How Much Does It Really Cost to Produce an E-Book ?

Someone is making a ton of money!

How far apart are print book and ebook production costs ?

I ran across an interesting article from a favorite source the other day and encountered some production cost figures that I'm not so sure are telling an accurate story.

Left me a little confused [nothing new about that :)] --- I was dog-tired when I first scanned it and pounded out this post, so I may not have interpreted all as well as I should.

Key excerpt from article:

“We still pay for the author advance, the editing, the copy-editing, the proofreading, the cover and interior design, the illustrations, the sales kit, the marketing efforts, the publicity, and the staff that needs to coordinate all of the details that make books possible,” said Bob Miller in February 2009 on the HarperStudio blog (which has been defunct since April 2010 when the publishing start-up folded) when he was president and publisher of that company; he is now president and publisher of Workman Publishing. “The costs are primarily in these previous stages; the difference between physical and electronic production is minimal.”

That so ? From my initial research I had reached a different conclusion.

Perhaps it's in the way Bob miller is splitting his hairs or framing his parameters.

I do believe that content is king and should drive cost/value, but ...

This from Digital Book World by Jeremy Greenfield: 

Consumers Upset and Confused Over E-Book Pricing

Publishers are making a killing on e-books because they cost nothing to produce, distribute and sell and are almost 100% pure profit. At least, that’s what many consumers think.

“E-books cost almost as much as printed books but are phenomenally cheaper to create,” said Trevor Doyle, 39, a teacher from Ione, Calif.

“There’s so much less cost involved – no material, relatively low distribution cost, no inventory costs, transportation,” said Michelle Barrineau, 42, a sales analyst from Ft. Lauderdale, Fla.

While consumers understand the basic costs involved in the bricks-and-mortar retail world, they don’t understand the costs involved in selling something that is, well, much, much smaller than a bread box.

“With today’s pricing, the profit in e-books is crazy,” said Greg Harris, 49, who lives in San Carlos, Calif., and is a vice president of sales and marketing for an electronics company. “Without the need to stock inventory and move paper all around the country, there should be a significant discount in the pricing model.”

“When I saw how much these e-books cost, I was amazed,” said Heidi Barron, 48, a public relations professional from Atlanta. “There is no printing, no shipping, no warehousing, no retailer. There is simply the transmission of the content through the Internet. Someone is making a ton of money.”

On that last point, Barron may be on to something. Publishing companies that publicly reported earnings for 2011 followed a similar pattern: flat sales, increased income. Digital Book World and others have speculated that higher profit margins on e-book sales are the culprit.

With the recent news about the Department of Justice lawsuit against some of the largest U.S. publishers and Apple alleging an e-book a price-fixing scheme, consumers are more aware than ever that there is a price battle going on in the e-book world. They just may not be aware of who is on what side, what each party wants and why, and what is really at stake.

“Why the frick-frack do these major publishers think it’s okay to put out a paperback at half the price of an e-book they can upload and forget?” said Diane Castle, 36, a writer from Dallas. “To me, this defied logic – until I stumbled upon a news article about the Justice Department’s price-fixing law suit yesterday. Now it all makes sense.”

“I do read e-books and am disgusted with the price that is usually charged,” said Sarah McGill, 37, a freelance writer from San Antonio. “I truly believe that the larger companies participated in some sort of price-fixing.”

So, How Much Does It Cost to Produce an E-Book?

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In the eBook Business, Authors and Readers Are Necessary, Publishers Are Not

Publishers Panic!

History repeats itself, especially if people do not learn from past mistakes.

The publishing industry [by that I mean the old, big house publishing model - not the new digital, streamlined model :)] is going down the same mistake laden path that the music industry did a few years ago.

And what's worse, I believe the publishing powers to be (or should I say mental midgets) were warned of this.

When the new digital tech RE publishing exploded on the scene and leveled the playing field, big publishers tried to maintain ebook prices at or close to print book prices.

Well, the book loving public (smarter than they realized --- as with their music loving cousins) revolted by pirating the ebooks in one way or another, e.g. getting them free from file-sharing sites.

Publishers should listen to their customers! When they think a price is too high they will go elsewhere or pirate it.

'Once record companies put a reasonable price on their products, the vast majority of buyers gave up piracy and started paying for their music. The same can happen with eBooks.'

Ed Hardy, writing for Tablet PC Review, says:

Book Publishers Must Learn the Same Lessons Music Publishers Did


Last week, the U.S. Justice Dept. sued some of the world's largest publishers as well as Apple, accusing them of eBook price fixing. This lawsuit wouldn't be necessary if eBook publishers would learn the lessons that music publishers did a decade ago.


