Scalzi on Why Some Publishers Are Rigging Their eBook Prices
When I commented on the NYTimes report about the supposed "decline" of ebook sales, I pointed out the limitations of the AAP’s data and how certain publishers were increasing their ebook prices (and thus reducing ebook revenues).
I carefully sidestepped trying to explain why the publishers were raising their ebook prices. That is a whole other post, one which John Scalzi addressed yesterday.
After pointing out that the cited AAP stats did not reflect the whole market, Scalzi went on to explain why publishers might want to sell fewer ebooks. The short answer is that they are propping up their print sales:
This is in part because (and this seems to be a point of some confusion) there’s more to publishing than maximizing eBook sales numbers in the short term. Publishers, for example, might decide that it’s in their long-term interest to stabilize and even grow the print market, and price both their eBooks and print books in a manner that advantages the latter over the former in the short term.
Why would they do that? For a number of reasons, including the fact that Amazon is still 65% of the eBook market in the US, and publishers, as business entities, are appropriately wary of a retailer which a) clearly has monopsonist ambitions and tendencies, b) has been happy to play hardball with publishers to get its way. Investing time in strengthening alternate retail paths makes sense in that case, especially if, as the article suggests, consumers are happy to receive the book in different formats for an advantageous price. If people fundamentally don’t care if they read something in print or electronic format, as long as they get a price they like, that leaves publishers a lot of room to maneuver.
I wouldn’t put the same spin on it, but I agree with Scalzi. The major publishers are raising their ebook prices so they can keep their print sales up.
Most in publishing would tell you the same thing; the point where we disagree is whether we think this is a good idea.
Scalzi has presented what he sees as a reasonable argument in favor but what he left out was that the major publishers are pushing sales from digital, where Amazon has a two-third market share, to print, where Amazon has a one-third share (64% of online print sales, also) and a lot more freedom on the prices they can charge.
Publishers are trading one set of problems for another, and to make matters worse those same major publishers are raising ebook prices and pushing consumers to buy the expensive print products during a recession.
Sure the publishers are propping up their print sales but they’re also driving price-conscious consumers to wait for sales and buy cheaper books from competing publishers (this, at a time when the major publishers are shrinking).
That arguably makes the print/digital decision penny wise and pound foolish.
image by Adam Tinworth
Tim Wilhoit September 24, 2015 um 11:17 am
If I feel to compelled to buy a print copy, it will always be a used edition. It wouldn’t be in their benefit to push print sales if a significant percentage turned to used books. If their print sales also drop, perhaps they will have a sensible reaction. Nah, they’ll just fire more of those expensive editors. Who needs editors anyway? :/
Jesslyn Hendrix September 24, 2015 um 11:47 am
And I laugh. I am an ebook exclusive reader and after years of just skipping a book when it was overpriced, I now just wait for a ebook copy to come to the library.
But those are my only two avenues to reading. Overpricing an ebook does NOT push me to purchase a print copy–it just means that the publisher will miss a sale from me. My entire family has also switched to ebooks and feel the same. The only print books we purchase are for the grand- and great-grand kids.
Totally stupid reasoning, but I don’t expect anything else from them.
Adam Smith September 24, 2015 um 12:54 pm
I’m with Mr. Wilhoit. When I buy paper, I buy used. When I buy an ebook, I wait for a sale. I’ve also been using the library more often the last year or two. I’m a fan of John Scalzi the author, but not John Scalzi the blogger. His views on ebooks and ebook pricing are not in line with reality.
Nate Hoffelder September 24, 2015 um 1:11 pm
I usually do library first and then used books, assuming the ebook costs too much. But I agree that cost trumps format.
Chris Feola September 24, 2015 um 1:22 pm
Why that’s genius! Remember how well it worked for Encylopedia Britannica when they propped up sales of their print edition by charging $1,000 for the stand-alone CD-ROM? THAT’S why we all have print editions of Encyclopedias today! I’m sure this e-book price propping will work out just as well!
Steve H September 24, 2015 um 1:26 pm
I agree with Jesslyn. What many publishers don’t get are the reasons that people read ebooks. Here are a few of mine:
1) Convenience- I can read anywhere…waiting in line, in bed, at work, outside or in the dark
2) Portable library…any of my books, any time, not just one or two that I can carry
3) Minimalism- I just don’t want to take up more space with physical books
4) Font and format control…I tend to like sans serif
5) Search function in book and across my library
6) Dictionary and Wikipedia
7) Note taking
8) Ease and speed of acquisition…in seconds you can be reading
When I started buying e-books in 2010 my book consumption more than quadrupled. Now due to high pricing I am buy less, borrowing more and often when I do buy I am buying budget/sale books. I am not going out and buying physical books. In many cases the major publishers are just loosing my business.
