
E-Book Sales Fall After New Amazon Contracts - msh
http://www.wsj.com/article_email/e-book-sales-weaken-amid-higher-prices-1441307826-lMyQjAxMTE1MzAxNDUwMjQ2Wj?utm_content=buffere3d81&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer
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jbeales
When an ebook costs over 90% of the price of a hardcover, am I going to buy
the ebook, which I can't lend, resell, or give away, or the ebook, which can
only be read by me? The answer is simple, I'm going to buy whatever the
cheapest physical book is.

In Canada, with a Kobo, buying from Chapters/Indigo, the trade paperback is
often _cheaper_ than the ebook. This is my situation, and it means that the
only time I buy an ebook is if I'm extremely motivated to read a book _right
now_ and I can't get it digitally from the library. If I had a situation where
I was travelling and extremely space-constrained I might pay the premium for
an ebook, but that hasn't happened to me yet.

All that doesn't mean I don't read ebooks, but that I don't buy them. The
ebooks I read come from the library, (I'm a member of two libraries with great
ebook selections), or are classics from Project Gutenberg or similar.

~~~
zippergz
I suppose it depends on your priorities. For me, the value of instant
delivery, searchability, zero physical space consumed, and near infinite
portability far outweigh the value of lending, reselling or giving away. Maybe
I'm selfish, but if I have to choose between something that works really well
for me while I have it, and something that is easier to pass on to someone
else, I'm going to go with the former. Having both would be better, but if I'm
forced to pick one, it's an easy decision...

~~~
gcb0
for me it is the opposite. i like to pay more for the physical book because i
don't want a delay of over 1s while flipping pages.

~~~
fsloth
That sounds like you've chosen poor hardware. I've not had this problem in
five years (with the three different devices I use for ebooks, one being an
e-ink reader)

~~~
gcb0
so you seems to have a magical eink reader. most eink take 0.5s to clear and
0.5s to draw a full screen in most usable resolutions.

~~~
kbutler
It's not really fast, but it's not a second, either. Just ran a quick test on
a kindle paperwhite, repeatedly paging after I saw the page refreshed. 20
pages in under 14 seconds, and there was definitely lag time between the page
being refreshed and my finger tapping again.

That said, the page turn lag bugs me, too. It's better on tablets/phone.

------
blinkingled
This was about the publishers being able to set their own prices wasn't it?
Maybe they tested out if people were willing to pay more. If they find out
they don't they can always go back to the discounts.

Trouble was before Amazon had that power. Seems fair that publishers should be
able to set their own price.

Personally I don't buy an ebook if it isn't in single digit price. Anything
more and I might as well buy the hard copy if I need it badly, otherwise I am
better off not buying it at all.

------
toyg
Surprise: higher prices do not mean higher profits, especially if most of your
business relies on impulse buying and disposable income, and your goods are
fundamentally intangible.

You didn't need to be a genius to see that coming. The more I see ebooks I'm
vaguely interested in selling for £15 or more, the less I'm going to buy them.

~~~
Azkar
It really baffles me that a company will still treat customers like this.
Amazon has become bigger than wal-mart because they focus on the customer,
maybe other companies will catch on and follow suit. Customers are not stupid,
they understand that e-books are a lot cheaper to produce/distribute than a
physical book, and they should be priced accordingly.

I wonder how long we're going to see these inflated e-book prices before the
publishers drop the prices to what they previously were. If this sales trend
continues they'd be dumb to not drop the prices of e-books.

~~~
ghaff
"Customers are not stupid, they understand that e-books are a lot cheaper to
produce/distribute than a physical book, and they should be priced
accordingly."

If customers "understand" this, they mostly understand incorrectly. While it
may make intuitive sense that printing and distributing a book should make up
a lot of its cost, that's not actually true. I haven't looked at the details
for a few years but this is something I wrote a while back on the topic:
[http://www.cnet.com/news/why-e-books-arent-
cheaper/](http://www.cnet.com/news/why-e-books-arent-cheaper/)

(To summarize that post, printing plus the take of wholesalers who handle
distribution is only about $5 for a hardcover.)

