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> Publishers said the current pricing model involves some sacrifice but they felt it was worth it to keep Amazon in check. > Before 2010, book publishers opera

> Publishers said the current pricing model involves some sacrifice but they felt it was worth it to keep Amazon in check. > Before 2010, book publishers operated with a “wholesale” model for e-books in which they sold titles to retailers, which could discount as they saw fit. Amazon was willing to buy a title for $14.99 and sell it for $9.99, taking a loss to grab market share and encourage adoption of its Kindle e-reader. > Publishers worried that such discounting kept Apple Inc. and Google Inc. from emerging as competitors, as those companies might not want to lose money on e-books. Seems reasonable to me.

jbeales 11y ago
Keeping Amazon from becoming dominant is the only reason for jacking ebook prices that makes sense. > [Amazon] accounted for 64% of the U.S. e-book market, by units sold That's actually lower than I thought, but higher than publishers should be comfortable with.
- cstross 11y ago
  Back at the point in time when Apple and the big six were talking about agency model pricing -- which the DoJ brought the price-fixing case over -- Amazon's penetration was around 90%. (I'm of the opinion that the DoJ case is therefore evidence that US anti-trust law is broken; Amazon were clearly operating a predatory monopoly, but the DoJ went after the much easier target because price fixing is easier to prove.) Speaking as an author published by the major houses (Penguin Random House and Macmillan in the USA; Macmillan and Hachette in the UK) I'm not seeing my books hitting the ebook bestseller charts much -- but I'm not seeing my sales decline relative to where they were a few years ago, either. What seems to be happening is that the bestseller charts are being dogpiled by self-published titles on deep discount -- 99 cents to $2.99 seems to be typical. And the old joke "sell it at a loss, we'll make it up on volume" seems apposite at this point.
  - Turing_Machine 11y ago
    "Amazon were clearly operating a predatory monopoly" Nonsense. You could maybe argue that they were a monopsony, but even that is a stretch. "What seems to be happening is that the bestseller charts are being dogpiled by self-published titles on deep discount -- 99 cents to $2.99 seems to be typical." Someone selling a product for less than your antiquated publisher sells it for is not "predatory". Those authors are almost certainly making more per copy than you are. The consumers are paying less. The authors are making more. What is the problem with this?
    - cstross 11y ago
      * Looks at royalty statements * Nope, not seeing it. (Seriously. You're telling my the sky in my work is green with pink polka-dots. Hint: I do this for a living. Yes, some self-pub authors make out like bandits. But you might want to look up what the average revenue is, and how big the gap between mean and median looks.)
      - Moshe_Silnorin 11y ago
        What do you think the future is for professionals? I've noticed that there is an awful lot of very-high-quality content being produced for free, Worm and Shadows of Limelight are better than most published fiction, but are free and the authors seem uninterested in anything more than Patreon donations. As making art is something people enjoy and there are no bottlenecks to distribution, maybe we should expect there to be fewer professional artists and vast entertainment niches filled by popular amateur or part-time artists. I sort of imagine a world where one can have millions of readers and still can't be a pro - but probably Patreon would pay a living wage after that point.
        jsnell 11y ago
        Worm is an instructive example. It has some of the best speculative fiction worldbuilding, characters and plotting this decade, and it's amazing that somebody doing this in their spare time while having to work for a living could keep up that pace of writing for a couple of years. But it also suffers badly from the lack of professional editing and could do with major tightening up. It's also not someone just doing it as a hobby, but someone really trying to make a living as an author. And it's not at all clear that it's been very successful. The $2200/month from Patreon is still a fairly pitiful wage for such highly creative work. And I think it's pretty sad if we end up with a world where that's how things work. (I wrote a bit more on both the merits of Worm as a piece of fiction and on the business model last year here https://www.snellman.net/blog/archive/2014-05-24-book-review-worm.html https://www.snellman.net/blog/archive/2014-05-24-book-review... . It's interesting to note that the Patreon campaign has not really made that much progress in 15 months, it was $1200/month then).
  - jbeales 11y ago