As it stands now, publishing companies like MacMillan, HarperCollins, Penguin, Simon & Schuster, and others want to charge more for the digital versions of books than most of their customers think they are worth. These companies frequently price eBooks the same, or just below, the printed versions. Few of their customers see the logic in this -- publishing a book electronically removes the costs of printing, shipping, and storing a physical object.

The argument the publishers make in response is that the majority of the cost of a book isn't in printing it, but rather in their overhead of paying authors and editors, advertising, etc. The answer this this is clear: if they don't find ways to significantly lower their overhead, these companies are going to be out of business in a few years.

Learn from the Past

There is another industry that was in a similar situation a few years ago: the music business. Around the turn of the millennium, the Apple iPod had made the CD obsolete, and consumers wanted to buy MP3s. The music publishers didn't want to sell these -- they liked being able to force people to buy a whole CD in order to get the one or two songs they actually wanted.

Consumers felt they were being ripped off, and turned to pirating songs instead of buying them. The music industry struggled for years... until record companies finally bit the bullet and started selling songs in digital formats at reasonable prices. Now, people are buying more tracks than ever and the music industry is healthy again.

History Repeating Itself

Book publishers must learn from music producers. Currently, when their customers complain that eBooks are too expensive compared to the security of owning the printed version of a work, the publishers tell them to buy the printed book -- as if that was the only other option.

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The Digital Reader, Digital Book Price Switch Strategy :)

From left,the Kindle Touch, Kindle Fire tablet and new Kindle displayed…

My theory on the strategy of e-reader and e-book pricing is that it was mapped out prior to public knowledge or acceptance of either.

You know ... sell a new well marketed hardware product (e-readers) at a premium at first (to recover initial research & manufacturing cost) ... but stuff it with a large assortment of low-cost content (cheap e-books consisting of backlists, old titles with expired rights, works by hungry new authors etc.) to sweeten and increase sales ...

THEN, when the consuming public gets hooked on the new reading media device, DROP the e-reader price and UP the e-book price (content price).

I like it because it will give writers more value for their work ... and properly align reward for creativity.

Just thoughts running through my crooked mind. I love being an armchair quarterback :) It's not as if this strategy is a new concept.

This from The Wall Street Journal via Chicago Tribune:

Readers getting cheaper, but rising e-book prices causing sticker shock

Cheap new e-readers are expected to be one of the hottest gifts this holiday season. But new owners of Kindles and Nooks may be in for sticker shock on Christmas morning: The price gap between the print and e-versions of some top sellers has now narrowed to within a few dollars -- and in some cases, e-books are more expensive than their printed equivalents.


When Amazon.com Inc. introduced its first Kindle e-reader back in November 2007, the $9.99 digital best seller was a key selling point. Today, the price of a Kindle has plummeted to under $100 -- from $399 back then. But e-book prices for some popular titles have soared.

Take Ken Follett's massive novel "Fall of Giants," for example, which costs $18.99 as an e-book. On Wednesday it was selling for $16.50 as a paperback on Amazon.

The digital price increases are the result of a decision by the six biggest publishers to set their own consumer e-book prices, a move that effectively bars retailers from discounting their e-books without permission. No such agreement exists for printed books -- where retailers are free to set their own prices. So while a best-selling e-book price is often less than half of the hardcover price, heavy discounting of the print version closes the gap.

Industry executives say this new state of affairs may already be hurting e-book sales, which have skyrocketed over the past three years and are today 15 percent to 20 percent or more of major publishers' revenue.

"Some people who see $12.99 and $14.99 for e-books may find those prices a little expensive," says Scott Waxman, a literary agent and digital-books publisher.

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Publishers’ Why’s and Wherefore’s When Migrating to Digital (are all the damn apostrophes correct?)

Indeed, when the current publishing upheaval began (it seems just a little while ago in the scheme of things) and the conqueror ‘Digital’ came swaggering into the publishing world, publishers were at first completely devastated; then were bombarded by all kinds of options and questions for their very survival!

You can just imagine publishers’ mental angst deciding “Should I get out of this rapidly changing fireball of an industry or should I admit that the old ways are going down the drain and commit to learning a whole new process … dealing, perhaps, with an entirely new and separate tech industry?”

Karina Mikhil (pictured), a publishing executive with a Master’s in Publishing from New York University, has some excellent questions and analyses that will help these publishing execs and their firms reach a viable decision.

From Karina Mikhil in Publishing Perspectives:

Migrating to Digital Publishing? The Six Key Questions to Ask

Here are the six “Ws” you need to ask yourself before transitioning from the old to the new: why, who, what, when, which, and where.