~~~
Booktrope
When a publisher sells an ebook, they receive wholesales not retail price.
Wholesale prices in the book businss range from about 35% of list (if you use
a full-service distributor) to about 5o% of list (if the publisher sells
directly to the retailer). You present an example where the list price is
about $28, which means the publisher will get at best $14. But your
calculations are based on the supposition that the publisher would get the
full list price.

Here's another huge cost you don't include for the publisher with print books
-- they are returnable and often get returned. If a publisher gets 25% of the
books sold returned, effectively the publisher is getting only about $10 for a
list price of $28 / wholesale $14. (Return rates can be higher or lower, but
there are always returns.) Using the cost figures you use on your referenced
example, the publisher loses money on the print book. And, you omit other
costs incurred by traditional print book publishing, including shipping,
warehousing books and fulfilling orders.

With ebooks there are no returns (a huge factor in the analysis), no printing,
no shipping, no warehousing. Wholesale prices are a higher percentage of the
list price. We publish ebooks and get about 65% of list from Amazon, Apple and
Barnes and Noble (it's a bit higher or lower depending on which vendor) So
it's obvous that our costs are lower for ebooks and the share of revenue we
get is higher. In other words, list price of ebooks indeed should be far less
than print, and ours are.

~~~
ghaff
>And, you omit other costs incurred by traditional print book publishing,
including shipping, warehousing books and fulfilling orders.

In the figures that I quoted, I believe that those are rolled into the
wholesalers cut.

Ebooks can certainly be priced so prices are lower to consumers than
hardcovers (as well as PoD) while the author/publisher makes at least as much.
My point with the figures--which seem to be surprisingly difficult to nail
down authoritative sources for--was that printing/distribution isn't the
lion's share of what someone is paying for when they buy a hardcover book.

~~~
Booktrope
It's much more than you are saying. If you start with the retail price of the
book (which your referenced article does), there's 50% off the top generally
for wholesale discount (that is, the retailer pays about 50% or so). There's
an additional 15% for a distributor's share (this means a company that has a
sales force, generates orders, etc.; if you don't use a distributor, you need
your own internal sales department which will cost almost as much). You don't
need a distributor for ebooks. You have returns -- at least another 20% or so
of your revenue will be eaten up there for most titles.) No bookstore returns
for ebooks. There is printing, shipping, warehousing. (Normally estimated at
about 15% of the cost of print books) No printing, etc. for ebooks. There's
capital costs associated with doing print runs -- you put money up front and
then have to wait for return while books sell, and also you run the risk of
printing books that never even ship to stores. Hard to estimate but another
cost that doesn't apply to ebooks. If you add it up, 15% for distribution. 20%
for returns. 15% for printing etc. These print book only costs come to about
50% of the wholesales price. It's just not so that ebooks cost almost the same
as print books.

Traditional publishers still have a business model that depends upon bookstore
sales. The real problem for traditional publishers is, if ebooks are priced
much lower than print books, it's an obvious problem for an important part of
their business model. So they struggle mightily to keep ebook prices high and
to persuade people that the costs of ebooks and print books are the same. As
the article indicates it's not working -- self publishers and non-traditional
publishers can produce ebooks at a much lower price point, because the ebooks
cost less to produce.

------
revelation
Who knew, if you raise prices, through collusion or explicitly, you might just
take in less money.

But part of it is probably just the same that is happening with music and TV.
There are now very diverse sources to fuel media consumption, you are not
bound to a specific "curated" collection. Hence the success of US series in
Europe, where most of the time you can't even see them legally.

------
Booktrope
The posted article has some huge errors. It actually says, "Amazon was willing
to buy a title for $14.99 and sell it for $9.99, taking a loss to grab market
share and encourage adoption of its Kindle e-reader." That is complete
poppycock. No retailer pays list price for books; they pay wholesale price,
which in the book business is usually about 50% for print books; sometimes
higher for ebooks. (It depends on the publisher/retailer deal) During the time
when the lawsuit was pending, the standard wholesale price for big publishers
was more like 50%. So when Amazon buys a book that lists for $14.99 they paid
$7.50. Marginal cost of selling an ebook is not very large. If Amazon bought a
product for $7.50 and sold it for $9.99, they marked up the product about 33%.
This is not "selling at a loss"

Big publishers did not object to Amazon selling for below list because it
would impact Apple. They objected because they thought selling books at a
discount would cause consumers to expect a lower price and they would no
longer be able to sell higher-priced books. This is just what's happening
right now. Amazon prices books very effectively and even more signficantly,
Amazon has opened the marketplace for book sales to self=published authors and
to independent publishers who are trying new models. For example I'm CEO of
Booktrope which has a new model that produces ebooks that can be sold in the
range of $2.99 to $9.99. (We pay a higher percentage royalty of authors in
view of the lower prices.)

