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The real agenda of Apple’s ebook partners: death to ebooks by Aaron Pressman
February 3, 2010 | 11:00 am
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By a TeleRead Contributor
The head of one of the big book publishers, Macmillan CEO John Sargent Jr., is out with an “open” letter about his dispute with Amazon over the pricing and timing of electronic books. It’s telling that this “open” ebook letter wasn’t released publicly and isn’t directed towards readers, book lovers and customers. It was placed as an ad in a small publishing industry trade rag and the message is for publishing industry insiders. Sargent’s message, despite a bunch of misleading surrounding verbiage, is simple: let’s strangle the growth of ebooks.
If you want to understand where Sargent and other major book publishers are coming from, I strongly recommend watching this online footage from a conference New York University hosted last September. Here you can see Sargent and a couple of fellow old media dinosaurs whine and complain about the digital world, dismiss Facebook, Craig’s List and Twitter as irrelevant non-businesses that will never make money and generally explain their plans to charge everyone for everything at every opportunity.
The real critical portions come towards the very end, in part three, as Sargent grows more animated about his opposition to giving away ebooks for free, even for promotional purposes. Despite being in charge of one of the largest publishing conglomerates in the world, he’s pretty pessimistic about the future of books. Challenged by Wired editor Chris Anderson to use digital distribution and new business models to attract new readers and expand the book market, Sargent is in full rejection mode:
“As the Internet grows, as all the other types of entertainment grow, it’s hard to imagine sitting here how we are going to convince everybody in this room to spend an extra six hours every week to consume another book. So in a way, if you look at the overall demand for books, it’s pretty hard to make that grow. We’ve tried. A whole bunch of people worked very hard to try and grow that. It’s pretty hard if you look at the demographics, how people read, to actually convince yourself that we have a growth business in books.”
In other words, what we have in books is a dying audience, a shrinking audience. And the way you extract the most revenue and profit from a shrinking audience isn’t with creative promotions and new ideas. It’s with ever higher prices. As Sargent says at a another point, in a barely veiled swipe at Amazon’s $9.99 ebook price:
“What we need is variable pricing. I think you guys would agree with this, variable pricing for content. You want a range of price points. You want to find a place — what you don’t want to do is give the consumer something for less than what they’re willing to pay for it in the rush to a new business model. Because once you get it out there it’s dangerous and hard to go back.”
Again, challenged to charge less because producing ebooks cost less, Sargent obfuscates, fixating on just one bit of savings, the printing costs of books (ignoring distribution, returns, overage, lost sales from out of print etc):
“Guys I can walk you through this. How much do you think a hardcover book costs us? A buck sixty. What are we saving? Not enough for the price point to drop from $22.50 down to $8.”
Amazon has been saying that its Kindle customers buy more total books – electronic and print – than they bought previously. It’s certainly been true in our household. I don’t have the figures at my finger tips, but I’d imagine that the whole creation and growth of Amazon.com has enlarged the book market, as well. But that’s not really happening in John Sargent’s world of mega-best sellers.
So keep in mind what Sargent was saying a few months ago when you read passages like this in his letter:
“In the ink-on-paper world we sell books to retailers far and wide on a business model that provides a level playing field, and allows all retailers the possibility of selling books profitably. Looking to the future and to a growing digital business, we need to establish the same sort of business model, one that encourages new devices and new stores. One that encourages healthy competition. One that is stable and rational. It also needs to insure that intellectual property can be widely available digitally at a price that is both fair to the consumer and allows those who create it and publish it to be fairly compensated.”
Leave aside for a moment the completely dishonest portrait Sargent paints of the old print book-selling world, and remember that he doesn’t believe the there will be any growth in book sales in the future. He’s not interested in a fair price for anybody — he’s interested in making sure that he never gives the consumer something for less than what they’re willing to pay for it. He wants to extract the big bucks from the big sellers and move on.
The great danger to Macmillan is that it’s the authors of those big best-sellers who are becoming increasingly able to cut him out. If ebooks really take off, an author like Stephen King or Nora Roberts can sell a lot more of their books direct to their audience with no publisher at all. And that’s why Sargent’s real goal here is not to increase competition or create a level playing field. It’s to squeeze as much profit out of a dying industry as quickly as he can and hold off the digital future for as long as possible.
