The cry heard in the hallways and boardrooms of the giant publishers is, “We’re running as scared as we can!” Events of the past few weeks simply confirm that those being paid the big bucks have no clue what to do. They are flailing in every direction possible, hoping that somewhere there is a life preserver to grab.
The most recent grab was for the Apple iPad. How clueless can one be to think that Apple would prevent the Titanic of Publishing from sinking. Apple brings to the table a very crippled – from a reader’s perspective – device for ebook reading – and it doesn’t do anything at all for multitaskers. But the big boys heard something they wanted to hear: ebook pricing of $12.99 to $14.99, not $9.99.
But not everything is rosy. If Apple charges $14.99 for ebook XYZ and Amazon charges $9.99, where are consumers most likely to buy the ebook? [News Update: Over the weekend, and after this post was written and scheduled for publication, Amazon conceded to an agency model with Macmillan similar to the model Macmillan has with Apple. Consequently, Macmillan ebooks will be similarly priced on Amazon and Apple. Now we only need to wait a few moments for the other publishers to follow suit.] Ahh, but Apple’s device will only read books bought at the Apple bookstore, so a book bought at Amazon won’t be readable on the iPad. For that to work, Apple will have to shut out all other booksellers. Alternatively, Apple could make its DRM available to other booksellers. If it does, do publishers truly believe Amazon and Barnes & Noble will sit idly by?
And there is a mighty big assumption being made: that iPad buyers are readers. No one has yet demonstrated that people are chomping at the bit to read on the iPad or that they buy more than 2 books a year.
Suppose Apple sells enough ebooks to capture 20% of the ebook market and begins to exert pressure on publishers to lower their pricing or to do away with DRM. What will publishers do? Aren’t publishers simply requesting a repeat colonoscopy just from a different vendor? Do they really think Steve Jobs is any more interested in their survival than is Jeff Bezos?
Publishers are deceiving themselves. There is no white knight, no altruistic company out there just itching to be a good Samaritan and save the publishing model publishers have come to love. It’s time to wake up and recognize that smell for what it is.
To be saved, publishers must do it themselves. It can be done.
Be creative. Create a multipublisher reader’s ebook discount program for consumers. Establish a central repository (see A Modest Proposal: Dying Days of Giant Publishers) that is device and bookseller agnostic. Improve book quality.
Think about cutting back on 7-figure author advances. Think about ebook device subsidy plans along the lines of what cell phone companies do. Especially think about such plans for K-12 students. Most important of all: fully embrace ebooks.
Forget about trying to control price; don’t fret about it. Here’s the bottom line: Let Amazon sell books at a loss. Who cares. If Amazon decides to compete in the publishing marketplace, let it. [News Update Questions: Will Macmillan’s gambit this past weekend, especially if other publishers follow suit, speed Amazon’s entry into the publishing side? If it does, will Macmillan and cohorts be able to financially compete for authors with the Amazon juggernaut? Have publishers written their funeral oration with this move? Bottom line: Has Macmillan really thought through the possibilities?] If publishers are right that they will lose money at a $9.99 price point, wouldn’t Amazon , too? Or is this a fiction? Besides, let’s be realistic about Amazon – like Apple it wants to make money. If Amazon enters the publishing market and discovers that it can make more money by charging prices higher than $9.99, it will. Consumers only kid themselves if they think Amazon is their friend.
Take up the challenge. Tell Amazon that if it really thinks the maximum price point should be $9.99, prove it to publishers by setting a ceiling of $9.99 on all ebooks. If that is truly the sweet spot, sales will soar and publishers will be able to react and will react accordingly. After all, if Amazon starts selling 60,000 copies of an ebook at $9.99 that publishers have only been able to sell 5,000 copies of in any format at a higher price, publishers will take notice and begin to think that maybe $9.99 is the sweet spot.
Tell Amazon to put up or shut up. If Amazon demonstrates that $9.99 is the pricing sweet spot, publishers will rapidly adjust their business model to accomodate it. Publishers and Amazon have this in common: both want to sell more books and make more money. Whatever is in the way has to be moved aside.
eBbooks are here to stay. eBooks are the growth area for publishing; pbooks are in permanent decline. Publishers must come to grips with that change.
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
” Apple’s device will only read books bought at the Apple bookstore, so a book bought at Amazon won’t be readable on the iPad.”
What makes you think that? There is no indication that it will be impossible to load your own DRM’d epub files from iTunes or similar, just like with music. Also, what makes you think that Apple will close the doors for Kobo, Kindle, B&N and other ebook store apps currently available on the App store.
