amazon? After launching almost 20 years ago and making virtually every book—new, used, dead-tree, electronic, audio, and I’m guessing any day now, olfactory—available to everyone in America at good-to-great prices, the company’s true character now stands revealed. It’s not pretty, folks. Despite a huge market share, Amazon apparently still wants books, especially the e-books that everyone agrees are the future of the medium, to be cheaper than what publishers and big-name authors want you to pay for them.

Just who the hell does Amazon think it is? Maybe a bare-chested tyrant who used to work for the KGB? Amazon is “like Vladimir Putin mobilizing his troops along the Ukrainian border,” a proprietor of an “e-book discovery site” tells The New York Times.

. . . .

Both Amazon and Hachette have signed confidentiality agreements, so the exact nature of the negotiations between the two companies is anybody’s guess. But it’s clear that they are duking it out over the future price of e-books (a market that Amazon, more than any other single company, made viable with its cheap, user-friendly Kindle devices and cross-platform apps). “Inside the publishing world,” reports The New York Times, “the consensus is that Amazon wants to offer deep discounts on Hachette’s electronic books, and that the negotiations are not going well.”

. . . .

Traditionally, a bookseller such as Amazon would buy a paper-and-glue title at around half the publisher’s suggested retail price. The seller’s per-unit profit varied according to whatever price she set and how many copies she moved; that was also the basic formula for many commercial e-books, so Amazon could be underpricing itself just like it did when it steeply discounted its sales price for certain books. Retailers cut margins on sales all the time for all sorts of reasons: to build market share, to reduce inventory, to stave off competition, and more. By keeping prices low, Amazon was hurting everyone but the reader.

Because Amazon has emerged as the single-largest seller of traditional and e-books, its policies are hugely influential in setting industry-wide prices and practices. Which incidentally are far from what most people, and certainly most economists, would consider monopoly levels. Currently, Amazon accounts for about 41 percent of all new books sold, and two-thirds of new e-books.

Unlike Putin annexing Crimea or the Mafia muscling in on, say, the bar and restaurant business, Amazon didn’t get that big by threatening violence or “scorched earth” (as one critic puts it). It got that way by relentlessly improving and diversifying its product offerings, customer service, and ability to sniff out what you might be interested in buying or accessing.

. . . .

Publishers and independent bookstores have a long history of being against booksellers discounting prices. In the 1920s and ’30s, the American Booksellers Association sued Macy’s for selling books cheaply, and Franklin Roosevelt’s National Recovery Act included anti-discounting provisions that were ultimately ruled unconstitutional. In the 1990s, the same ABA filed suit against Barnes & Noble and Borders for similar practices. So Hachette and the other publishers were all ears when Steve Jobs came a-calling with a surefire way to jack up e-book prices.

. . . .

[This fight is] really about how much readers are going to be asked to pay for titles coming out of big publishing companies. Amazon’s track record on that score is pretty damn great: It always wants the price to be lower. That sucks for publishers and authors, and maybe even for Amazon’s bottom line. But it’s worked pretty nicely for readers so far.

Link to the rest at The Daily Beast and thanks to Andrew and others for the tip.

In the fight over ebook pricing, why Amazon is not the bully

2 June 2014

From Fortune:

As a fight over ebook pricing intensifies between French book publisher Hachette and online retailer Amazon, some are suggesting that Amazon customers are being left behind.

While details of the ongoing standoff are sketchy, it has become clear that Amazon is pressuring Hachette by making access to its books difficult on amazon.com. As an author whose recent book was published by Hachette, Fortune’s Adam Lashinsky earlier penned an article earlier this week that takes issue with Amazon’s behavior as contrary to the company’s ostensible obsession with customer service.

I would argue that he is confusing “anti-consumer” with “fierce competitor” in characterizing Amazon’s behavior.

. . . .

In his piece, Lashinsky says:

“But let’s get back to the customer. Assume for a moment that Hachette is the bad guy here, that the smallest of the major book publishers is making unreasonable demands on Amazon. (This seems unlikely, but bear with me.) Even if Hachette were behaving badly, I’m scratching my head trying to figure out in what strange universe Amazon believes that making it difficult for its customers to buy Hachette’s products is consistent with “customer obsession.” I’m trying to understand how Amazon thinks this will help it “earn and keep customer trust.”