    Do you know what happens to the money that would be spent on printing when an ebook is sold? For example, if someone buys your $15 ebook, do you get more money than if someone buys your $15 dead-tree book, or does that money go to your publisher or someone else? If authors get more money for ebooks that would be an argument for buying ebooks despite their drawbacks.
    - cstross 11y ago
      Do you know what happens to the money that would be spent on printing when an ebook is sold? The cost of printing is a very small component of the cover price of a book; for paperbacks you're talking around $0.5, and for hardbacks around $2-3. The author and publisher get roughly equal shares of the profit from a traditional trade book sale; the lion's share of the profit goes to the retail distribution chain, i.e. Amazon. (And when I say "lion's share" I mean 30-70%, depending.) The author's cut is a royalty percentage of net receipts. And yes, I get a much larger percentage cut of ebook sales than paper sales -- it comes from what would otherwise be the physical dead-tree printing costs.
      - jbeales 11y ago
        Good to know, thanks. It's not a huge amount, but it looks like if you do fairly well on ebook vs. hardcover, and sell a decent number of books, it'll be a nice little bonus.
  - Oletros 11y ago
    > Back at the point in time when Apple and the big six were talking about agency model pricing -- which the DoJ brought the price-fixing case over -- Amazon's penetration was around 90%. Wrong, market share was less than 80%, Nook eat a lot of market before iPad > Amazon were clearly operating a predatory monopoly Citation needed
Turing_Machine 11y ago
The publishers want to keep ebook prices high to keep them from eating into their traditional print business, just as Kodak kept their digital camera prices high to keep them from eating into their traditional film business. The problem is that the publishers aren't the only people who can produce ebooks, just as Kodak wasn't the only company that could produce digital cameras. This is going to bite them in the butt in the long run.
- danharaj 11y ago
  Maybe, but their goal and rationale seem fairly reasonable, even if there are counter-arguments. If being rationally optimal were easy there would be far fewer divergent opinions in the world. The headline of the article is that they have lost revenue because of their business decisions. I just wanted to emphasize that there's more to business than maximizing sales revenue of your product: The way you sell your product shapes the market downstream, and it is reasonable for publishers to think that Amazon's market share grabs were anti-competitive and that a lack of competition is worse for them. Demand curves are not the only thing that go into pricing decisions.
  - Turing_Machine 11y ago
    If they think that keeping their prices high is going to reduce competition, they are in for a rude, rude awakening.
    - danharaj 11y ago
      There is an intermediate market between publishers and their ultimate consumers. They were selling their products at the same price as they are now to Amazon before, it's just that Amazon was allowed to take a loss on the sales to build marketshare which possibly prevented other players from entering the distribution market. Are you unconvinced that allowing Amazon to absorb losses in order to dominate their distribution market is possibly bad for them? Or are you satisfied with treating them with contempt because it's so "obvious" to you that they're being boneheaded?
Booktrope 11y ago
The quote is on its face silly. The author of the article got mixed up. Publishers set a retail list price of $14.99. Of course Amazon doesn't pay retail list price for books it sells - it pays wholesale. (As do other retailers including Apple and Google) Amazon pays more like $7.50 for the book and then offered a discounted consumer price of $9.99. This was not selling below cost. It was aggressive discounting which is a common feature in retail markets. Discounting is an especially good retailer strategy with overpriced ebooks. A retailer only pays list price for an ebook after it receives payment from the consumer, so the optimal price for a product like this is the one that generates the most gross profit basically (sales times margin). Amazon optimized. Apple and Google could certainly follow suit, and in fact, Google also aggressively discounted ebooks like Amazon during the time period in question. Apple's strategy seems to be to keep prices and margins very high on all products it sells, in my view, because most of those products are physical things that do have marginal cost. In any event, it is completely unreasonable to say, publishers were concerned about Apple and Google losing money, because publishers knew that Amazon was making money on each sale, not losing money. Publishers wanted to keep retail prices high out of a short-sighted belief that this would protect print book sales and that it would keep their own margins high. They're now paying the price in lost sales, and it's their own outrageous pricing that's the problem.

