The real agenda of Apple’s ebook partners: death to ebooks by Aaron Pressman

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.

@Aaron, I’ve watched it. Anderson makes a blue sky speculation — that “the potential audience for books is larger than the real audience”. Sargent gives him a dose of reality clearly based on actual research rather than a rose-tinted fantasy of “I think”.

He says the growth areas of population have a culture that doesn’t read *heavily*, while the *heavy* reader segment is shrinking, with a caveat that a bubble is coming up because older people read more. He doesn’t say this means demand is shrinking overall. Nowhere does he say this, cause that’s not what it means.

All it means is that the high-demand segment is shrinking while the *low-demand segment* grows. Low demand is not zero demand. A hundred extra readers who only buy one book a year would outweigh a loss of two readers who buy twenty five books a year, right?

Sure, Sargent doesn’t say that this is how it’s actually panning out, but neither does he characterise it as a haemorrhaging of audience, and certainly not with ebooks as the culprits. All he says is that this is the situation they’re dealing with, that it’s actually difficult to *grow* that audience, that it’s difficult even, when you’re faced with these sort of stats, to “convince yourself” that there’s really all this untapped potential readership as Anderson hypothesises.

Note, he follows that by saying that they’ve *tried* and are continuing to try, but it’s difficult given the investment required to read a book; it’s “hard to imagine how we’re going to convince everyone in this room to spend an extra 6 hours every week to consume another book.” He’s not doom-mongering, saying that the way things are going soon *nobody* will be willing to do that. He’s not projecting a pessimistic scenario but *being skeptical about Anderson’s optimistic one*.

Neither does he blame ebooks and espouse some zealous loyalty to print. He doesn’t say that the only way to keep making money in publishing is to kill ebooks dead. In fact, he talks about trying out particular strategies — adding “links” and “video” to add value — that are only possible with digital media. Wherever he talks about testing and experiments, his attitude sounds pretty reasonable — absolutely willing to try it out, but cautious, skeptical of any naive faith, and often referring to results on *both sides of the argument* — c.f. his comments on Doctorow and Edmunds. What he’s mostly doing throughout is pointing to the difficulty of applying to books the sort of strategies that work with news and music — advertising subsidy, free samples, upsell based on add-ons (like buying a pet for a virtual penguin).

Point is, I don’t see a shred of evidence for a hidden agenda here. What I see is a genuine belief in variable pricing as a sustainable business model. Whether you or I see this as fair/practicable or not is a different argument. But there’s nothing in that whole panel discussion to suggest that Sargent is really out to “strangle the growth of ebooks”.

@ Hal Duncan

“Point is, I don’t see a shred of evidence for a hidden agenda here. What I see is a genuine belief in variable pricing as a sustainable business model.”

While I agree with you that the idea that publishers are out to kill the ebook is absurd, the fact is that despite what Sargent says in the conference Macmillan has been far from interested in variable pricing for ebooks so far.

After ten years of Macmillan’s handling Fictionwise prices under an agency model like the one it wants Amazon to work with (ten years in which most Macmillan ebooks whose MMPBs were already released cost way more than their respective MMPBs) one has to wonder if his statements about variable pricing are to be taken seriously.

I’m amazed at how surpirsed most authors seem to be by the anger of ebook readers, as if it is something that started from the Macmillan/Amazon feud. The fact is ebook readers are mad at Macmillan (and other pblishers) for its general mishandling of ebooks (delays in releasing, gaps in series, the general lack of titles, the “variable” pricing and much more) for quite some time now, time during which they have essentially ignored these consumers. The apparent cluelesness of authors on these issues seems to imply authors themselves were just as ignorant.

Quote: “Sargent’s message, despite a bunch of misleading surrounding verbiage, is simple: let’s strangle the growth of ebooks.”

That makes no sense. Absent things like quantity discounts, which doesn’t apply to ebooks, the “agency” scheme the industry is pushing is the same as that used for print books. I also suspect that they’re excited about the new iPad in a way they could never be about the Kindle. First, because it’s a better design and second because Apple isn’t a competitor and a foe in the same sense that Amazon is.

Those who get all gushy over Amazon’s $9.99 price are forgetting two things.

1. Amazon has been subsidizing that price by selling below cost. If you think it is doing that out of the kindness of its heart, I’ve got a bridge to sell you. Amazon wants to control this new market and, once it does, don’t expect it to keep bleeding money.

2. The dynamics of ebook distribution are very different from those of print. Once a publisher’s initial costs are covered. its costs are virtually zero, which means that it can cut prices as low as it wants. It will still get 70% of the price, with a percentage of that going to the author. It is Amazon and the other online bookstores that are stuck with fixed costs per book sold. Do a little math, and you’ll discover that as the price drops much below $10, these store’s profit margin drops very rapidly. Amazon may have an interest in dropping ebook prices to about $10 to maximize profitable sales. But there are very powerful economic incentives that will deter them from cutting prices to $5. Remember, their costs to run a store and get that book to you (via cellular) are fixed.

And keep in mind that publishers have an interesting set of incentives because, unlike Amazon, they’re not selling books in general, they’re selling specific books. Just before a new Stephen King book comes out, they may find it makes sense to cut the price of his previous ebook down to almost nothing, while including a teaser chapter or two from the new book with the old.

And last but not least, publishers may find it makes sense to do what iPhone app developers do. If they have a book that’s good enough that it ought to be selling better, rather than blow money on an advertising campaign, they’ll offer the book for free for a day or two, publicizing it though affinity groups. Watch carefully enough and act quickly and you’ll get a book for free rather than for $9.99.