I would argue that it’s a mistake to assume there are good guys or bad guys here. I don’t begrudge either side for fighting hard for their own interests. So let’s just look at the impact on consumers if either side gets their way.

Hachette might prevail because they have a 100% monopoly on all their titles, and are pushing Amazon very hard with the threat of not selling any of their books at lower wholesale prices.  Essentially, Hacehtte’s position for now appears to be: “our way or nothing — if you want our books, here’s the price, period.”  If Amazon backs down, they will have to maintain high retail prices to cover high wholesale prices.

. . . .

Now if Amazon prevails – despite having the relatively weak bargaining position of controlling only 33% of total book sales – Hachette (and then presumably other publishers) will be forced to lower wholesale prices, which Amazon will likely pass along to consumers.

. . . .

I think Lashinsky should redirect some of his wrath on Hachette, who, like other major publishers, pays only a 25% royalty rate on e=book sales, compared to 50% from native e-publishers like Open Road Media or 50%-70% from Amazon (depending on ebook price).

Right now, publishers are squeezing authors and consumers pretty hard. But it’s just business. I don’t waste a lot of energy worrying whether publishers are anti-consumer.

Link to the rest at Fortune and thanks to Chris for the tip.

Bringing Down the Hachette

31 May 2014

From Slate:

Amazon is digging in for a lengthy fight with one of the Big Five publishers, Hachette, and flexing its extraordinary market muscle while the two companies negotiate a new contract. It’s understocking Hachette books so as to create shipping delays, cutting discounts, suggesting alternative titles to buyers, and even refusing to take pre-orders, foreclosing a major sales opportunity. 

. . . .

Neither side is officially discussing exactly what it is they are fighting about. But all indications and industry chatter suggest that Amazon and Hachette are revisiting the pricing and revenue split for e-books—the same contentious issue that prompted the 2012 price-fixing suit against the Big Five publishers, from which Amazon emerged more powerful than ever.

The publishing industry is cheering for Hachette to hold the line and has denounced Amazon’s anti-Hachette tactics almost unanimously.

. . . .

But the publishing world that is speaking as one against Amazon is really made up of two principal factions: publishers and authors. Their interests are not identical, and authors should consider the possibility that the publishers have contributed to the difficult situation they now face. Literature could end up suffering for it.

The crux of the issue is that in recent years, e-books have been more profitable for publishers than print books, despite the substantially lower price tag. But they’re less profitable for authors of new releases. This is not a well-known fact, but one group to have noticed is literary agents, who are in the business of ensuring that authors (and they themselves) get their fair slice of the pie.

So when HarperCollins, another Big Five publisher, boasted about its digital profits in a presentation to investors last year, literary agent Brian DeFiore seized on Harper’s own PowerPoint slide to point out that authors of new releases get the short end of the deal. On the blog of the leading agents’ trade association, DeFiore published a post headlined “e-books and profitability—What we’ve always said and publishers have always denied.” He noted that Harper’s chart neatly demonstrated that for a given title, the e-book is more profitable than the hardcover edition precisely because the author makes less money on it.

“Look at Harper’s own numbers,” DeFiore wrote. “$27.99 hardcover generates $5.67 profit to publisher and $4.20 royalty to author. $14.99 agency priced e-book generates $7.87 profit to publisher and $2.62 royalty to author.”

. . . .

By leaving royalty rates where they are, publishers have left their nice digital margins hanging out there for everyone to see. And when Amazon sees someone else’s healthy profits, it’s like a dog smelling a steak. As Jeff Bezos has said, “Your margin is my opportunity.”

What I suspect is happening right now is that Amazon is telling Hachette that they want some of that margin. If Hachette had spread some of those digital profits to authors in the first place, it would not be vulnerable to this tactic. What’s more, if Hachette had been the first to raise author pay, it no doubt would have snagged some marquee writers.

Link to the rest at Slate and thanks to Randall for the tip.

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