Amazon primarily but also Apple and Nook have opened up huge markets to us and
our books are available broadly to readers. It means that big publishers will
face competition from us, publishers like us, and self-published authors, and
it's not going away.

The only way for the big publishers to avoid that would be to somehow block
out competition including self-published authors and smaller, more efficient
publishers who can produce ebooks at a lower price point. It's not going to
happen so big publishers are at a crossroads and we should expect them to
adjust or they will face continuing decline in sales.

~~~
x0x0
I think the book publishers were also scared amazon might replicate the
ipod/itunes playbook, ie they might wake up one day and amazon kindles might
be 90% of the ebook market at which point amazon has way more leverage over
them than they would like. So I think for the publishers this is a way of
leveling the playing field and trying to create competition in the book reader
market.

------
Hyperborian
> “If you have a good book, price isn’t an issue.”

Because if it's that good, it will show up on the various pirating sites
quickly.

There is a new ceiling on media prices, books included, and these companies
are just going to keep loosing money until they adjust their pricing to the
new reality.

~~~
rhino369
But is that really true. Piracy is so easy only an extremely deep discount
will sway me.

Pirates are only a certain percent of the population.

The optimal revenue generation probably occurs when you just ignore pirates.
If they dash prices 75% and double the number of sales, they still lose
revenue. You'd need to quadroople sales to just break even.

------
kozukumi
A Kindle was my first e-reader but I have since switched to a Kobo. If I
cannot find a book to buy in DRM-free ePub I don't bother with it now.

Music is DRM-free these days, no reason for books to still come with horrible
restrictions.

------
efuquen
I always check kindle prices, and if they are close to physical price of the
book I will more often then not simply not buy. Overall I still prefer to buy
hardcover versions of books I really really want, but if I'm on the fence and
see a kindle book that has at least a decent markdown I will more easily make
that purchase then give away precious bookshelf space to a book I'm not sure
is a must have. I've forgone quite a few purchases I would have been likely to
make for that very reason.

------
DrNuke
I'm pretty sure I read somewhere it depends on content: niche-domain knowledge
and test-preparing e-books sell ok at $10-$15 even if pirated more than often;
self-empowering fluff and cuisine titles sell nicely below $10; mainstream
novels, essays and general prose sell below $5. If I'm able to trace down the
report, will add a link for your reference.

------
danharaj
> Publishers said the current pricing model involves some sacrifice but they
> felt it was worth it to keep Amazon in check.

> Before 2010, book publishers operated with a “wholesale” model for e-books
> in which they sold titles to retailers, which could discount as they saw
> fit. Amazon was willing to buy a title for $14.99 and sell it for $9.99,
> taking a loss to grab market share and encourage adoption of its Kindle
> e-reader.

> Publishers worried that such discounting kept Apple Inc. and Google Inc.
> from emerging as competitors, as those companies might not want to lose
> money on e-books.

Seems reasonable to me.

~~~
Turing_Machine
The publishers want to keep ebook prices high to keep them from eating into
their traditional print business, just as Kodak kept their digital camera
prices high to keep them from eating into their traditional film business.

The problem is that the publishers aren't the only people who can produce
ebooks, just as Kodak wasn't the only company that could produce digital
cameras.

This is going to bite them in the butt in the long run.

~~~
danharaj
Maybe, but their goal and rationale seem fairly reasonable, even if there are
counter-arguments. If being rationally optimal were easy there would be far
fewer divergent opinions in the world.

The headline of the article is that they have lost revenue because of their
business decisions. I just wanted to emphasize that there's more to business
than maximizing sales revenue of your product: The way you sell your product
shapes the market downstream, and it is reasonable for publishers to think
that Amazon's market share grabs were anti-competitive and that a lack of
competition is worse for them.