jbeales 11y ago

Keeping Amazon from becoming dominant is the only reason for jacking ebook prices that makes sense. > [Amazon] accounted for 64% of the U.S. e-book market, by units sold That's actually lower than I thought, but higher than publishers should be comfortable with.

cstross 11y ago
Back at the point in time when Apple and the big six were talking about agency model pricing -- which the DoJ brought the price-fixing case over -- Amazon's penetration was around 90%. (I'm of the opinion that the DoJ case is therefore evidence that US anti-trust law is broken; Amazon were clearly operating a predatory monopoly, but the DoJ went after the much easier target because price fixing is easier to prove.) Speaking as an author published by the major houses (Penguin Random House and Macmillan in the USA; Macmillan and Hachette in the UK) I'm not seeing my books hitting the ebook bestseller charts much -- but I'm not seeing my sales decline relative to where they were a few years ago, either. What seems to be happening is that the bestseller charts are being dogpiled by self-published titles on deep discount -- 99 cents to $2.99 seems to be typical. And the old joke "sell it at a loss, we'll make it up on volume" seems apposite at this point.
- Turing_Machine 11y ago
  "Amazon were clearly operating a predatory monopoly" Nonsense. You could maybe argue that they were a monopsony, but even that is a stretch. "What seems to be happening is that the bestseller charts are being dogpiled by self-published titles on deep discount -- 99 cents to $2.99 seems to be typical." Someone selling a product for less than your antiquated publisher sells it for is not "predatory". Those authors are almost certainly making more per copy than you are. The consumers are paying less. The authors are making more. What is the problem with this?
  - cstross 11y ago
    * Looks at royalty statements * Nope, not seeing it. (Seriously. You're telling my the sky in my work is green with pink polka-dots. Hint: I do this for a living. Yes, some self-pub authors make out like bandits. But you might want to look up what the average revenue is, and how big the gap between mean and median looks.)
    - Moshe_Silnorin 11y ago
      What do you think the future is for professionals? I've noticed that there is an awful lot of very-high-quality content being produced for free, Worm and Shadows of Limelight are better than most published fiction, but are free and the authors seem uninterested in anything more than Patreon donations. As making art is something people enjoy and there are no bottlenecks to distribution, maybe we should expect there to be fewer professional artists and vast entertainment niches filled by popular amateur or part-time artists. I sort of imagine a world where one can have millions of readers and still can't be a pro - but probably Patreon would pay a living wage after that point.
      - jsnell 11y ago
        Worm is an instructive example. It has some of the best speculative fiction worldbuilding, characters and plotting this decade, and it's amazing that somebody doing this in their spare time while having to work for a living could keep up that pace of writing for a couple of years. But it also suffers badly from the lack of professional editing and could do with major tightening up. It's also not someone just doing it as a hobby, but someone really trying to make a living as an author. And it's not at all clear that it's been very successful. The $2200/month from Patreon is still a fairly pitiful wage for such highly creative work. And I think it's pretty sad if we end up with a world where that's how things work. (I wrote a bit more on both the merits of Worm as a piece of fiction and on the business model last year here https://www.snellman.net/blog/archive/2014-05-24-book-review-worm.html https://www.snellman.net/blog/archive/2014-05-24-book-review... . It's interesting to note that the Patreon campaign has not really made that much progress in 15 months, it was $1200/month then).
- jbeales 11y ago
  Do you know what happens to the money that would be spent on printing when an ebook is sold? For example, if someone buys your $15 ebook, do you get more money than if someone buys your $15 dead-tree book, or does that money go to your publisher or someone else? If authors get more money for ebooks that would be an argument for buying ebooks despite their drawbacks.
  - cstross 11y ago
    Do you know what happens to the money that would be spent on printing when an ebook is sold? The cost of printing is a very small component of the cover price of a book; for paperbacks you're talking around $0.5, and for hardbacks around $2-3. The author and publisher get roughly equal shares of the profit from a traditional trade book sale; the lion's share of the profit goes to the retail distribution chain, i.e. Amazon. (And when I say "lion's share" I mean 30-70%, depending.) The author's cut is a royalty percentage of net receipts. And yes, I get a much larger percentage cut of ebook sales than paper sales -- it comes from what would otherwise be the physical dead-tree printing costs.
    - jbeales 11y ago
      Good to know, thanks. It's not a huge amount, but it looks like if you do fairly well on ebook vs. hardcover, and sell a decent number of books, it'll be a nice little bonus.
- Oletros 11y ago
  > Back at the point in time when Apple and the big six were talking about agency model pricing -- which the DoJ brought the price-fixing case over -- Amazon's penetration was around 90%. Wrong, market share was less than 80%, Nook eat a lot of market before iPad > Amazon were clearly operating a predatory monopoly Citation needed