The publishing industry is not generally known for being agile or quick to change, yet it is facing one of its biggest times of change probably since the invention of the printing press. At the heart of this is the migration to digital.

Prior to this migration, a time-tested process and structure existed for getting books printed: from acquisition, copyediting and typesetting, to author reviews and proofreading, to print. Although hiccups occurred and no two companies had the exact same workflow, the foundations were the same and ensured quality products got released in expected time frames.

Whether publishers are dealing with online content or e-books, digital only or both print and digital, publishers are now faced with more questions than answers as to how to incorporate the new with the old. Below I provide a framework for those questions, using the traditional 6 Ws: why, who, what, when, which, and where.

Why?

Of the six questions, this is the easiest to answer. No publisher can afford to ignore the digital any longer: the tipping point has come and gone; more and more e-books and e-readers are being sold weekly; and authors will begin demanding this, if they haven’t already. And traditional publishers need to offer all things digital to compete with the emerging “digital publishers.”

Who?

Even prior to the migration to digital, publishers would do one of two things to keep costs down: outsource as much as possible, keeping headcount down, or the reverse, which is hire talent to keep all services and costs internal. With digital, publishers have to make this decision anew. Should they invest in new talent from other industries (e.g., technology) or in educating existing talent, those who are eager to learn and have a background in publishing? Or should they turn to one of the many conversion and content solutions providers that exist in the market?

What?

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Amazon Should Lose the $9.99 Ebook Price War

Publishers have engaged in a battle with Amazon on pricing all eBooks at $9.99...and they are winning.

I think they should win! Why? Simply because the value of a book (a creation, if you will, from intellectual capital) has never been just about the manufacturing process...It has, more importantly, been about the "content" from the writers mind and imagination.

Traditional publishing has always tried to minimize content (as evidenced by the chump-change percentages offered to writers)...But, in fact, it has always been the true gold.

Faith Merino, writing for Vator.tv, reports on this issue (not always with my point of view) with a key timeline history of the publishers vs Amazon fight and future probabilities:

Why are publishers fighting Amazon's e-books?

A breakdown of traditional book publishers' uphill battle against cheap, digitized books.

Amazon’s war with publishers heated up last week with a passive-aggressive letter to customers posted on Amazon.co.uk informing them that the high prices of e-books have been set by publishers and Amazon will continue to fight them. Personally, I go back and forth on this issue. On the one hand, charging the same price (or more) for an e-book as a hardcover seems ludicrous, but at the same time, the publishing industry has long struggled to survive, as there is little if any money in books these days. So what is the real story?

Amazon’s letter to customers reads:

“Dear Customers, recently, you may have heard that a small group of UK publishers will require booksellers to adopt an ‘agency model’ for selling e-books. Under this model, publishers set the consumer price for each e-book and require any bookseller to sell at that price… We believe they will raise prices on e-books for consumers almost across the board. For a number of reasons, we think this is a damaging approach for readers, authors, booksellers and publishers alike.”

The letter ends with a simple statement about Amazon’s confidence in its customers’ buying power: “In any case, we expect UK customers to enjoy low prices on the vast majority of titles we sell, and if faced with a small group of higher-priced agency titles, they will then decide for themselves how much they are willing to pay for e-books, and vote with their purchases.”

The agency model that Amazon refers to was first proposed by Macmillan, which threatened to pull its books from Amazon if the online bookseller didn’t raise the prices of its $9.99 e-books. Amazon responded by pulling Macmillan’s books itself, but as other publishers rallied behind Macmillan (Hachette, HarperCollins, Simon & Schuster, and Penguin), Amazon has been left no other choice but to capitulate and let publishers set their own prices.

How it all started

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Award-winning Author Chooses E-book Over Print Publishing Deal !

Are eBooks starting to win the race with printed hardcover books? This post gives an example of one established, award-winning author who has chosen to bypass a printed publishing deal (hardcover book would have sold for $27.95) for publishing on Amazon for $1.99 per digital copy...He is going for quantity readers over fewer who would/could shell out $27.95 for a book...

I'm betting he will get enough increase in numbers of readers over the vast internet to offset the cheaper price...and then some, maybe...But, I don't know. I will be following up to find out the result...One thing for sure, he will be getting 50% to 80% of the digital sales price...which is probably approaching what he would get from the $27.95 hardcover price after big publishing and the associated companies take their cut...You know 80% of $1.99 vs 7% of $27.95...

This press release is from prweb.com:

Author takes bold move toward the future of publishing.


