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Whale Math: If Reasonable eBook Prices Devalue Books, Then What About This?

We’ve all read the claims from legacy publishers and their authors that ebook prices have to be kept high. The authors will justify prices by making tea in China comparisons or telling us that it just costs more for legacy publishers to publish a book, while publishers will tell us things like cheap ebook prices devalue IP (Markus Dohle, PRH, 2016).

I have generally doubted those claims, and today I came across a graphic reminder of just how bogus they are.

I was shopping in a local supermarket today when I found this bargain bin full of books:

IMG_20160906_140738

Nestled in the frozen section (it wasn’t even placed with the magazines) was a pallet with a box full of discount books.

All of the books were hardbacks, and all were priced $5 to $6. This includes titles from most of the Big Five publishers like Macmillan and Penguin Random House:

IMG_20160906_140931

Isn’t it funny how a reasonably priced ebook will devalue IP, and a remaindered print book doesn’t?

One would think that would be a logical contradiction, but apparently not under Whale Math.

For those just tuning in, "Whale Math" is the term outsiders have given to the bizarre business decisions of the Big Five publishers. Raising ebook prices to sell fewer print books is an example of Whale Math. Telling everyone that it’s good that revenues have dropped 10% is another.

Whale Math is basically the book publishing industry’s equivalent of Double Think from 1984, only without the media reinforcement. In that book the government devoted whole agencies to propagating the official view, but out here in the real world the only reinforcement of Whale Math comes from the book publishing industry’s echo chamber.

And thanks to the internet, which enables more voices to be heard; and the rise of indie publishing, giving authors more opportunities to bypass the gatekeepers; that echo chamber is not nearly as deafening as it was decades ago.

Just think, ten years ago I would never have been able to call bullshit on the official position of the book publishing industry, nor would authors be able to route around the major publishers and their self-destructive business decisions.

Just imagine where we will be in another ten years.

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Comments


Fjtorres September 6, 2016 um 8:46 pm

Those $5 books, how much do you think the author earns?

I’m guessing, in rough terms…
Nothing. Zip. Zero.

http://kriswrites.com/2016/07/13/business-musings-discount-abuse-contractsdealbreakers/


Fjtorres September 6, 2016 um 8:50 pm

As for Whale Math™, this is the full story for those interested:

http://www.hughhowey.com/david-streitfeld-is-dangerous-and-disingenuous/

Kevin September 7, 2016 um 6:54 am

Fjtorres, thanks for the link. I was wondering what it was.


Amber September 6, 2016 um 11:23 pm

Great post. I have always disliked the BS of pricing like paperbacks being less cost than a kindle copy. Whale math for sure.

Marion Gropen September 9, 2016 um 8:18 am

That’s not the publishers' issue, but an artifact of the way Amazon discounts things. The ebook’s MSRP is almost always about 60 or 65% of that of the paperback. Check and see. And that’s how the costs run, too.


Steve Vernon September 7, 2016 um 7:46 am

I see these bins in my local grocery store AND my local drugstore. I think they’ve replaced the paperback spinner rack.
🙂


author/reader September 7, 2016 um 9:36 am

Most publishers consider book buyers imbeciles who can easily be manipulated. It’s an attitude endemic in American busines in general (and to business in many other countries), an attitude blessed by the economist Milton Friedman, who announced to the world that corporations have no social responsibility. It’s intrinsic to the philosophy of free-market Neanderthals who will justify nearly any business practice with the mantra that if the customer doesn’t like it they can buy somewhere else. And then along came Jeff Bezos and Amazon, who turned over the pushcarts of rotten apples by demonstrating that one could make piles of money by treating consumers with maximum respect. The real story is the exposure of the thick-headed comical stupidity of publishing executives who truly are way above their heads in understanding the way the world works.


J.D. Ogre September 7, 2016 um 10:47 am

Hmm. The **exact** same discount box (not in general – I mean that exact design) is at my local supermarket here in eastern Canada with the exact same selection of books. Only difference is that they’re CA$5.99 instead of US$5.00…


Carmen Webster Buxton September 7, 2016 um 9:01 pm

Nate, I wondered if you saw Mike Shatzkin’s post on ebook pricing? I think he gives publishers too much credit. http://www.idealog.com/blog/ebook-pricing-resembles-three-dimensional-chess/

Nate Hoffelder September 7, 2016 um 10:29 pm

I saw it, and I enjoyed watching Shatzkin eating crow after being wrong for six years.


Bruce A September 7, 2016 um 10:47 pm

A couple possible differences are:
1) It’s much harder to find the book you really wanted in one of these bins.
2) The remaindered books in the bin usually aren’t discounted until several months or more after the print book release.
3) Reducing the price of an ebook to remaindered prices before the paperback is released probably affects paperback sales more than remaindered hardcovers.