Turing_Machine 11y ago

The publishers want to keep ebook prices high to keep them from eating into their traditional print business, just as Kodak kept their digital camera prices high to keep them from eating into their traditional film business. The problem is that the publishers aren't the only people who can produce ebooks, just as Kodak wasn't the only company that could produce digital cameras. This is going to bite them in the butt in the long run.

danharaj 11y ago
Maybe, but their goal and rationale seem fairly reasonable, even if there are counter-arguments. If being rationally optimal were easy there would be far fewer divergent opinions in the world. The headline of the article is that they have lost revenue because of their business decisions. I just wanted to emphasize that there's more to business than maximizing sales revenue of your product: The way you sell your product shapes the market downstream, and it is reasonable for publishers to think that Amazon's market share grabs were anti-competitive and that a lack of competition is worse for them. Demand curves are not the only thing that go into pricing decisions.
- Turing_Machine 11y ago
  If they think that keeping their prices high is going to reduce competition, they are in for a rude, rude awakening.
  - danharaj 11y ago
    There is an intermediate market between publishers and their ultimate consumers. They were selling their products at the same price as they are now to Amazon before, it's just that Amazon was allowed to take a loss on the sales to build marketshare which possibly prevented other players from entering the distribution market. Are you unconvinced that allowing Amazon to absorb losses in order to dominate their distribution market is possibly bad for them? Or are you satisfied with treating them with contempt because it's so "obvious" to you that they're being boneheaded?

Booktrope 11y ago

The quote is on its face silly. The author of the article got mixed up. Publishers set a retail list price of $14.99. Of course Amazon doesn't pay retail list price for books it sells - it pays wholesale. (As do other retailers including Apple and Google) Amazon pays more like $7.50 for the book and then offered a discounted consumer price of $9.99. This was not selling below cost. It was aggressive discounting which is a common feature in retail markets. Discounting is an especially good retailer strategy with overpriced ebooks. A retailer only pays list price for an ebook after it receives payment from the consumer, so the optimal price for a product like this is the one that generates the most gross profit basically (sales times margin). Amazon optimized. Apple and Google could certainly follow suit, and in fact, Google also aggressively discounted ebooks like Amazon during the time period in question. Apple's strategy seems to be to keep prices and margins very high on all products it sells, in my view, because most of those products are physical things that do have marginal cost. In any event, it is completely unreasonable to say, publishers were concerned about Apple and Google losing money, because publishers knew that Amazon was making money on each sale, not losing money. Publishers wanted to keep retail prices high out of a short-sighted belief that this would protect print book sales and that it would keep their own margins high. They're now paying the price in lost sales, and it's their own outrageous pricing that's the problem.