Award-winning novelist Gary Ponzo (pictured) is prepared to gamble his literary career on the strength of the growing digital book business. He’s turned down a print publishing deal for his novel, “A Touch of Deceit,” in order to publish it as an ebook on Amazon.

“I had to decide what’s more important to me,” Ponzo said. “Do I want profit or do I want readers. Inevitably I chose readers.”

The publishing company sold only hardcover books and the retail price was $27.95. Ponzo felt this was too much to ask in this economic environment. “I don’t want to throw the publisher under the bus, they’re a good honest company. They’re just stuck in an old business model. I felt uncomfortable asking my own mother to spend thirty bucks on my novel. It’s the digital age and I needed to adjust my thinking.”

Ponzo’s novel “A Touch of Deceit,” won the 2009 Southwest Writers Contest, Thriller category. He’s an award-winning author who’s published numerous short stories including two which were nominated for the very prestigious Pushcart Prize. His ebook is available as a digital download on Amazon for just $1.99.

“I spoke with author Karen McQuestion who’s sold over 36,000 ebooks on Amazon,” Ponzo said, “and she recommended I keep the price down. That's the price she felt she had the most success with.”

“A Touch of Deceit,” is a thriller about FBI agent Nick Bracco who recruits his mafia-connected cousin to track down a terrorist in Washington D.C.

Media contact: Gary Ponzo
Website: www.garyponzo.com

What’s So Hard To Understand About Random House’s Strategy?

Does Random House (RH) have the right approach to establishing digital content pricing, especially eBooks? RH is successfully moving the digital pricing needle from the retailer to the publisher...where it probably belongs and will be more beneficial to writers and other creative people...Just this bloggers opinion.

Mike Shatzkin, The Shatzkin Files, has his usual intelligent analysis on this subject:

Since Apple made its iPad announcement last January, five of the Big Six publishers have been featured participatants. That not only means they’re making content available for the iPad “form factor” (color and connectivity like the iPhone, screen size like the Kindle) but also that they’re buying into the new “agency model” for sales. As anybody who cares about this stuff already knows, under the agency model the control of pricing to the consumer moves from the retail point of contact to the publisher.

In return for that control, the publisher lowers the “established retail price” and, although the stated margin to the retailer is reduced from 50% to 30%, the effective margin rises because the retailer sells at that publisher price, not something substantially less. And the publishers going to agency are happily accepting less for each book sold to gain that pricing control and price stability across all retailers.

Random House has been prominent by its absence from the group. And some people, including some who are really well-informed about publishing, wonder “why?”

I wonder why they wonder.

Although it is certainly possible that iPad book sales will be startling right out of the box, that’s not really likely. Unlike the Kindle, which is purchased by consumers solely for the purpose of reading books, the iPad will attract customers for all manner of reasons and, actually, reading books would be pretty far down the list for most people. Although there are pockets of skeptics, I’m sure most publishing people accept that the iPad can grow into a very robust bookselling channel but it isn’t clear how long that will take or whether narrative text will be as much a beneficiary of the device as books that are more complex presentations of words and pictures.

In the short run, which from this seat looks like some months, if not a year, Kindle and Amazon are still likely to be the leader in ebook sales, and other established ereader platforms that are optimized for text (Nook, Sony Reader, the new ereader from Kobo) will remain important. By holding themselves out of the new channels, continuing the current policies of “wholesale” discounting, and allowing the retailers to set prices, Random House will be maximizing their short-term sales and profits. Assuming they maintain their publisher-established prices near their current levels (and why would they not?), Random House will collect more money for each ebook sold than their competitors do while the public will will pay less for each Random House ebook they buy than for comparable titles from other publishers.

That’s a pretty significant short term advantage. Why wonder why somebody would do that?

Of course, most publishers hope — if not believe — that the proliferation of new devices and platforms combined with the more widespread use of the agency model setting retail prices will disperse the ebook market among many more players. Will Apple or any other player hold it against Random that they were slow to make the change if they decide to join the party after it really gets going? My hunch is “no.”

And that may be Random House’s hunch too. They may be making a perfectly conscious and rational gamble that the sales they’ll lose in the short run by not being on the iPad will be more than compensated for by margin they’ll make through higher wholesale prices and greater sales through lower retail prices than any of their Big Six competition in the still-dominant Kindle channel.

And if Amazon is willing to retaliate against a publisher’s print business over dislike of their ebook policies, wouldn’t they also be likely to favor the books of a big publisher that cooperates with them when everybody else doesn’t? Couldn’t that add a further incremental edge to Random House in the short run while the iPad book-reading audience is still ramping up?

