Gaza and Israel. Russia and the Ukraine. Isis, Iraq, the United States. Amazon and Hachette…
Phew, people! Can we all just chill out and love one another? (Song: C’mon, people now, smile on your brother…)
Just about every author on the planet has joined the Amazon/Hachette war this morning by adding their name to a NY Times author-paid ad calling for a ceasefire between these two entrenched huge corporations accustomed to getting their way. Unfortunately, unlike with the sale of pots and pans, a large number of authors are stranded on their own isolated mountaintops as these two huge armies duke it out. The authors are the innocent civilians, and I would argue in many cases, not particularly well informed.
I have been observing with interest how the remaining Big 5 publishers address the threat and opportunity provided by the only new invention in decades within books: the ebook. From what I can see, most have continued doing business as they have in the past, publishing the $27 hardcover novel first along with a $15 ebook, then one year later along comes the $17 trade paperback as the print book backlist hopeful.
But some publishers, most notably HarperCollins from what I can tell, have shaken up their old business models and tried new approaches, including lowering ebook prices on new releases in conjunction with offering the other higher-priced versions (depending on the author, depending on the title), and I have to believe they have learned something about incremental revenue increases and total profitability from altering their overall pricing mix.
Every business wants and needs to create new customers to maintain a healthy future. Some customers are always leaving, so new ones are desperately needed. In and out. Might it be that Amazon and ebooks are responsible for the lion’s share of new customer creation for publishers and authors? New readers? I’m talking about established authors here, not self-published.
Most established authors I speak with do not realize that 40-50% of their print book royalties have been coming from Amazon over the past decade, plus 80% of their ebook royalties. Surely Amazon knows how to sell books! That is their job as a reseller. Well done. Hats off. Good for you.
Many Hachette authors are now learning with recent royalty statements what this ongoing war is doing to their livelihood, and they blame Amazon. (A publisher’s royalty statement does not show where the sales are being made so authors would not have known in the past just how important Amazon is.) But I think this is truly unfair. A reseller is in business to resell the items they want to sell at the terms they mutually agree to.
Retailers have no commitment to product producers, let alone authors. Their mission statements all say to conduct business ethically, blah, blah, blah…but in the end they decide what to sell. The DVD of the movie Sandlot is not always available at Walmart, Target, Stop & Shop, and Blockbuster. Same for many other notable movies. Do you hear those copyright holders crying in public against the retailers?
I am confident Amazon has the best data on the effect of different price points on sales and profits in this particular war. They believe digital content priced over $10 will not sell nearly as well as under $10. To me, as a consumer, this seems obvious. (Mass market paperbacks sold much better at $4.95 than $5.95 and the profit return was better.)
I have found book prices in general over the past two decades indicate a lack of concern for consumer pricing by the publishers. $28 for a hardcover novel? You couldn’t have made me feel a tiny bit better and priced it at $27.95? $18 for a 128-page novel in paperback? Not $17.95? Throw me a bone here, will ya?
The future of publishing lies within this overall pricing challenge. The audience for hardcover fiction is shrinking, not growing, so the publisher needs to get as much out of that shrinking group of purchasers as possible. People who love hardcover novels might well pay $35 for all I know. I think there are some people who would pay $10 for the Sunday New York Times in print to keep it alive. If those options can be managed without too much churn by the publishers, good for them. They are taking care of more customers with acceptable choices.
But Amazon has a unique point of view about digital content, armed with mountains of price-testing data. Ebooks are where the new readers can be found, in the sub-$10 price points, using interesting new “tech toys” such as Kindles and iPads, the exciting developments of our time. Impulse buying works. Ebooks can be downloaded anywhere anytime immediately so lower impulse prices make sense. (No one is measuring how many sales are not made due to the price being $1.00 too high.) There is a reason retailers put sub-$5 items at the checkout and not higher-priced ones. Retailers do know what they are doing sometimes, shocking, I know!
Hachette needs to be profitable, which is tough enough in books, hence all the T-shirts and bags one sees in what used to be “book stores.” The problem with big retailers when they set low prices, is those already low prices will come down further beyond the established point in retail wars of digital competition. (Yes, more wars, sigh.) I do not believe manufacturers should ever dictate what retail prices will be as that leads to worse forms of monopoly. Hachette gets paid the same invoice price regardless of the retail price, a fact most authors I speak with do not understand, so the publisher gets their money, but then they have to manage the “chaos on the field” of other resellers complaining they cannot compete. And they have to worry about the erosion to their print book profits.
This has been the name of the retail game for decades now. In books, Barnes & Noble drove down retail prices first back in the 1980s. Staples did it for office supplies; Home Depot for hardware; Walmart for everything on earth, and so on and so forth. And now Amazon. Consumers love these bargains.
As a consumer of books, I hope I can buy new ebooks within the first few years of their release for under $10. I will spend much more than I do now if that happens and try more first-time novelists. I don’t need to read a new novel first in hardcover, and in fact most of the books I read have been available for five years or more by the time I get around to them. (Many are freebie pass-alongs, with the average popular book read around 77 times I believe is the stat? As in bought once, read 77 times.)
Clustering customers into their appropriate “buckets” is what is needed by the publishers: those who need to buy first (hardcovers, the avids); those who want a reasonably-priced paperback (the early mainstream), and then the mainstream and laggards with ebooks priced $9.95 or lower– the same price they pay to go enjoy a three-hour movie.
But they don’t have this data. Amazon does. Working together they could both learn a lot.
Anyway…(sigh)…peace be with you.
— Caleb Mason from Publerati