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Will Apple’s iBookstore be Publishing’s Waterloo?
April 5, 2010 | 8:52 am
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By Rich Adin
Publishers have bet the store, so to speak, on Apple’s unproven iBookstore. Publishers knew what they had with Amazon, Sony, and Barnes & Noble, but forsook the known to engage with the unknown. If the iBookstore fulfills publisher dreams and becomes a real competitor to Amazon, it is likely that the agency model will expand. But what if the iBookstore becomes a Newton?
The problem is that if the iBookstore doesn’t fulfill all of the big 5 publisher’s prayers, they may not be able to retreat, having burned their bridges behind them. And if they do retreat, they may do so in the face of much more powerful Amazon than the Amazon that originally sent them into Apple’s arms.
The iBookstore experiment has several problems, not least of which is that it will be impossible to know how the agency model fares against the wholesale model on a same-publisher basis because once a publisher chose agency it was crammed down all ebooksellers. This would have been an important experiment for publishers. It is important to know whether agency decreases, increases, or has no effect on profitability and revenues. For the agency publishers, this knowledge will be lost.
Another problem is the possibility of being Newtoned. It is pretty clear that the initial adopters of the iPad are the hardcore Apple fans. But there are only so many of them and no one knows how many of them are ebook readers. Long-term viability is significantly more important than short-term sales spikes. And for publishers, of even greater importance is how many ebookers will purchase an iPad and shop the iBookstore.
iPad’s shortcomings have been well discussed in the media. Chief among them for ebookers are the difficulty of reading in bright light (outdoors), lack of annotation, and the weight. eBookers are generally, as I use the term, avid readers, the people who buy more than 5 books a year. The casual reader, the person who buys 1 or 2 books a year won’t make the agency model and the iBookstore a success for publishers; ebookers are needed. How happy will ebookers be with the weight and limitations of the iPad?
What happens if the iPad and the iBookstore are Newtons (flops)? What is the backup plan? Have publishers cut their own throats by forcing ebooksellers to accept the agency model? If the agency model is a flop with consumers, will publishers simply have given Amazon the dominant position they were trying to undermine?
The iPad is a nice gimmick and for all the hype, I don’t find it a compelling buy – and I’m looking for a larger screen ebook device. When I sit down to read, that’s what I want to do — read, not just for 5 minutes but for hours. And I buy lots of books; last year I bought more than 200 books (so I’ve got a huge to-be-read pile to which I am constantly adding). But I can’t imagine reading on a 1.5-pound device for very long; it would be uncomfortable to hold and would constantly require both hands. And I like to read in the sunshine when the weather is nice, something I can do on my Sony Reader. Convenience and comfort are two reasons for buying an ereading device. So the iPad is not on my list and the iBookstore, with its proprietary DRM is also not on my list.
What will publishers do to keep me buying books? Higher pricing is certainly not an incentive to buy books; if anything, it is an incentive to buy significantly fewer books, especially as I just lease the ebooks rather than own them. Locking me into a proprietary DRM leasing scheme and a particular ebookstore – whether Amazon’s or Apple’s — doesn’t appeal to me.
If ebooksellers like Smashwords continue to price aggressively, I am more likely to buy books from their indie publishers than I am to buy from the big 5 at inflated prices. So I and others like me, who do not fall for the Apple hype, are a problem for the big 5 and the higher agency model pricing. Don’t get me wrong. I am not one of the ebookers who believes that $9.99 is the magical sweet spot; I’m willing to pay more or less than that price point, but I’ll only pay more if I perceive the value in doing so. That’s where publishers fall down: they fail to convince me of the value of their ebooks.
The big 5 have declared war on me (and like-minded ebookers) with agency model pricing and aligning themselves with the iBookstore. This may well be their Waterloo, yet it is a battle the publishers cannot afford to lose. If the iBookstore’s sales numbers do not at least meet the sales numbers of the wholesale model, publishers will have won the battle (imposition of the agency model) but lost the war (decline in sales and revenues).
What remains to be learned is how the agency model publishers will evaluate whether the agency model is a success or failure. If the goal is to kill ebooks, then a decline in ebook sales will equal success; that is a fool’s goal, however, because ebooks are clearly the growth area of the future. If such a decline is not accompanied by a parallel increase in pbook sales, all the big 5 will have accomplished is lowering their overall sales and revenues. How will they view success or failure if the ebook market continues to grow but their share stagnates or declines?