I have read nothing to tell me whether Apple would or wouldn’t accept Random House books on the wholesale model. (The other publishers embraced the agency model; they didn’t need to be talked into it.) If they do, Random House could persist with this strategy for a long time, even when they start putting books on the iPad. Even though their “listed” ebook prices would be considerably higher than their competitors’, the prices at which they’d be offered to the public could be lower.

If this all works the way the agency publishers envision, we’ll have a multi-platform, multi-retailer, price-stable ebook market before too long. If that happens, Amazon may tire of paying more for Random House books, whether they sell them for less or not, and the wholesale model with retail price reductions is not a palatable combination for publishers. But that’s not imminent and for the foreseeable future, all the Random House position means to them is more revenue per copy and lower prices to the consumer.

There is a school of thought that ebook consumers are very sensitive to price. Starting with the appearance of the agency model next week, ebook prices to the consumer for (usually author-) branded frontlist titles are going to rise. It will be interesting to see if the IDPF (International Digital Publishers Forum) reports of sales show any change in the trend line starting with the reports of sales in April.

Publishers, Amazon Inch Toward Truce In Post-iPad World

More insider opinion Re e-book pricing and battles between Amazon and publishers. Who is going to make more money under the new materializing business model? Who is offering olive branches to get on the new book media distribution bandwagen?

Dan Gallagher of the Wall Street Journal reported thusly:

Since Amazon.com Inc. (AMZN) debuted its first Kindle e-book reader late in 2007, the reaction within the book industry has been some mix of welcome and scorn.

Welcome because of the potential to tap an entirely new market--before a wave of digital piracy similar to the one that decimated the music business. Scorn because of fears that the online retail giant, which already has a commanding share of the market for physical books, might use its leverage to seize control of the new market and push down prices even further.

Publishers have been fighting back, and seemed to score an important victory over the last week, with Amazon reportedly agreeing to a model that would let them set higher prices for e-books sold for the Kindle.

Analysts say a truce is likely but won't do much harm to Amazon even if the company loses the $9.99 price tag for e-books that has helped make the Kindle a major hit.

The company discloses little data for its Kindle business, but it is widely estimated that Seattle-based Amazon loses money on most e-books that it sells for that price. Higher prices would mean a better margin for the business even if sales take a small hit in terms of volume, experts say.

But concerns persist about whether publishers will give any ground at all on e-book prices. In theory, the companies should still make good profits on e-books at lower prices, because they are saving on the costs of printing, binding and distribution that make up an estimated 10% to 12% of a hardcover book's total price.

"Publishers seems to be fighting a rear-guard action against Amazon," Stephen Windwalker, a small book publisher and author of the Kindle Nation Daily blog, said on a conference call hosted by the brokerage Collins Stewart on Monday.

"I'm not seeing a lot to be excited for," he added.


Turning Off The 'Buy Button'

Ironically, the company that has thrown the biggest wrench into Amazon's plans for the e-book market is the very company that Amazon was trying to emulate--Apple Inc. (AAPL).

Apple, with the launch of the iPod and its iTunes online music store, turned the music industry on its ear.

The store sold single tracks for 99 cents and kept most full albums under the $10 mark. The music industry had already seen its profits socked by digital piracy, so it begrudgingly accepted a model that allowed for some revenue--even if it was less than what the industry was accustomed to.

Amazon tried the same simplified pricing scheme for e-books, pushing publishers to keep the prices below $10.

But last month, Apple introduced the iPad tablet device and with it, announced a new service called iBookstore. No prices were announced for the store, but the company said it would let publishers set their own rather than force them to accept a set price.

Six major publishers announced support of the iPad and have been pushing Amazon to allow them to set higher prices. Things came to a head last week when Amazon removed the titles of one publisher--Macmillan--from its site in protest of its new e-book prices, even as the company admitted that it had "capitulated" to Macmillan's demands to set higher prices.

Macmillan's books are back for sale on Amazon this week, and neither company will say what sort of deal they reached.

"It's fair to say that no one in the book industry wants to see a major channel of distribution shut down, and that's what happened when Amazon turned off the buy button on Macmillan's books," said Al Greco, a professor of business at Fordham University who studies the book market.

An Olive Branch?

In an op-ed column in The Wall Street Journal on Monday, the head of a major publishing house noted the changes rippling through the book business and offered what some considered to be an olive branch in the battle over pricing e-books.