What the publishers don’t get:
1) Pre-agency prices made impulse buys easy…I made a lot of them
2) After agency I now think through purchases. I save favorites to check price.
3) Prices have become so high that I look for alternatives. Before I really never considered many budget books that (Amazon) sold. Now I look there first. I never bothered with the library( before it was just buy it and read). Now that I got over the hurdle of borrowing e-books my actual purchases have gone way down.
4) Other things compete for my dollars not just other book titles. Movies- Food -You name it.
5) The new pricing has created a mental barrier that makes it hard to hit the buy button. I really read reviews first now.
6) Many e-book buyers will not go back to print.
In short -Business Lost
Syn September 24, 2015 um 1:28 pm
I can’t speak for everyone. Now days I buy audible format if its available, then I move to ebook. Only time I don’t buy the ebook version is if it was never made in ebook form. Which also usually means its older and there are plenty of used copies.
The biggest change for me in regards to publishers and their high prices was to give indie authors a try. Now I’m hooked on a few indie authors I never would have tried. I think all this does is push people to look for alternatives.
Everyone has their one or two big six authors they have to read. I have one myself I get everything she puts out on audible. But usually it is only a couple of must have people everyone won’t give up. It doesn’t include all of their authors. For that, I look for my alternative indie story.
Anne September 24, 2015 um 1:36 pm
I haven’t read fiction in paper since sometime in 2009 and I have no intention of ever returning to paper. If the digital price is too high for me, I just put it on my ereaderiq.com list and/or try the library.
Indies have gotten a very high percentage of my book budget since 2010. What’s been kind of fun is that since agency pricing, I started exploring genres that I had never looked at before. I had no idea that I liked speculative fiction so I guess agency did me a favor.
Just an aside- I don’t think it’s just the big 5 doing this. I have seen some huge increases in pricing from non-agency publishers such as Severn House, Kensington, Macmillan Australia, Soho Press, Text Publishing, etc. I can see Kensington trying this but with the other publishers, I just can’t imagine that their US paper sales are large enough to make this worth trying.
fjtorres September 24, 2015 um 4:44 pm
The Scalzis of the world paint the BPHs campaign as an anti-Amazon effort when the reality it is an anti-Indue effort. With Indies taking a third of unit sales and growing, the threat to tradpub is significant on both the downstream (sales) and upstream (submissions) sides.
The truth is that high ebook prices might have stunted the mainstreaming of ebooks back in 2008-2009 but by 2010 it simply provided a pricing umbrella for Indies to ramp up under. By 2015 it is actually helping Amazon in three separate ways:
– by driving down BPH ebook sales, they undercut the revenues of the epub bookstores, both generic and walled-garden, who rely on tradpub ebooks to a much greater extent than Amazon, who have a million indie exclusives and their own much smaller APub catalog. Most of them have no way to make up that lost revenue through print sales.
– by converting a fraction of ebook sales to pbook sales they are driving online-savvy buyers to Amazon’s pbook business. After all, ebook buyers are already online; they are not going to replace expensive ebooks with near-full priced pbooks. Instead, they will look for the lowest-priced pbook. Which means Amazon, costco, and *used*.
– by making Indie publishing even more attractive to authors hurting for income, if we believe the AG.
Give those New Agency contracts a bit more time to settle in and finish sorting the market out and Amazon will probably end up controlling 80% of the *total* ebook market and (along with Costco) two thirds of the pbook market.
They really didn’t think the whole thing through.
As always, their poorly laid out plans flounder on their total lack of understanding of consumer behavior.
Conrad September 24, 2015 um 4:53 pm
the anecdotal evidence from agents is that the strategy is failing and panic is setting in (slowly but surely) as the total number of units sold (p+e) as well as the revenue is decreasing and not getting to expected targets
I predict lower ebook prices from majors by year end
Hrafn September 24, 2015 um 10:58 pm
My question would be whether this is actually driving sales away from Amazon, or simply driving sales from Amazon-eBook to sales from Amazon-print? To the extent that the two markets are linked, I’m not sure that this is doing anything to reduce Amazon’s overall dominance (and to the extent that they aren’t, e.g. eBook-exclusive readers, they’re just losing themselves sales).
I think publishers need to get over themselves and realise that any efforts to coerce readers and/or Amazon (who knows a lot more about readers than publishers do) is almost certainly to backfire to their disadvantage.