Having said all that, I still think people who buy hardcovers might not buy very many paperbacks or ebooks because they like hardcovers, and it’s probably also true for paperback and ebook buyers. I also think that as an ebook buyer, nothing stops me quicker from buying an ebook than seeing it priced higher than a print book, and that publishers and authors are missing out on the long tail sales by not pricing backlist ebooks at used/remaindered print book prices when it’s time for the backlist to go out of print.


Marion Gropen September 8, 2016 um 2:20 pm

Those books were probably sold by the publisher to a remainder dealer for less than $1 per copy. This is less than the cost of printing. So, no, authors won’t have gotten any royalty on that. The remainders dealer probably sold them to the supermarket distributor for $1.50 to $2 per copy. The distributor then sold them on for something like $2.50 per copy. The only people getting much from those books are the retailers. Maybe not even them.


Marion Gropen September 8, 2016 um 2:26 pm

Large publishers confront different parameters in their financial analysis than most self-publishing authors do.

Let me do an example: Let’s say that you have a book that will sell 10,000 copies no matter what you do with manuscript prep or pricing. And you can invest another $30,000 in cover and design and publicity — and triple that number of copies, without decreasing the price point.

You invest the money, right? You’d be an idiot not to do so.

But if you were self-publishing and your book will sell 1500 copies as an ebook at $4.99, then that $30,000 is a stupid idea.

It’s a hypothetical, and over-simplified, but it’s an example of the type of judgment calls that publishers routinely make.

Same thing with pricing, except that it’s even more complex, and involves cost curves, demand curves, and isn’t just tactical (for this one book for this next year) but also strategic (what will it do to the future pricing of all books for a decade).

Fjtorres September 8, 2016 um 3:41 pm

Thing is, they don’t invest $30,000 worth of value add.
Oh, it *costs* them $30,000 but that is because of their business structure. The value add in today’s terms is probably a tenth of that.

It is the same constraints that victims of vanity presses face: they overpay for services and end up complaining that self-publishing is expensive.

Cost does not equal value and building your pricing around your cost puts you at a serious disadvantage against competitors pricing to market valuation. It is the same thing that has been decimating bookstores for decades.

Marion Gropen September 8, 2016 um 8:38 pm

If you are correct, then why do major houses' books tend to sell even more than those put out by self-publishers?

Remember, the Author Earnings reports compare sales by self-publishers to royalties from major houses. The major houses DO sell more, all else being equal.

Fjtorres September 8, 2016 um 11:12 pm

Remember we are talking value here, okay?
So, since you mention Author Earnings, did you also see the part where the only authors doing well in tradpub are the ones who established themselves before the cartel’s monopoly on market access was ended?
Or that the reason the "major houses" sell as much as they do is the legacy authors they have under contract? Take out the Kings and the Pattersons and the other legacy giants and compare sales for everybody else. Better yet, compare the author incomes *including* the big names?

If BPH support is so valuable, then why do authors who had their rights reverted do so much better as indies as they ever did under tradpub. If tradpub support is so valuable why do their newer contracts make it impossible to get rights reverted? If their services were so valuable nobody would ever want to leave their "nurturing" grasp.
If the BPHs services are so valuable to authors, why do 80 percent-plus of their titles never earn out, so the authors never see a single cent beyond the payday loans called "advances"? If the BPHs are so great at what they do, why do they fail their authors 80% of the time?
Why are they even now bemoaning how lack of buzz is preventing their "best sellers" from actually catching on with the public?

Yeah, the BPHs sell a lot of books and make a lot of money…for themselves. The majority of their authors?
Not. So. Much.

Nope: The publicly available informavtion does not support the idea that the BPHs add much more value than the freelancers offering the exact same editing, formatting, and art services for much lower *one time* fees. Especially since most of those freelancers are BPH refugees in the first place.

Marion Gropen September 9, 2016 um 8:10 am

The sale of more units as well as having a higher price PROVES that readers find value. There’s no better way to measure what readers value, than to look at what they choose to buy.

Marion Gropen September 9, 2016 um 8:14 am

As for whether authors get more royalties, they may not. But they still choose to sign with large publishers. And it’s not because they’re stupid nor because they’re ignorant. The information about relative total earnings is widely available and discussed in depth in every place I see authors hang out.

Personally, I’m method agnostic. I don’t work with large publishers and haven’t for decades. I DO work with successful self-publishing authors on occasion.

Authors do sign, therefore they’re finding value in something. I’m not going to go further than that.


Marion Gropen September 8, 2016 um 2:27 pm

The short version of that last comment is: Don’t assume that publishers are idiots, or short-sighted, or malicious or even greedy.

Fjtorres September 8, 2016 um 11:13 pm

Oh, they’re not.
They’re merely overpriced and ineffective now that their monopoly power is broken.