John Makinson, chairman and chief executive of the Penguin Group, wrote that publishers need to understand that "it's fruitless to stand between the reader and his choice." But he also noted that the physical cost of a book is roughly on par with the average margin of the consumer book-publishing industry, "and what's needed to keep investing in new writing and new ideas." (John's editorial note: The last part of the last sentence makes absolutely NO sense to this author)

"So there's some room for discussion but not that much," he wrote.

Greco called Makinson's piece "an attempt to calm the waters." He noted that five of the six major publishers have entered into what is called an "agency agreement" with Apple to allow the company to sell e-books for its iPad, but it gives publishers control over pricing.

Such a model "will become the norm for all sales of e-books in the future," Greco said.

"Ironically, while Amazon seems to not like that agency approach, they lost money on every transaction under their current model," he said. "From a financial point of view, Amazon will make more money this way."

He noted the risk, however, that consumers have now become used to a $9.99 price tag for e-books, which may make some resistant to the idea of paying higher prices.

"Will consumers walk away? I don't think so," Greco said.

Windwalker, the Kindle Nation Daily blogger, agrees that Amazon will likely do well financially even under higher prices. But he added that consumers will likely resist the higher prices--providing an incentive to publishers who break from the pack to keep prices low.

He also noted that publishers may be ignoring Amazon's key strengths--at their own peril.

"There are two things that Amazon knows more about more than anyone else in the world: Price elasticity and their own customers," he said. "If higher prices begin to suppress sales and profits, then I think it's fair to assume they [publishers] will not march in lockstep."

Amazon vs The Book Industry

Martin Peers of the Wall Street Journal has more on the empowering of publishers:

In Amazon vs. the book industry, the latest round has gone to the publishers. But they might not want to claim victory just yet.

It's no doubt gratifying to publishers, and all content companies, to see Amazon.com affirm their control over their own product by capitulating on e-book prices. But it won't do the publishers much good in the long run if they raise prices so far they snuff out the burgeoning market for e-books.

Leaving aside the pricing issue for a moment, e-books offer big advantages for publishers. They eliminate one of the industry's major costs – printing, binding and distribution. No longer does cash have to be tied up in inventory. With e-books, there are no costly returns of unsold books to worry about.

Publishers should therefore be flocking to e-books. That includes trying to figure out how to keep the low prices. There's little question the Kindle's $9.99 pricing on best-sellers is part of the reason Amazon now claims six Kindle sales for every 10physical sales when the same title is available in both formats.

Instead publishers are fretting about the Kindle's impact on higher-priced hardcover sales. Raising the e-book price to $13 or $15, as reportedly contemplated in Apple's discussions with publishers, isn't the way to embrace the digital future. A price of $15, for instance, is close to the hardcover book price charged by discounters like Costco.

The music industry showed what happened when content makers try to hold back their product, including through high pricing: Piracy takes over.

By introducing iTunes, with low prices for music, Apple saved the music industry from itself. Publishers appear to have won the right to set e-book prices. They should use that power wisely.

Are Book Publishers the New Record Labels?

More on the intrigue of the eBook pricing drama...Starring iPad, Macmillan Publishers and Amazon:

By Nick Mokey of Digital Trends
Macmillan’s battle to raise e-book prices echoes earlier battles fought by the recording industry, and will end with the same rampant piracy if companies don’t get reasonable.

Ten dollars for a virtual copy of a book – one that you can’t handle, sell, lend, or even read without a $259 device – never seemed that reasonable to begin with. But with e-books gaining steam, most recently with a prominent inclusion on Apple’s new iPad, it looks like publishing house MacMillan will push that price even higher. After a round of back-and-forth face slapping, Amazon has been forced to abandon its $9.99 e-book price cap to accommodate Macmillan titles that will sell for $12.99 and $14.99.

Let’s recap: An old-school company that used to make a killing by controlling the dissemination of an artist’s work and keeping a fat share of profits is now bent out of shape that the same job can be done digitally for much cheaper. They still demand the product is wrapped in an unwieldy tangle of DRM, and sold for prices nearly on par with physical copies. But they own the rights to most of the work we want to enjoy, so companies that want to distribute it online have nothing to do but pay the piper.

This sounds familiar. Like, oh, the battle record companies have waged with digital distribution of music for over 10 years now.

As the $1.29 price tag on DRM-free iTunes tracks demonstrates, getting dragged into irrelevance kicking and screaming wasn’t totally fruitless for those goons. They’re still milking CD-like prices out of a distribution system that practically eliminates the need for them to exist at all. It’s like Aquafina ganged up with the public waterworks to charge you $2 for every cup out of the tap.

Of course, that’s overlooking one significant fact: A good portion of the civilized world gives this rigged system of overcharging the middle finger and downloads everything for free, illegally.