Will they have succeeded or failed if Amazon’s, Sony’s, and B&N’s ebook market share continues to grow and the iBookstore only captures a very small percentage of the ebook market? How will the big 5 view the experiment if Smashwords’ share of the iBookstore market is greater than their share? Most importantly, if the iBookstore is a failure, how will the big 5 extricate themselves from the debacle?
Needless to say, it is much too early to determine success or failure, but it is not too early to plan a retreat. Placing all one’s hopes on unproven entities (the agency model and the iBookstore) is begging to be Waterlooed.
Editor’s Note: Rich Adin is an editor and owner of Freelance Editorial Services, a provider of editorial and production services to publishers and authors. This is reprinted, with permission, from his An American Editor blog. PB
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Comments:
It’s hard to say how the iBookstore will evolve, but right now, it looks like Apple has advertising or coop agreements for placement at key spots within the iBookstore. Discovery is a real problem in the iBookstore. There are very few subcategories and those are not well populated.
Books are not searchable by price, only differentiated by free or not free so while I am a big fan of buying books at a lower price, I am currently befuddled about how one will go about finding them.
What I do wonder is whether the publishing industry really does need the “ebookers”. The reason I say that is because publishing is largely successful because of its hits (the big front list titles). Those hits are successful because they draw far beyond the eBooker crowd.
Thus, if publishing’s current model which rests on the volume sales of big books continues, then I don’t see the iBookstore as making an impact on the publisher’s bottom line, particularly since it is such a closed ecosystem available only to iPad users.
I don’t mind that the publishers want dynamic ebook pricing. After all, we know that with paper books, they have three pricing ranges. The problem for me is that with loss of paper book rights (lending, resale), I think the ebook should be priced at the bargain book level. It’s fine with me that the publishers want to charge a premium ebook price when the hardcover comes out, but when they drop the price of the ebook when the lower priced (“bargain”) paperback is released, and leave it there. From John Sargent’s comments, and from example prices of books where the ebook has been out some time, but the mass market paperback has been discontinued, the publishers now find it fair game to raise the ebook price to correspond to the original hardback price, which they keep in print. I submit as an example, the Lemony Snicket books published by Harper Collins, of which 10 of 13 were briefly free this weekend. The first one is priced above the in-print paperback price, the next two are priced below the in-print paperback price, and the rest are priced at about 4 different prices, above the out-of-print paperback price, but below the in-print hardcover. They don’t even bother to keep the prices of the ebooks the same across the series, even though the hardcover prices are the same across the series. This is why I’m convinced that the publishers don’t get ebook pricing yet.
Bruce, I agree. I have been looking at an ebook priced at $23 ‘discounted’ to $13.99 when the cheapest available paperback is $6 less, and another priced at $18.59 when the newly released paperback is $11. It’s just not fair. It isn’t that people aren’t willing to pay for ebooks, and it isn’t that they expect them all to cost $1. We just want to be treated fairly. We are the customers dedicated enough to reading to shell out hundreds of dollars just for the device, before we even start reading on it. Wouldn’t you think they would WANT to sell to us?
I’m kind of scared to find out what term you use for people like me, who buy 5 books a month. Voracious? Slavering? Bottomless pit? *g*
As for ebooks, I bought a Sony Pocket Edition over the weekend, but I haven’t had time yet to charge it and start loading books on it. But when I do, it’ll be only the ebooks that I consider a good value vs. the price. Looking at the pricing structure over the past few days, it looks like the Big 5 not only have no idea how to use dynamic pricing to their advantage, they have no idea how retailing even works.
Which makes sense, in a way. The biggest publishers have never been retailers in the traditional sense; they’ve always sent their books out to distributors and stores, and had very little direct contact with readers. However, the day has come when the Big 5 have to learn to think like retailers if they’re going to navigate a market in which they’re competing with other media and small, retail-minded publishers.
Great article- I agree completely. I’ve been keeping a list of ‘lost’ and ‘gained’ purchases since I went completely digital and it’s been interesting to track how the market changes have affected my spending. Right now, books I would have purchased in paper (but did not in digital due to publisher games) are far exceeding books I would not have purchased in paper but did in e-book (due to attractive pricing).
So it looks like, for me, the move is toward buying less. (On the other hand, storage space on my TIVO is no longer an issue.)
@jane: The only reason the big publishers “success” is tied to the big hits is because they do next to nothing for the bulk of their authors. In most cases, the least they can do to promote an author’s work is the *most* they will do. This, of course creates the death-spiral they are trapped in; they only support a handful of “name” authors and are thus dependent on those authors’ sales, so they only support those product which makes them even more dependent on them. Everythung else is secondary; things like content acquisition, catalog management, customer service… Everything else has been farmed out to agents and retailers.
