The May 2015 Author Earnings Report, Hugh Howey and team‘s “sixth quarterly look at Amazon’s ebook sales,” has just hit the web, and I’m going to precis some of its most important conclusions, while recommending that any writer in particular digest the whole thing. And as in the past, this carries the caveat that it is a biased report from a crew with an agenda, and that there will be a grab-bag of by now customary criticisms of its methodology, conclusions, etc. All the same, it’s an important milestone document, not least as it’s the first Author Earnings Report to show the impact of Amazon’s recent renegotiation with some major publishers on price setting and discounting terms. And the figures do rather speak for themselves – imposing a huge onus on the Big Five and their allies to get competing data out there, if they want to head off the inevitable criticisms.
As the Report states, “after a contentious and drawn-out negotiation with Hachette Book Group last year, Amazon relinquished the ability to discount ebooks with several publishers. Prices with these publishers are now set firmly by them. Soon after these agreements went into place, industry observers noted an upward move in average ebook prices. Freed from Amazon’s discounting, and with complete control over pricing, the publishers made a decision to push the price of many of their books above $9.99.”
The most telling representation of the results is in the two charts above and below. According to Author Earnings, Big Five published titles across the sample have gone from handing over ZERO revenue to Amazon (who was busily discounting them at its own expense) to a massive chunk, under the new pricing terms.
“Publishers fought hard to take back control of ebook pricing from Amazon. This was a stated intent by Hachette to its investors in 2014, and it was touted as the end result of their lengthy negotiations. What has that control brought?” argues the Report. “By our data, which matches industry reports, this control has brought higher prices to consumers, lower sales for publishers, and less earnings for their authors. It has also brought greater market share for self-published authors.” And buried in there are other nuggets like: “Any report showing a decline in ebooks and an increase in print means a net loss for the Big 5 and their authors.”
And while these charts show only a minor impact on the share going to authors, the bigger picture is not even that attractive. The Report finds that: “for authors, we can see here a huge loss in daily earnings from Big 5 publishers of 20%. Their higher prices aren’t just hurting readers; they haven’t been good for their authors either.” So much for Hachette & co.’s pretensions to be acting in the interests of authors, and literature.
The Report’s conclusion about the motivation for this self-destructive – and author-destructive – strategy is “that control over pricing is enormously powerful. The largest retailers and the largest publishers are willing to do great harm to one another in a fight for this power.” All the analysts and critics complaining about Amazon’s tactics of pursuing platform predominance at the expense of profit ought to reflect on that.
Once again, I recommend any writer to read the entire Report in detail, digest, and execute your publishing and pricing options accordingly.
“[The pricing policy of the Big Five] has also brought greater market share for self-published authors.”
I’m supposed to be against that? As Napoleon observed, “Never interrupt your enemy when he is making a mistake.” Calling the Big Five an enemy is a bit much, but they are competitors. Someone who doesn’t buy one of their books may buy one of mine. Yeah!
Alas, I also suspect these executives are not fools. If this report proves true, they’ll correct their mistake and lower ebook prices. (Boo, hiss….) Just keep in mind that these publishers are thinking in broader terms than maximizing ebook profits. They have other formats to sell and an interest in making sure that Amazon doesn’t take over the book market.
Also, one of my arguments against the DOJ lawsuit was that government meddling was stupid because is interfered with both the right and ability of publishers to set their own prices to maximize their profits. (Note that is precisely what these DOJ lawyers would insist on doing for their fees should they go into private practice.) That these publishers can do only if they’re left alone. Try to kick them around, as the DOJ did, and they’ll get even more stubborn.
Besides, books, particularly NYT bestselling novels, aren’t medicine. There’s little if any harm done when they’re overpriced. People just buy something else. Yes, maybe even my Lily’s Ride—a wonderful, bestselling 19th-century novel adapted for modern readers, a novel written by one of the foremost champions of civil rights in 19th century America.
And it’s only $2.99. Much less that those greedy, grasping three-martini-lunch swizzling Big Five publishers are selling their ebooks for.
Yes, keep at it Big Five. I’m not going to interfere—not at all.
There’s a huge problem with making such a broad statement that treats all of the Big Five as a single unit; S&S had healthy ebook sales last quarter:
First, I agree with Michael W. Perry.
Second, as a both a traditionally published author and a self-published one, I am doing quite well. In fact, I had my best year in 2014 and it looks like I will have an even better one in 2015.
Here is one of the reasons for my success: I won’t participate in either Kindle Unlimited or Kindle Select. I also refuse to price any of my ebooks below $5.97 unless it is a book of quotations. Offering my books for free or 99 cents or even $2.99 would cheapen what I have to offer.
Marketing guru Seth Godin called the strategy of low ball pricing:
“Clawing Yourself to the Bottom.”
“Trading in your standards in order to gain short-term attention or profit isn’t as easy as it looks. Once-great media brands that now traffic in cheesecake and quick clicks didn’t get there by mistake. Respected brands that rushed to deliver low price at all costs had to figure out which corners to cut, and fooled themselves into thinking they could get away with it forever. As the bottom gets more and more crowded, it’s harder than ever to be more short-sighted than everyone else. If you’re going to need to work that hard at it, might as well put the effort into racing to the top instead.”
Indeed, clawing your way to the bottom costs you the chance to make a decent living. It also costs you your reputation.
Insofar as readers, this quotation applies:
“People that pay for things never complain. It’s the guy you give something to that you can’t please.”
— Will Rogers
In short, when your book doesn’t measure up, the answer may be to charge a lot less for it or give it away for free. If you have a great book, however, the answer is to charge a lot more for it than the substandard competition charges for theirs.
Ernie J. Zelinski
The Prosperity Guy
“Helping Adventurous Souls Live Prosperous and Free”
Author of the Bestseller “How to Retire Happy, Wild, and Free”
(Over 250,000 copies sold and published in 9 languages)
and the International Bestseller “The Joy of Not Working”
(Over 280,000 copies sold and published in 17 languages)