Demand curves are not the only thing that go into pricing decisions.

~~~
Turing_Machine
If they think that keeping their prices high is going to reduce competition,
they are in for a rude, rude awakening.

~~~
danharaj
There is an intermediate market between publishers and their ultimate
consumers. They were selling their products at the same price as they are now
to Amazon before, it's just that Amazon was allowed to take a loss on the
sales to build marketshare which possibly prevented other players from
entering the distribution market.

Are you unconvinced that allowing Amazon to absorb losses in order to dominate
their distribution market is possibly bad for them? Or are you satisfied with
treating them with contempt because it's so "obvious" to you that they're
being boneheaded?

~~~
Turing_Machine
"it's just that Amazon was allowed to take a loss on the sales"

That is absolutely not true.

The marginal cost of delivering an ebook is so close to zero that it's hardly
worth calculating.

Amazon (or anyone else) can easily deliver ebooks for $0.99 and still make a
profit on every single sale.

~~~
danharaj
They bought the ebooks for 15 dollars and sold them for 10 dollars.

~~~
Turing_Machine
No, they did not. Perhaps a occasional loss-leader was marked down that much,
but overall Amazon has always sold ebooks for more than the cost of
acquisition.

------
mg74
These publishers are absolute idiots. Ebooks for 12 to 16 dollars just to
support their outdated business model of the hardcover to paperback cycle.

I have a whishlist of over 1000 books on Amazon. I can just go through that
list and wait with the newer ebook titles until they drop down in prices. This
will be my "customer buying pattern" from now on.

Winners: 2 to 3 year old books and Amazon. Loosers: New books and the
publishers.

------
swehner
Just write shorter books.

~~~
fencepost
That's perhaps excessively terse, but there's probably quite a bit of that
going on. EBooks remove the physical hints that differentiate between the
latest doorstop from George R. R. Martin or Neal Stephenson and something
that's 5 words over the novella/novel dividing line.

------
cletus
I believe consumers as a whole have an innate sense of fairness and it's this
that drives a lot of piracy. Australia has had historically high amounts of TV
piracy because Australia tends to get treated poorly. One of the country's
largest ISPs admitted over half of traffic was BitTorrent [1].

I live in the US now. I don't have cable TV but I do pay for Netflix and HBO
Now and will probably pay for the ad-free Hulu Plus now that it exists (I'd
never pay for an ad-supported streaming service) and, what the hell, probably
Showtime too. In part because I watch them but I don't really need all of
them. I really want to put my money where my mouth is here and support such
services.

I often now see novels on Amazon where the paperback is $8 for a book that's
been out for years. The ebook is... $10.

Now in the case of print media like the NY Times and the WSJ, I get why they
prefer the physical copy: it comes down to advertising. Advertisers will still
pay more for print ads and certain advertisers will only buy print ads so they
have to print physical copies a bunch of people won't read. It's why, just now
in going to this page, you see the WSJ advertising print + online access and
why print + online is usually cheaper than just online.

But I don't get this at all with ebooks. Paper books need to be typeset and
printed, supplies for that bought and the physical products need to be boxed
and shipped to various distributors and so on. The distributor, printer and
retailer all need to take cuts.

The ebook is essentially direct to market with zero distribution costs.

Now ebooks offer a lot of advantages to the consumer: immediate access,
searchability, more portable. But they also come with negatives: you can't as
a general rule resell or even give away an ebook so it can only generally be
read by the buyer and their immediate family.

Publishers should be loving this because publishers hate the preowned book
market. It's why textbooks are often changed from year to year: just to
devalue used previous editions and force students to buy new books.

Yet publishers are acting in a way that strongly suggests they just want to
kill the ebook market. Could that be it? They just know how to print and sell
paper books and want to keep on doing it? Could it be fear of piracy and the
inability to adapt to this new business model?

My own sense of fairness kicks in here: when I see a $10 ebook for an $8 paper
book I just don't buy either.

I'm reminded here of the cable TV industry. Cable TV is dying. It's why cable
companies will essentially give you free Internet if you subscribe to TV
services (and charge you $50-80/month if you don't). This artificially props
up the number of TV subscribers, which is important because the price of
content is driven by the number of consumers. The more consumers a provider
has, the lower the pre-consumer cost of channels. This is also why Comcast was
so desperate to merge with TWC and has since merged with Dish: to reduce
content costs and increase their negotiating power with content providers.