This can not continue and even the BPH execs have started to get a hint that something needs to change.
Of course, being the clueless sort, they have taken the one sure path to kill all sales *except* those of the big “name” authors: raise and fix retail prices of the only growth channel left.
At some point there will be authopsies performed to reveal how the BPHs frittered away control over an entire industry.
I think the iBookstore may have a advantage in selling because customers can’t see the price of the book in other versions like at Amazon or B&N. You see an ebook you want at $7.99 and you buy it for your iPad. At Amazon you realize that same $7.99 ebook is $4.99 in paperbook and you’re less likely to purchase it.
Rich, how have the pubs burned their bridges? As far as I can see, they are still selling on Sony, and B&N Nook, and Kindle — along with iBookstore. Meanwhile, preliminary hype for the iPad served as leverage for the pubs (all but Random House of the majors) to force agency pricing on Amazon. That’s something they’ve been trying to do for some time, without success. Sony didn’t give them the leverage, Smashwords didn’t, but Apple did.
As far as putting their books in the ‘unproven’ iBookstore, how is this different from letting a new mom-and-pop bookstore on your main street sell their books?
I agree that the pubs don’t know how to price ebooks; as far as I can see, they just want to price ebooks out of the market and would be happy if ebooks just died and went away, already. This will change. But in general, it’s just one of the sad sorry side effects of publishing today, as the big ones are only small cogs in giant multimedia conglomerates, and must bring in highest returns possible to please their corporate masters. They aren’t primarily in the making and selling books business, but in the climbing the corporate ladder business now. More’s the pity.
The prices will shake out and settle. Take for instance Time Inc’s decision to charge full cover price of $5 for their iPad edition — when the stories are online for free (still). Everybody is mocking the poor Time execs for this. It made them a laughingstock.
Bottom line is, we just won’t pay those high prices. The golden goose won’t quack. And print edition sales won’t climb back up, either. But we will probably see in future lower ebook prices across the board, released months after the hardcovers come out.
— asotir
Asotir, the agency model of pricing will only survive, in my view, if the iBookstore becomes a success. In the mean time, the publishers have angered the other giant — Amazon — and consumers with the agency pricing. If the iBookstore fails (by which I mean is not a real rival to Amazon), the publishers will need Amazon to maintain sales and revenue, which means, having angered Amazon, that Amazon will be in a position to exact its revenge. Sony is a minor player and B&N hasn’t yet demonstrated ebook market power to rival Amazon or the Apple hype.
@Rich Adin: Plus, what is likely going to happen if Apple does replace Amazon as the big power in ebook sales? How soon before Apple starts dictating terms?
Scorpions are always scorpions.
I tried reading the article but the assumptions got in the way.
Ebook publishing is new it is a learning process, in the past there is only amazon but publishers have no choice but to sell thru it. Now there is a new player and the publishers will test the market with pricing until they find the sweet point in pricing.
We buy books because we like what the authors wrote and nothing else (price does not play a part and if you think $14.90 is expensive I have a free alternative the public library).
As for those who believe Apple will dictate terms you are living in the past. Apple is an enterprise whose main aim is to make money for their shareholders and destroying the contents makers, which they rely on, is not doing something in the interest of their shareholders and users of their products.
Waterloo? it may well be the renaissance of reading once again.
Btw we have been trained to read for hours on the computer screen so will there be a problem reading from the iPad, i don’t think so.
@Felix Torres: If Jobs is in a generous mood, 60 minutes max; if he is in his typical mood, less than 5 minutes. However, it is interesting to watch 3 control freaks (Jobs, Bezos, and the Big 5) battle for supremacy. Certainly better than a standard 1-on-1 bout.
Terrific article, Rich. Enjoyed the graphic too.
asotir,
new mom-and-pop store: letting them sell in the neighborhood?
It’s more like having them move in and suddenly dictate that their own plan is the one everyone else must follow or the publishers don’t get to put books in their store.
It works when they’re big enough and the publishers are naive enough as well as wholly out-of-touch.
We got our iPad on the first day available and one of the things I did was download a book–which, unfortunately, the iBookstore (or the publisher) screwed up. We got the first page of each chapter, but not the full book. I brought it to the attention of their help service (not an easy thing to find, actually) and eventually they took care of it, i.e., refunded the $6.95. I also alerted the author via his website (Jim Butcher). I also downloaded some free books.