Also, I really don’t see the business case for Apple suddenly shutting down the apps from other software vendors. Apple sell hardware, not software. The App store and iTunes store exists to sell Apple hardware – iPods, iPhones, Macs, AppleTV’s etc. So in principle any app or content that will increase the number of Apple hardware users should be welcome on board the iPad as well, as far as Apple is concerned.
@Toke — To be more specific, DRMed books bought at Amazon will not be readable on the iPad. Apple will read ePub, a format Amazon does not currently use, but only Apple’s own flavor of DRM imposed on the ePub. Consequently, as things now stand, the iPad will not natively read any DRMed books purchased anywhere but at the Apple store.
As for shutting down competitors, I expect Apple will do that. Otherwise there would be no logic to creating its own DRM flavor.
From a publisher standpoint, I’m excited about the iPad. I’m also excited about the Kindle, the Nook, the Sony and the eBookWise (among others). Why? Because the more competition there is out there, the less ability any one vendor has to monopolize the supply chain. The big publishers see Amazon as a threat not so much because it charges $9.99 for eBooks, but because they know that eBooks are the future and they’re concerned that Amazon may own the entire distribution channel.
I agree that it’s short-term foolish to care that Amazon wants to take a loss on their books, but Amazon’s recent announcement that it’ll go to 70% royalties on lower-priced eBooks (compared to 30-50% on higher-priced eBooks) is handwriting on the wall to the big publishers. Do we really want to go after publishers who are willing to look past the short term?
As a reader, I’m unhappy that the publishers picked the $9.99 price as their battleground. I think it’s the wrong fight and the wrong side to take. But I sure understand lining up behind Apple. If the iPad becomes a major player, that’s a bit more leverage we have to make sure we don’t get that letter saying the publisher cut has been reduced from 70% to 15%.
Rob Preece
Publisher
Rich: What makes you think that “DRMed books bought at Amazon will not be readable on the iPad”? There’s a Kindle Reader app for the iPhone, you know, and the iPad will support iPhone apps natively. By the time the iPad hits the street, Amazon will probably have updated the Kindle Reader app to support the iPad’s higher-resolution screen.
You think Apple will block Amazon’s Kindle app (or for that matter, Fictionwise’s eReader, Stanza, Bookshelf, Kobo, etc.)? Why should they?
As a friend opined to me the other day, Apple generally runs its content stores (music, movies, apps, etc.) at around the break-even point; their real value to Apple is that they help sell the high-margin hardware.
Why should Jobs get upset at other e-book stores, even Kindle, helping to sell his iPad for him? It’s additional value added that he doesn’t have to shell out for the overhead to add. (Plus, it would trigger a loud user revolt from people who have already built up large libraries in those apps.)
@toke: shutting down other software vendors’ apps seems to be starting. not ‘shutting down’, exactly. just: e-readers stanza and goodreader (for large pdf’s) have their usb sharing capabilities crippled in the newest upgrade, and moving forward for new purchaser. (goodreader was about USD 5 when i added it.)
what apple will do with the kindle app is a question. if they shut that down (and why wouldn’t they. it helps one to purchase content directly from amazon — bypassing itunes), i hope amazon will come out with an app for palm pre (’cause *iiiiii* have a pre, and need a backup for reading my content ‘on the fly’). and of course, for all of the rest of the smartphone os’s out there, for the rest of everyone who doesn’t have an iphone.
asphalt: You’re comparing Apple and oranges. The no-USB-sync thing is a restriction Apple has long been known to hold on stuff accessing the phone. To be honest I didn’t know Stanza and GoodReader even had it until it was removed; I never thought to look because I already knew that Apple would never allow any app but iTunes to use it. I’m surprised they got away with it for as long as they did.
Apple has allowed other e-book stores on its iPhone/iPod Touch devices for the longest time as they basically helped create the market for it in the first place. They haven’t started kicking those stores off yet and I doubt they will.
I know it’s fashionable to make a great big Apple straw man and whack on it, but let’s hate on Apple for what it’s actually done, not what it might possibly do.
@chris meadows: what you say makes sense; now that i think about it, what’s striking is the timing of the change-implementation.
@Chris: Perhaps it is my remembering Apple’s shutting down computer vendors that wanted to build computers and install Apple OS. Perhaps it is Apple’s past tactics with Google. Perhaps it is Apples generally monopolistic approach.
Yes, Apple has allowed a lot of apps to be sold in its store but then Apple hasn’t sold books before. I doubt Steve Jobs’ charity when it might infringe on his bottom line (real or perceived). And what will he do if the 5 big publishers tell him to close down Stanza or Kindle because they are undercutting their Apple store prices?
Obviously I have no firm data to support the idea that the Kindle Reader app of the iPad will be disallowed, but Jobs’ history indicates to me that I’m more likely right than wrong. I’d be more inclined to disbelieve me if Bezos was allowing Apple DRMed books on the Kindle, but he isn’t and Jobs is a 2-tits-for-1-tat type person, so I expect him to smackdown Bezos.