UPDATE: Henry Blodget also really gets it in his post today called “Hey, John Sargent, CEO of Macmillan Books, Screw You!” An excerpt:
Did Steve Jobs seduce you with that temporary “charge-whatever-you-want” speech? Well, Steve has been known to seduce people from time to time. Just imagine what will happen once Steve has put the Kindle out of business and Steve owns the ebook platform instead of Jeff Bezos. That’s right: You’ll get held up even worse than Jeff’s holding you up today. Just ask the music industry. Careful what you wish for. So, bottom line, John, take your $15 ebooks and shove them. We’re with Amazon on this one.
Editor’s Note: This is taken, with permission, from Aaron Pressman’s Gravitational Pull blog. One thing is becoming increasingly clear to me as I follow the news and attend various conferences, such as Digital Book World. Publishers do not like ebooks, do not want ebooks and wish that ebooks would just go away. If the presentation by an author’s agent at DBW is typical, then the same can be said for agents as well. It’s going to take a long time for this to shake out, because the only real supporters of ebooks are consumers, and the industry doesn’t care much about them. Many authors, too, are not too fond of ebooks and so you won’t get a lot of pressure from them, at least not yet. PB
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Comments:
They can wish, but it isn’t going to happen. Didn’t they notice CES and all the new e-books readers coming out this year? Because consumers want them, they are here to stay. The publishers have two choices. Get on-board (and survive) or watch readers read pirated books on their shiny new readers.
No, I am absolutely not supporting piracy. But consumers will get what they want. If it’s available for purchase, they’ve proven they’ll put up the money. But if it’s not, they will still get their e-books. And only a handful will feel honor-bound to buy pbooks of what they downloaded from the pirate sites.
The publishers can thank themselves in a year or two when book piracy takes off to a new level – then they’ll get $0 for each book.
$9.99 is the right price for new releases, just as $.99 is the right price for songs. It’s a price point that makes it easy for consumers to justify mentally and swipe that credit card.
Interesting post.
Please remember that not all publishers are the same. Some of us have been behind eBooks for many years. A few of us have even been behind affordable prices for eBooks for years. I do agree with Sargent’s concern that book reading is not exactly a growth industry. I like to think that eBooks are a way of increasing reading because they open up more reading time and places.
Rob Preece
Publisher
I’m not saying the RIAA tried to repress digital music, but this is exactly how the mass piracy on Napster started. There were few places to purchase digital music at a reasonable price and an easy way for anyone to steal.
I’m not saying it was right, but that all actions have consequences. Piracy will increase, and instead of blaming themselves for increasing piracy, publishers will blame piracy for lost profit.
—
A+ to Rob Preece above. Baen and others have been huge proponents of e-books.
$9.99 is nice and causes me to make more impulse purchases of new (to me) authors, but I think there is room for higher prices if they do it right.
If a major publisher were to take something like Webscriptions and alter it a bit I think it would be successful. They could price most books around $6 and instead of eArc’s for $15 they could do books that are getting a hardcover release at $12-$15 for folks who want them right away and then lower the price to $5-$6 later. Of course I’d want it to follow the no DRM and multiple format parts which help make Webscriptions so great.
Sargent’s not the only businessperson who just wants to hold their stash as close to their chests as possible, and keep running as long as they can before the mob of progress catches up to them.
It’s sad to see industry leaders take the attitude that they are better off entrenching until they can scurry out with their retirement accounts intact, and who cares about the welfare of the industry that made them that retirement. But there it is.
Fortunately, the evolution of the industry has already demonstrated it is ready to fill the trench they are digging between them and the consumers. (I’ve got my shovel, and it’ll shift plenty of dirt.) So, let them keep digging until they fall in… the digital industry will be glad to conduct business over their buried remains.
@Rob Preece; fear not, most early adopters recognize the difference between the agile publishers looking to leverage new tech for their business, their customers, and their authors.