But all of this is just seeking higher land in a flood: eventually you run out
of land anyway so you're just delaying the inevitable.

We see the same thing in the music, TV and movie industries where direct-to-
market versions are often more expensive than, say, buying a CD or DVD and
having it shipped to your house.

Perhaps this really is the long game of setting price expectations.

Piracy seems to be the response of the market to "unfair" pricing and
licensing practices and it does seem to eventually force change. The problem
is that once you've taught a whole market to be pirates, only some of them
will switch back to more legitimate channels.

It still astounds me that you can be forced to watch FBI disclaimers and the
like on movies you legitimately buy and have incompatibilities that won't
allow you to watch HD content (HDCP versions and the like) yet what has none
of those problems is pirated content. It's a wholly better user experience.

I really wish these old world industries would just accept we live in a
digital world and get over their anachronistic business models.

[1]: [http://www.itnews.com.au/news/day-13-iinet-ceo-says-
bittorre...](http://www.itnews.com.au/news/day-13-iinet-ceo-says-bittorrent-
dominates-traffic-159742)

~~~
kasey_junk
This idea that ebooks are dramatically cheaper for publishers to produce is
the single biggest problem they have. Because the actual production and
distribution of the paper books is not a huge cost component of the price of a
book. With the deals they were previously getting with amazon the distribution
channel of ebooks could frequently be _more_ expensive than their traditional
book distribution channels, which have had many years to become more
efficient.

The vast majority of the cost of the book is not in the production of the
paper product, but in the production of the content of the book and the
marketing of it. This remains static regardless of the delivery vehicle, but
is non-obvious to the consumer.

My big concern is that the consumers attitude about the price of books is
going to lead to a world where it is impossible to maintain the current
standards around content creation, and that the drive to the bottom in prices
will mean much fewer opportunities for professional writers, editors and
booksellers. I believe that will be worse for me as a book consumer.

~~~
Oletros
> With the deals they were previously getting with amazon the distribution
> channel of ebooks could frequently be more expensive than their traditional
> book distribution channels

How so?

~~~
Booktrope
Not actually so. The canard that print books are not more expensive than
ebooks comes from traditional publishers trying to justify high prices for
ebooks, but it's not so. Costs for print books that are higher than ebooks:
printing, shipping, warehousing, capital costs (sunk costs of a large print
run meaning investment in books that might take years to sell or never sell).
Another huge factor in the print book business is returns -- nearly all
bookstores are consignment shops and regularly return up to 30% or more of the
books shipped to them. It's the custom in the book business (to avoid shipping
costs) that "return" means, the retailer actually destroys the books that
aren't sold and gets a refund for them from the publisher. (Really!) Returns
can add another 30% or more to the effective cost of print books sold in
bookstores. (Returns are a smaller factor for bestsellers, one reason why
traditional publishers are so focused on that corner of the business.)
Remarkably, Amazon is one of the few retailers that tries to minimize returns
-- they try to get smaller shipments from publishers so that they can avoid
overstock.

So why do traditional publishers say that ebooks cost as much as print books?
(Booktrope is an online publisher focused on ebooks and print-on-demand paper
books, and we certainly do not say that ebooks cost as much as print!) For
traditional publishers, low ebook prices can undermine print sales. A big part
of their business model is selling print books at high prices through
bookstores. Lower ebook prices obviously are a problem for that model. Also,
traditional publishers are used to a world where they have great connections
with tastemakers and can persuade people their product is "better" than the
competition. If you can do that, you can keep your retail price high -- like
Apple does in the phone/tablet/computer world. But it's not working -- there
are lots of great books being self-published and coming from non-traditional
publishers these days, so, as the article says, big publishers are really
starting to suffer from their own pricing policy of trying to keep ebook
prices artificially high.

------
subliminalzen
I recently subscribed to Kindle Unlimited and it has definitely saved me
money. And with the selection getting better and better, I envision this
"Spotify for ebooks" business model as the new normal.

I own a Kobo too and hope Chapters / Indigo offers the same service.