In the face of unjust pricing, piracy thrives. It did with music, and it will with e-books, too, if book publishers learn nothing from their musical counterparts and insist on pricing their virtual wares into the realm of absurdity.

Pulp piracy is already taking root before our eyes. In 2009, Dan Brown’s The Lost Symbol became one of the first major novels to sell more digital copies than hardcovers, priced at $9.99 in Amazon’s Kindle store. Within days, it also became one of the most popular pirated books, with over 100,000 illegal copies getting passed around online. You can download the 2.86MB PDF file from any number of pirate sources in a matter of minutes.

Who can blame the pirates? I can buy a physical copy of Dan Brown’s book for $12, or a digital copy for $10. With the physical copy, I need no expensive e-reader to use it, I can lend it around to a dozen friends when I’m done with it, or I can turn around and sell it for about $7, in which case the privilege of reading it cost me about $5. Not bad, and it amounts to half the expense of the digital copy, which is impossible to lend or resell, and which I most likely will not read again.

As the pirate surge around The Lost Symbol proved, the reading public, much like the music-listening public, is not afraid to go underground to dodge the barbed wire and tollbooths publishers have strewn out above.

Macmillan reminds me a lot of street artists who charge money to take pictures of them. They’re really in no position to make outlandish demands of you as a pedestrian. You should really pay them something – because it’s fair. But if the amazing robotic moonwalker’s little cardboard sign demands $50 for a picture, you’re just going to take a picture, turn on heel, and walk away with it for free. Because you can, and because that price is outrageous.

Go back to your calculators and punch up some numbers that make sense, Macmillan. Before we snap our pictures and slink away from your clown act without dropping you a dime.

Amazon Removes All Macmillan E-Books

More drama and intrigue in the publishing world!

The pricing wars have begun since the iPad was unveiled by Apple last Wednesday. Macmillan scheduled a meeting with Amazon to discuss eBook pricing and Amazon's response was to remove all their books! A bad move, in my opinion, since Amazon sells it's Kindle based on it's large selection of eBooks and Macmillan is one of the largest publishers in the U.S. You just know other publishers will be wanting to negotiate with Amazon!

Anyway, Jeffrey A. Trachtenberg and Geoffrey A. Fowler of the Wall Street Journal had this to say:

Amazon.com Inc. has removed all e-book titles published by Macmillan from Amazon and its Kindle e-reader site in a battle over pricing, according to a statement issued by Macmillan late Saturday.

The move follows this week's launch of Apple Inc.'s new iPad device, which is expected to shake up the publishing industry by competing directly with Amazon's Kindle reader and by enabling publishers to set their own retail prices on their books.

Macmillan CEO John Sargent said he visited Amazon on Thursday in Seattle to discuss "new terms of sales for e-books" and that by the time he returned to New York, he'd been informed that Macmillan's e-books would only be for sale on Amazon.com "through third parties," according to the statement, which appeared as an advertisement on publishing industry Web site PublishersMarketplace.com.

An Amazon spokesman didn't respond immediately to a request for comment regarding Mr. Sargent's statement.

People familiar with Amazon's action said the move by the online retailer signals its unhappiness with the prospect that e-book prices may be rising in coming months. Amazon has made discounted e-book prices a cornerstone of its digital strategy.

Macmillan, a unit of Germany's Verlagsgruppe Georg von Holtzbrinck GmbH, and one of the largest publishers in the U.S., boasts such top sellers as "Sarah's Key" by Tatiana de Rosnay and "Wolf Hall" by Hilary Mantel.

Neither was available for purchase on Amazon's Kindle e-reader on Saturday. Instead, customers saw this message: "Tell the publisher! I'd like to read this book on Kindle."

How long Amazon will continue not to sell Macmillan titles – and whether the move will spread to other publishers who also want Amazon to charge more for e-books – remains unclear. The move could be only temporary. Amazon has marketed its Kindle e-reader by trumpeting its wide selection of books.

Macmillan was one of five major publishers which announced they would begin selling their e-books on Apple's new iBooks store, a key feature of the iPad. Publishers have agreed to a new pricing model with Apple, under which they will set their own e-book prices, with Apple taking 30% of the revenue. They are expected to price many e-book titles at $12.99 and $14.99, with fewer carrying the $9.99 price that Amazon currently charges on most best-sellers.

It is expected that publishers will now seek to do business with Amazon and other e-book retailers on the same terms as with Apple. By setting their own prices, publishers would be able to eliminate discounting on Amazon and elsewhere that they believe threatens the long-term business model of publishing.