And ultimately it will be those of you who are trying to successfully adapt that will lead the way past the disruption of the ongoing transition.
However, if the *publishing* voices the mass media hears and diseminates are from the Sargents and Authors’ Guild of the world, then they will take that to represent the position of the entire industry.
If nobody from the content side is willing to take on the luddites then they will be lumped with them by the mainstream consumers who are *not* equipped with a scorecard to tell the good guys from the bad guys.
Silence is acquiescence.
Clearly the Authors’ Guild is *not* going to be building bridges to consumers (3-for-3 they are; against TTS, *for* Google’s land-grab, *for* the MacMillan/Apple Axis) so who remains?
Who, if anybody, on the content side, will stand up for engaging consumers and negotiating common ground rather than trying to dictate by fiat against a rising tide?
I would posit that, out of self-defense if nothing else, the non-luddite camp had better band together and organize a common, *visible* front before the luddite message overwhelms all rational discourse on pricing, release windows, appropriate use of DRM, and rational licensing terms.
Otherwise, there is a very real possibility that, yes, ebook piracy *will* get mainstreamed.
And at that point, nobody wins.
It takes two to tango, though, and it is clear the BPHs are more interested in dictating terms of surrender than negotiating. Bad times are coming…
For the people who say Baen’s model is so great, do you really think that a Stephen King or a Michael Connelly would be okay with the level of marketing that Baen does? Or accept the size of the advance they give? Please keep this in mind as you try to project business models onto other companies.
What’s continues to be clear is that many people don’t (or don’t want to) understand the subtlety of the many different markets that exist in book publishing and selling. There is hardcover, trade paperback, MMPB, textbooks, professional books, etc. Each of these markets have their own issues and each need to be addressed separately. If you never purchased hardcover books before, what’s the difference if you have to wait for the ebook as opposed to a paperback? Or possibly pay $5 more than the magical $9.99? I really don’t understand this argument at all, other than people are whining and acting entitled (which I guess is their right, but it’s still immature).
The “Baen” model (probably) can’t work for the BPH’s because the BPH’s have to pay huge advances, take out ad space in USA Today, magazines, buses, NYC subways, etc., or else their authors aren’t happy. That’s the reality, and the “Baen” model doesn’t seem to afford that level of promotion for authors, or else they would already be doing it. While there is definitely “fat” that can (and should) be trimmed from most large corporations (not the editors!), it seems that a lot of people forget that publishers are really not making huge profits, and indeed lose money on many books.
Having said all of this, Sargent is an a**clown and I remember cringing at multiple points while watching that conference. He really comes off terribly and does not put publishers in a good light at all, let alone BPH’s. And while I do believe some of the issues that many of the most vocal ebook readers have are just plainly ignorant, I understand they are frustrated. However, as Rob Preece said above, please remember that not all publishers think the way John Sargent does. And just because they may disagree on certain issues (pricing, release windows, etc.) doesn’t make them the enemy.
Scare quotes around “open”? Addressed to publishing industry “insiders”?
It was a paid ad in a trade mag that went online immediately: http://www.publishersmarketplace.com/lunch/macmillan_30jan10.html
All over the interwebs is hardly an “openness” that deserves scare quotes, I think.
And those “insiders” were the creative people directly affected by Amazon’s blockade — the writers and illustrators (and agents of such). Yeah, Sargent made a statement to them rather than the public at large. Good. Without that statement, they would have known *nothing* about what was going on and why, because Amazon said *zero*. Amazon have *yet* to make any statement other than the risible “we’ll have to capitulate in the end” bulletin fired out by some nameless (mid-level?) stooge on the Amazon Kindle Team in a forum, a memo made all the more laughable by its shoddy rhetorical appropriation of the term “monopoly”.
Meh.
And after your own opening salvo of similarly shoddy rhetoric, your whole article turns on conflating non-growth with decline. “[I]t’s pretty hard to make that grow.” does not equal “It’s impossible to stop that shrinking.”
Double meh.
“The “Baen” model (probably) can’t work for the BPH’s because the BPH’s have to pay huge advances, take out ad space in USA Today, magazines, buses, NYC subways, etc., or else their authors aren’t happy.”