And I also downloaded the free Kindle app, & synced the books I had on my iPhone (which is not a great way to read a book, but better than you’d think).
I also bought a couple books on the iBookstore for a friend (JA Konrath) to see if his e-books were available and formatted properly (they were). My own e-book, Dancing In The Dark, is also available on Kindle, but not yet on the iBookstore. The same goes for my latest novel, The Fallen, which is available in hardcover and via Kindle, but no other readers yet (that I know of).
I haven’t found the iPad to be too heavy. The glare can be a nuisance, although I don’t really know how it compares to the Kindle or other readers (or, for that matter, my inability to read a paper book in bright sunlight or in dim light). As for pricing, well, it’s going to shake out eventually, and I’m not convinced it’ll be $9.99 either. If I had to guess, I’d say it’ll eventually come in around the price of a mass market paperback and probably be tiered the way hardcovers, trade, and mass market paperbacks are now, with the e-books not coming out until after the hardcover publication (that is, until hardcovers go the way of pterodactyls).
I think the iPad may introduce a lot of people to ebooks who hadn’t really considered them before, so in that way it could help create more growth of ‘ebookers.’ However, people who are already ebookers I think have different wants and needs.
I want something I can read outside and check my email from. The idea of laying in the sun and checking my email then immediately flipping to reading a book has some massive appeal for me.
I can’t do that with the iPad. Plus it’s just too big. I want a smaller device to read from.
So far, despite it’s limitations (like no support for epub and DRM, though that’s a publisher choice, not de facto) I think the Kindle is the superior ereader at this point.
My question is… those who DO get an iPad for reasons other than ebooks who check out ebooks and like them… will they continue to read off the iPad or will they want to switch to something like the Kindle for that.
I think if I had an iPad I’d have a real dissatisfaction with my ereading experience but not sure with something like that I could justify the purchase of a Kindle or other dedicated ereader.
I have to say that I don’t really get the argument.
I’m a big reader, I own a Nook & use it, and I’m in favor of ebook prices that can be higher than $9.99. Amazon’s price is too much cheaper than the new hardcover prices, and over time that price would be highly destructive to new book publishing. People who think that ebooks should be cheap, cheap, cheap because they’re not physically printed on paper just don’t get that that’s not the greater part of the cost of a book. Authors — those people producing good books — need to be paid, editors need to be paid, and yes, designers and artists also contribute to a pleasurable reading experience, and they get their share, too. And the publisher brings all those people together, gets the word out (and the review copies to book reviewers) and distributes the book.
Ebooks look easy when there’s a print edition as its parent. But when there aren’t enough buyers to create a $25 or $30 print edition, then … well, that ebook will have to cost more, or the book simply won’t exist. This is what will happen if no book costs more than $9.99: a lot fewer books, and books of lesser quality.
I have been reading ebooks for several years now (since before the Kindle) and I typically read 5-10 books a month. I would say about 95% of those books are in ebook form. I have mostly used Palm devices and the Mobipocket and Ereader software. I know the Palm (non-WiFi device) is going the way of the dinosaur so I will have to adapt. The thing that bothers me is that everyone is so focused on specific devices. I like the freedom of being able to move my books from device to device because it is software based. Since my various reading devices do tend to die after a while this has been a great thing.
I have bought ebooks through various companies who act as distributors for the publishers (ie Fictionwise, Ereader, and others). It seemed like most books I found were about the same as what I would have paid for in paper form, which I am mostly fine with. I do get a little disgusted if a book is now available in mass market but the ebook is only in hardcover price. And this whole agency change is making me mad because all the sudden I can’t get the ebooks that were available only a few weeks ago.
The interesting thing to me about ebooks is that there have been several companies who mostly published in ebook first and then gradually expanded into paper publishing for the most popular books. I know part of the reason these were in the pretty affordable $5 or so range was because these were smaller companies with lower overhead and mostly unknown authors. There is some truth to the idea that an ebook may cost more because of still having to pay for the people involved in getting a book to the printing stage but you will have fewer people and companies involved than with a paper book. You don’t have to pay for the printing, shipping, and all the people involved in taking a book from the printing press and putting it in a purchaser’s hands. And not only do you not have to pay for getting the book to the store, you don’t have to worry about the costs of shipping it back if not enough copies sell. Also there are no dumpsters full of stripped cover mass markets because most of these just get tossed rather than returned if the copies don’t sell.
I know this sounds a little like I don’t like paper books which isn’t true (as my overloaded bookcases can attest). They have just become less convenient for my daily life.