Macmillan e-books were still available for sale on Saturday at the e-bookstore at Barnes & Noble.com, a unit of Barnes & Noble Inc. Kobo, Inc., a Toronto-based e-book retailer, also said that it is continuing to sell Macmillan's e-book titles. Added Bob LiVolsi, the founder and CEO of independent e-book retailer BooksOnBoard.com, based in Austin: "As a matter of policy we won't do anything to shut down a publisher because of pricing."

Big Publishers Don't See The Core Reason Their Biz Is Imploding!

The old business model for publishers of letting "content" find them is failing today due to the overabundance of content (much of it free) on the internet. Also, general publishers, who do not cater to a specific audience, are having more difficulty in selling content because they have not cultivated a niche audience and a sense of trust for what they do publish.

Anyway, Michael Shatzkin, an industry professional whom I trust and admire greatly, has some targeted thoughts on today's publishing dilemmas and I am proud to present them here:

The rapid series of developments in the digital book space and my rising profile mean that I seem to be in an interview with a journalist just about every day. As I was yesterday. The focus of yesterday’s conversation was the Baker & Taylor“Blio” platform that I wrote about last week. How widespread did I think its uptake would be?

The interviewer and I covered a lot of ground, including ebook pricing and timing and whether publishers would be able to make enhanced ebooks work. Those are the topics of the moment (and they are all panel topics at Digital Book World.)

At one point we had a robust discussion about ebook pricing. My interviewer asked me about a pundit’s observation that hardcover books were just wildly overpriced. The implication is that publishers should consider themselves damn lucky that people would pay $9.99 for an ebook, which, after all, has far fewer bytes than a movie they can get for $1.99.

That’s an easy one to answer. What’s a “right” price? Well, from the publisher’s perspective, that’s a question with a clear mathematical answer. (The math wouldn’t yield the same answer for an author.) The right price is the one at which the total gross margin — revenues after all costs — is maximized. We all know more will buy if it is cheaper and fewer will buy if it is more expensive, but the “right” price is the one where customers times margin (margin being revenue minus costs) is the highest it can be.

There is no way in the world that a publisher would maximize margin cutting $28 print book prices to $9.99. So the author of this blogpost being quoted to me might be looking at the “right price” from a consumer perspective or a high-level industry observer perspective, but they sure aren’t looking at it from the perspective of the one who sets the price: the publisher.

At the conclusion of the interview, the journalist on the other end of the phone asked me whether, in effect, publishers would be able to save themselves. “Is there a model,” she said, “which assures that a publisher will profit selling their books in the future?” ...

The rest of the story: http://alturl.com/ztsf

The Ebook and POD (publish on demand) Publishing Strategy

The new and much more economical publishing model being anticipated and envisioned is to publish the manuscript as an eBook first and publish individual downloadable eBooks when a sale is made. The publisher can also produce a limited press run of hard copies if it is anticipated that a certain number might sell out. Sustainable pricing in the eBook field would be key here to make this model come to full fruition.

The following post from the Shatzkin Files addresses this exact point head-on and I have included here for your further consideration:

'Is the eBook and POD combo a viable publishing strategy yet?'

Posted by Mike Shatzkin on September 12, 2009 at 6:57 am

'There’s a new publishing model afoot, which is to lead with the ebook and just print what you need. That might be POD, and it might be press runs, if you can sell out whole press runs. If the ebook becomes a substantial chunk of sales and if ebooks maintain their prices, this looks like it could be a new way to do much lower-risk publishing.

Some very smart publishing people are moving in this direction. It had been the plan of the meteoric Quartet, which has already flamed out. It is part of the plan of Richard Nash, an experienced publisher (Four Walls Eight Windows) and a budding entrepeneur. It is the model for a young and aspiring Irish publisher named Eion Purcell. And last week, tor.com announced that it would be publishing books (this is distinct from its “parent”, St. Martin’s sci-fi imprint Tor) with an ebook first and POD methodology.

Can no pressrun publishing work? That’s a subject for discussion at Digital Book World in January, but, based on an interesting post by Kassia Kroszer, one of the four principals in Quartet, I have real doubts.

Kassia’s post makes it clear that direct sales at “full margin” (meaning no cut to anybody else in the supply chain) were an important part of Quartet’s budget and plan. They figured that by sticking to niches, and the first one was going to be romance, they’d be able to build up a direct audience and avoid sharing revenues with retailers and wholesalers. Kassia points out that savvy ebook readers (who hate DRM, high prices, lack of interoperability, etc.) are willing to support their “local” publisher, knowing that more money gets to the author that way...' Read more at http://www.idealog.com/blog/