While I can’t speak to relative size of advances paid, when Baen published Harry Turtledove’s “Sentry Peak” they took out just as much ad space in USA today, magazines, buses, and the NYC subway as Macmillan did when they published “The Valley-Westside War” by the same author: none.
Yes, the handful of authors who the BPH have decided will be next week’s bestsellers will get advertising and huge advances and publisher-supported book tours and appearances on Oprah; the majority will get printed, nothing more. The model is fundamentally broken for paper – applying it to electronic publishing isn’t going to fix it.
Yep. Steve Jobs has said, “nobody reads.” Steve Jobs hates being wrong. Steve Jobs wants our eyes on advertising, not in books.
And as Steve Jordan says: The huge publishers are enormously conservative, and *do* want to retrench. Especially since at present they’re having to run two production models in parallel.
Here is an opposing viewpoint.
Pricing is a funny thing and doesn’t always work the way that people think.
Take, for example, me and ebooks.
If ebooks cost $20 each I would buy zero per year.
If ebooks cost $10 I would probably buy ten.
If ebooks cost $5 I would probably buy thirty or forty.
But if ebooks cost just $2 my guess is that I would buy a couple hundred or more.
People like to gather and collect stuff. If ebooks were extremely cheap, like the cost of a song, people would buy great masses of ebooks. This is the logic of the digital age.
Since the cost of additional duplication once an ebook is prepared for download is nothing this would be a huge win for authors. Better to sell a million copies at $2 than 50,000 at $10.
But the primary motivation for the old school publishers is to protect their existing model of publishing physical books. They don’t understand and aren’t interested in looking at new models for selling ebooks.
Chris,
I suggest you check out Lynn Abbey’s perspective on this.
I doubt there is a great conspiracy to stop e-books. What I do believe is that there are a number of people placed fairly highly in the publishing industry who don’t understand that e-books are not something that can simply be adapted to the existing publishing model; they will radically alter it.
Bill, I posted Lynn Abbey’s perspective on it here. You don’t need to tell me about it.
I do think it’s useful to consider opposing viewpoints, because sometimes they see things you might miss—or at the least, they let you adjust your own arguments to better address the points they raise.
If I can find an opposing viewpoint a little more articulate and less earthy than barbarienne’s, I’ll probably post it as a feature on TeleRead for that reason. We’ve been running a little more toward the “publishers want to kill e-books” side of things here lately.
Funny thing ebook price elasticity should come up, today of all days.
There I was, minding my own business (more or less) when in pops an email from Webscriptions pointing out, ever so politely, that the latest Honorverse Novel is now available as an ARC for $15.
Now, all my free time for the next 6 months is committed to MASS EFFECT 2, but still, I checked in for a looksie.
Before I knew it, I was stating at a shopping cart ready to go and I remembered I was a few months behind in my Webscription orders. So I got up to date.
Total expense?
$150.
Ten times what I didn’t intend to buy.
(Okay, so I’m weak. But I really have no intention of buying a MacMillan book this decade.)
What I got for that money was 63 ebooks.
(Should last me a few months.)
Of those, about half are from authors I haven’t sampled yet and a dozen are from authors I know and like and hadn’t gotten around to buying that specific book.
Average price, including the ARC package? About $2 or so per book.
I got a must-have-now, a dozen “should’ve read before now”‘s and I get to sample a dozen or so new-to-me authors’s.
Who lost anything here?
I know I came out okay.
My newly-discovered authors get a shot at my future business.
Baen seems happy with their cut.
I guess time will tell if Mr Weber objects to other authors piggybacking on his new release.
It may not be a business model for everybody but it seems to move ebooks without seriously offending anybody involved.
@hal, I’ll let most of your argument stand or fall on its own merits, but go listen to the whole NYU forum and all of Sargent’s comments if you really want to quibble about his point of view.
For example, his bit about no growth is around the 25 minute mark of section 3 and he starts off talking about the demographics of the country. In Sargent’s analysis, the growing parts of the country are, according to him, people from cultures that don’t read much and the shrinking groups are the heavy readers.