Marion Gropen September 9, 2016 um 8:08 am

It’s hard to have a monopoly when there are nearly 100,000 of you. And its even harder when they’re all trying to do things differently, as well as having different ideas of the things that publishers should do.


Marion Gropen September 8, 2016 um 4:21 pm

You mean YOU don’t think that they’re adding enough value for the cost. But you’re not the person who’s willing to pay for them. That would be the readers who choose to pay or not pay the higher price for the better design, or who are more attracted to a book because of a better cover.

Fjtorres September 8, 2016 um 4:32 pm

Not me.
The market sets its valuation when consumers vote their wallets. Think of it as a "wisdom of crowds" effect.
If the books don’t sell at $25 or $20 or even $10 but they sell at $5 then $5 is the value the market attaches to the book. And the differenfe between what the book would have brought self-published and what it brings tradpubbed is the value add.

Note that for many many books (and their authors) the net value add is negative.

That is what non-whale math tells us.

Fjtorres September 8, 2016 um 4:40 pm

Mind you, that is the simplified version.
The detailed version would factor in how many sell at each price point and how much income the author derives in total. The sake basic idea remains: the real value add is independent from the cost charged.

Marion Gropen September 8, 2016 um 8:33 pm

Remainders are no indication of anything except that retailing is not completely efficient. They’re the necessary extras, often the returns from bookstores, sometimes the ones from the last print run.

We need to have more copies printed than we’ll sell, so that we don’t miss sales. There’s a number of returns that maximize profits. For most trade books it’s somewhere between 20 and 30%.


Marion Gropen September 8, 2016 um 4:31 pm

Alternatively, do you mean that you think that the same improvements could be made for less? The fact is that some things can be done for less, to a degree that most readers won’t consciously perceive. But the difference between an inexpensive designer and an expensive one does make a difference to sales. And if you’re selling 10,000 copies, a 5% difference in sales may be worth pursuing.

Fjtorres September 8, 2016 um 4:48 pm

Focusing on the number of units simply masks the actual value of the service provided. The whole point of this article is about books that are sold without generating net income to the author. So what if he sells twenty percent more units if that added twenty percent costs him a century of copyright control and delivers pennies or less?

Empty, valueless sales are just camouflage for overpriced services.

Marion Gropen September 8, 2016 um 8:36 pm

Authors may choose to expand their audience, which working with a major house will do, because that has effects for the rest of their career. Authors may choose to offload things that they’re not good at doing, because there’s more to publishing than writing well and marketing well.

But no one is forcing them to work with a publisher.

And no one keeps the copyright on a book for a century, unless it is selling and selling well, for that time. It costs money to keep a title active. And if the author wants reversion of rights on a dead book, they’ll get it.

If they want to revert rights on something that the publisher helped make a valuable property, then the publisher has a right to share in that profit.


Fjtorres September 9, 2016 um 9:16 am

Nate linked to this today:

http://kriswrites.com/2016/09/07/business-musings-myth-busting-contractsdealbreakers/

It endcaps a series trying to educate those who still think the BPHs add value. It includes this:

———-

"If you want writing to remain a hobby, get a traditional book deal.

If you want a career, stay away from traditional book publishers.

Besides, traditional book publishers are actively cutting their book lines right now. They’re drowning. The numbers I recently heard from Random Penguin/Randy Penguin/whatever they’re calling themselves just in the past month are this: They’re cutting their titles from 900 to 250.

Think there’s room for your book in those 250 slots? Um, no. Writers I know who have been cut this past year include a large number of New York Times bestsellers. Only those writers weren’t mega bestsellers.

That 250 is for Big Guns and people who “write” novelty books, like the Kardashians. Not for you.

But go ahead. Bang your head against that wall. Break through and have leaches and hangers-on destroy your career. If you don’t understand what’s so bad about last week’s contract, and you don’t want to learn, then you’ve figured out what kind of life you want to live—and it certainly ain’t the life of a professional writer."

There’s lots more in that articles and the whole series.
Especially last week’s article.
But only for those who understand the year is 2016 and not 1989.

No. Value. Add.

Marion Gropen September 9, 2016 um 11:22 am

Which value are you discussing? The value to the reader or the value to the author???

You seem to be making both arguments at the same time, interchangeably.

The value to the reader is proven by the fact that sales improve.

The value to the author is in the eye of the author.

I’m not going to argue that the author’s royalties with a big house will be better than their sales as a good self-publisher. Most authors don’t bother to learn to be a good self-publisher, but that’s not the issue.

As for the cutting of lists — I think that any sensible publisher is moving away from mid-list fiction publishing.

Fiction has never been all that profitable, and it’s getting less so, rapidly. For everyone, no matter whether they’re a self-publisher or a Big 5 publisher. It will only get worse, but hey, it’s not a big part of the pie in any case, so no big deal.


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