Rich: Comparing the shutting-down-computer-vendors thing to the iPhone/iPad platform is comparing Apple clones and oranges. (How many ways can I mangle that metaphor today? :))
Again, Apple is fundamentally a hardware company. They make their money on their hardware—that’s why the prices are so high. The amount of money they make from selling a Genuine Macintosh is a lot more than they would make from licensing a copy of MacOS to a clone maker, so by allowing low-price clones they were undercutting their own business. (It’s the very same reason IBM, the company who invented the PC, doesn’t make PCs anymore—once PC-clone OEMs were able to undercut them, sooner or later that was all she wrote.)
Under the cloning agreement, Apple went from selling a record 4.5 million Macintoshes in 1995 to selling 2.8 million in 1997, and was most commonly described as “beleaguered”. Was killing that agreement really such a bad idea, you think?
The fact that Apple’s then-CEO had made a string of that kind of bad decision and so Apple was sinking fast was the main reason the board of directors gave him the boot and begged and pleaded with Steve Jobs to come back, all is forgiven—and ending the clone program was one of Jobs’s first decisions as CEO.
But the situation with the iPad is the exact opposite. Apple isn’t making money by selling iBook software or even the iBook books, they’re making money by selling the hardware platform iBook software runs on.
And if they can make the iPad that much more desirable by allowing people to read their non-iBook e-books on it, at no cost to them, it doesn’t make any kind of sense that they wouldn’t.
Or, to put it another way, how hard has Apple tried to prevent people from running Windows on its shiny new X86-architecture Macintoshes? Or, for that matter, to prevent people from playing Amazon-purchased MP3s on their iPods? (Hint: they haven’t.)
Regarding Amazon selling books at a loss and whether we should care, the point is that Amazon is affecting consumer expectations. When an Amazon or a Wal-Mart sells goods at low prices, they set de facto standards. If consumers expect to pay low prices for books, eventually Amazon will have enough power to stop paying publishers 50% of the cover price and only pay half of the (lower) retail price. When that happens, publishers and authors will find themselves making less money than they/we already do and may have to fold entirely.
@paula b.: the *entire game* is ‘consumer expectations’. there are many who would say that amazon actually raised them. *lots* of people expected that e-books, because they lack paper, glue and stitching, would drop in price to USD 5 or less. then for months amazon sells bestsellers (mostly) at USD 9.99, and gets people used to paying ‘more’, the entire time that publishers are screaming, “consumers are going to think our stuff is worthless!!” now that macmillan & amazon have had their tiff and are purported to be resolving their differences, much of the e-book world is saying, “hmmm. maybe that USD 9.99 wasn’t so bad!”
now. *that’s* what i call ‘affecting consumer expectations’. with the help of an *entire cast* of players.
“masterful.”
@Chris — I do not seem to be alone in my thinking. See Mike Cane’s blog: http://ebooktest.wordpress.com/2010/01/30/epub-ebooks-from-apple-will-use-fairplay-drm/
Yes, I see your point, asphalt. Yesterday agent Nathan Bransford took a poll. He asked blog readers what they would pay for ebooks. I voted for the $5 – $10 range, figuring that ebooks should cost about the same as paperbacks. However, as an author, I recognize that I wouldn’t make much money at those price points, especially with the puny royalty rates most publishers offer.
So of course the question becomes one of demand. If there are enough book buyers to make that price range profitable for authors and publishers, great. If not….
Rich: Thanks for pointing that out. I went and left a comment there too.
To reiterate: Apple didn’t try to restrict the iPod to playing only iTunes-bought songs. That would have been ridiculous. It doesn’t keep you from running Windows on its shiny new X86-architecture Macintosh PCs—far from it, it came out with Boot Camp to make it easier. And the iPad’s OS 3.2 is going to include a shared document sandbox that can be accessed by third-party apps via USB. Why do that if there aren’t going to be third-party apps to access it?
Also, as I pointed out in an article here last night, the Wall Street Journal lately said that textbook publishers like McGraw-Hill (whose CEO did that night-before leak about how the iPad was going to have his content on it) have partnered with appbook-company ScrollMotion to put textbooks on the iPad. If Apple and McGraw-Hill were buddy-buddy enough for the CEO to be able to say that with confidence on the eve of the launch, it suggests that there will be room for other books besides iBooks on the platform.
While I was formerly paranoid about Apple rejecting other e-book apps myself, I now see no reason other than paranoia for the iPad not to allow these e-book apps to continue.
Of course, it’s possible I could be wrong. I still don’t think it would make sense, but it could still be possible.