American Association of Publishers reports that November book sales increased 10.9% to $808 million. Of that $18 million is accounted e-book sales, representing a fifth of sales increases. Meanwhile e-book advocates imagine that screen books are driving the industry and wonder why publishers remain interested in print.
E-book advocates cannot understand why dinosaur print publishers have not learned from the experience of the music industry. Well maybe they have; the music business is now worth half of what it was ten years ago and the decline doesn’t look like it will be slowing anytime soon.
I’m afraid you really don’t have the correct perspective on the subject because you’ve only been keeping up with ebooks and big publishing for a few years.
As someone who has been watching the cautious dance around electronic publishing as performed by the conglomerate publishers for over ten years, I believe that it’s not that publishers want to destroy ebooks, it’s that they haven’t taken them seriously until recently so they are having to clean up the financial messes they’ve made with their inattention.
In the last year of Kindle expansion and the introduction of the iPad, publishers are finally aware that ebooks are not only here to stay, they are profitable, and the profit will only get better.
Many of us who have been part of epublishing for so long have wanted to grab the decision makers at the big houses by their lapels and shake some sense into them about the lousy deals they’ve made with Amazon as well as their blindness to the forces moving in to control access to books.
Finally, finally, the publishers are beginning to realize that they can control their destiny, and maybe, publishing can move into this new digital age with some hope of survival.
Right now, things are messy, but I think things will get better for those of us who read and write books, and the pricing issues will gradually reach a level that consumers and publishers can live with.
@ManBehindCurtain
How is following a similar model to Baen’s ($5-$6 for most, $12-$15 for some) any different than what Macmillan’s talking about other than the lack of DRM and the multi-format availability?
BTW, the huge million plus advances some authors get (not necessarily proven authors) is one of the problems in publishing right now IMO.
I don’t necessarily think pubs want to kill ebooks. I do think many were caught kinda flat footed with their recent market growth compared to a number of years when they didn’t really do much.
In the end, it doesn’t really matter if the BPH are against ebooks. The worst they can do is not publish an ebook and “focus” on print only. Guess what – it won’t matter one little bit because there are individuals who LIVE to scan, proof, and share those books on usenet and irc. Once there, the books quickly move into more mainstream piracy models – either email, warez sites, bittorrent, or “rapidshare” sites. Please note, I am NOT advocating such activities or philosophies, just stating the facts so don’t flame me for pointing out this stuff. If you want examples, just look at Harry Potter or Stephen King (Under the Dome).
Scanning technology will also of course get better and better and cheaper and cheaper and faster and faster…
“Overall CD sales have plummeted sixteen percent for the year so far — and that’s after seven years of near-constant erosion. In the face of widespread piracy, consumers’ growing preference for low-profit-margin digital singles over albums, and other woes, the record business has plunged into a historic decline.” Rolling Stone
So what is the difference between music and print? Rhapsody is rap; a rendition of orality while print is a rendition of symbolic code. Think of a print music score. Why does print provider prosper and music provider fade? One has a killer DMR which is the ability to read. How does a constraint toggle into an attribute? All of the traits of print are constraints, depends on how you look at digital transmission generally.
As an author who also works for a small publisher I agree with Marilynn’s comment that control is key and all the big players in the industry will have to come to terms with consumers’ demands and needs if they wish to profit from the continuing evolution of e-books. For a small publisher’s take on this, check out The Know Something Project http://www.knowsomethingproject.com
“Overall CD sales have plummeted sixteen percent for the year so far — and that’s after seven years of near-constant erosion. In the face of widespread piracy, consumers’ growing preference for low-profit-margin digital singles over albums, and other woes, the record business has plunged into a historic decline.” Rolling Stone
Why does print provider prosper and music provider fade? One has a killer DMR which is the physical product of the print book. How does such a constraint toggle into an attribute? All of the traits of print are constraints and it depends on how you look at digital transmission generally. The recorded music industry is faced with the disappearance of physical media. This “download dilemma”, prefigured by the demise of the compact disc, looks like the fulfillment of the digital cloud but it also prefigures the dissolve of the physical product that sustained recorded music industry.