Nate Hoffelder September 25, 2015 um 9:58 am
I think you’re right; I think it moves the sales from one part of Amazon to another. At best the sale might go to a seller in the Amazon marketplace, but that’s still money for Amazon.
Mackay Bell September 25, 2015 um 1:01 am
My guess would be the big NY publishing executives know this won’t work, but they are willing to sacrifice long term to buy a few more years of print being relevant, and a few more years of cocktail parties with clueless literary darlings rubbing paper, before they retire and let someone else worry about the future.
DavidW September 25, 2015 um 6:30 am
I agree with fjtorres. In a few short years indies have come to dominate the ebook market but not the pbook market. But they’re wasting their time. By not embracing ebooks and agressively setting low prices they’re going the way of the dinosaur.
The RIAA actually did more to embrace digital downloads. I’m sure they did not want to give up on potential revenue from overpriced cd sales, but they did anyway with the pay per song itunes model. And while they don’t make nearly the profit they did in the 80s and 90s at least they are still around.
The Big 5 need to stop fighting the future and accept it and try to find a place in it, even if it means far less revenue. Better than simply not existing in the future.
William Ockham September 25, 2015 um 8:47 am
The Big 5 strategy is actually quite rational and effective. As I am fond of pointing out, the reasoning is contained in a marginal note written by Carolyn Reidy on an email from Eddie Cue when Apple and legacy publishing were cooking up their illegal price-fixing conspiracy:
“Higher prices slows Ebks/casual purchaser/keeps retailers/stops authors leaving”
The goal is to stop authors leaving, i.e. going indie. If you want the theory behind this, just go read Ben Thompson’s recent posts over at stratechery. Without bricks and mortar retailers, publishers go out of business entirely.
Anthony Pero September 25, 2015 um 2:33 pm
It might still be money for Amazon… but its a lot LESS money, and the publisher makes more money. The cost of printing and warehousing is trivial when considered per unit–but that’s only true if the physical books actually MOVE. If you end up trashing half of your print inventory, you just doubled the cost of manufacturing and distribution. If you print half as many books, you will see an even LARGER jump in the cost of manufacturing. So, some people say "Well, they should just go POD, then". They can’t, not yet, because the industry invested billions of dollars in robotic warehouses just 12-28 years ago. They needed 20 years of sales at the 2000 rate of physical books to pay it all off, or so I’ve heard. They NEED to sell print books, at relatively the same margins.
Meanwhile, Amazon discounts print books to compensate for higher ebook prices because of agency pricing, but Amazon pays the same amount of money to the publisher regardless of what they sell it for. It also transfers the cost of warehousing some of these copies to Amazon, because of Prime. So, Amazon makes less per book, pays for warehousing, the publishers make MORE per book, and pay the author less per book (or around the same, for some authors). Even IF it means Amazon sells more copies of their physical books, its still a win for the publishing industry… and a necessary one, because, well, bean counters in Germany.
Nate Hoffelder September 25, 2015 um 2:46 pm
"but Amazon pays the same amount of money to the publisher regardless of what they sell it for"
Furthermore, Amazon wouldn’t discount print unless they were still coming out ahead somehow. The deep discounts are hurting the publishers more than Amazon.
Geoffrey Kidd September 26, 2015 um 8:05 pm
I was curious that Scalzi cited the following as part of the publishers' motivations: "b) has been happy to play hardball with publishers to get its way."
The publishers (who play hardball with nuclear weapons) are shocked, SHOCKED, that a corporation, an entity just like themselves, plays hardball!
I just looked at the Irony Fairy. She’s opening a bottle of Dom Perigonon.
Anthony Pero September 28, 2015 um 2:36 pm
Regarding the deep discounting, none of us have any idea if that is happening at amazon or not. And since there isn’t even a rumor about it from another source, the fact that Kris attributed her spike in discounts to a new agreement between Amazon and her publisher doesn’t wash. My understanding is that when books are bought at deep discounts, there is no return for the retailer. They do not reflect sales to readers, in this case, but sales to retailers. And since there are no returns, they are reflected on the next statement, instead of in 18 months after holds have come off. HalfPriceBooks could have purchased a lot, for all anyone knows.
And retailers normally sell deeply discounted books between $5 and $9 depending on the size. Amazon’s discounts are no where near that level on the books in question (where the ebook is prices the same or more than the physical book). So, I doubt remainders are being sold to Amazon to account for this. Amazon is most likely simply lowering its price to right near wholesale. So, even though, yes, they are still making a profit, its significantly less than 30% of the sale price.