3 ms·

It can't possibly be good for consumers that any one middleman is so powerful that they can lay a major hurting on MacMillan like this. I really dislike the arb

It can't possibly be good for consumers that any one middleman is so powerful that they can lay a major hurting on MacMillan like this. I really dislike the arbitrage model where the middleman tries to capture all the profit at the expense of the supplier and the consumer. I like the fixed margin model (like Apple's). I think it's good for everybody.

patio11 17y ago
It can't possibly be good for consumers Amazon wants to sell me a book delivered on day 1 for $10. Macmillan wants me to choose a book delivered on day 8 for $30 or a book delivered on day 180 for $15. Remind me why I'm suppose to back Macmillan again?
- michael_dorfman 17y ago
  Actually, according to their Open Letter, Macmillan wants to sell you a book on Day 1 at $12-$15.
- raganwald 17y ago
  If Amazon is writing the book, fine. But if Amazon is saying that somehow magically they will sell you a book for $10 when MacMillan needs $12-$15 to make money, then MacMillan or the author are going to starve while Amazon makes all the money. That is not a win for anyone except Amazon.
  - adamc 17y ago
    If Amazon is saying that they don't like MacMillan's terms and decline to sell their books, how are they doing wrong? Like it or not, Amazon is not an actual monopoly, and readers who really want to find those titles can look elsewhere (such as bn.com). MacMillan has no particular right to sell through Amazon.
  - patio11 17y ago
    It isn't magic: Amazon takes a loss on certain Kindle books with the goal of changing customer behavior, in much the same way that WalMart loses money on most new titles it sells to bring customers in the door. MacMillan would rather they dictate prices to Amazon so that they can avoid channel conflict. To enforce this, they told Amazon that if Amazon doesn't play ball with their dictated prices, MacMillan will use their strict legal monopoly on sale of MacMillan books to make it impossible for Amazon to sell them in the crucial post-release window. Amazon said "Two can play at that." (MacMillan doesn't "need" $12 to $15 to make money, but if they demanded it, Amazon would pay $2 a book during the new release window to make boku bucks on the hardware, midlist/backlist titles, and non-book services.)
    - cstross 17y ago
      MacMillan doesn't "need" $12 to $15 to make money Actually, you'd be surprised. The author's cut is a royalty based on the suggested retail price, which for a hardback offering would be 10-15% of $24, or for a first ebook at $15 would be 25-30% of $15. The production cost of an ebook is non-zero; there's a lot of editing, copy-editing, proofreading, typesetting that goes into it, not to mention commissioning cover art (arguably obsolescent) and other marketing activities. Rule of thumb is $7000-$20,000 for a book, which must be recouped somehow. Typical book sales are much lower than most folks imagine -- midlist hardcover SF novels sell 3000-8000 copies at $24 discounted to $16, paperbacks sell 15-30,000 copies at $8 discounted to $6 (but with a hideous level of wastage such that typically 20-50% of the print run will be pulped due to not selling within 90 days). Suppose the $15 ebook somehow sells as many copies as the $16 (after discont) hardcover. The iBook cut is 30%, leaving $10. The author's cut is another 30% of $15, leaving $5 for the publisher. They then have to defray $7-20K of production costs before they're into profit; an expensively produced book that sells for $15 but only moves 4K copies is thus a loss. You want to know the grisly truth? Right now, ebook sales are lucky to make it into three digits. Even Baen, who are Doing It Right, are happy to shift 4000 ebooks at $6 each. And Amazon isn't taking only 30% of the cover price: they're wanting 30% with a cap of $10, and they get to set the retail price, or 70% of retail price (current books). Let me say it again: in publishing, about 70% of the revenue stream is soaked up by rent-seeking intermediaries between author/publisher and reader.
- mechanical_fish 17y ago
  I would point out that, if I owned a Kindle, and yesterday I could buy a given book, but today I log in and find that said book isn't available anymore because the vendor of my Kindle is flexing their monopoly power, I'm not sure how happy I would be. Now, let's try a metaphor. It will be a little clunky, since the situation isn't the same. But go with it for a second. I see that Bingo Card Creator sells for $29.95. That seems awfully high. [1] But suppose I've got my hands on the channel through which 50% of Bingo Card Creator's sales are flowing. (Perhaps I'm Google, and I both (a) run AdSense and (b) own a lot of the pipes down which your content flows.) And I'm starting up an app store. My deal for you is: You will license Bingo Card Creator to me for republishing at my app store, where all apps cost $19.95 flat rate. If you refuse, I'll cut off all the ads and distribution that connect you to over half of your customer base, and we'll see how long you can afford to defy me while your cash flow has been cut in half. Of course, if you say yes to $19.95, your customers will be very happy. They will flock to my app store where the prices are lowest. Soon 75% of your customers will arrive through my channel. At which point I might decide to lower the price on your app to $9.95, flat rate. I'm assuming that there is a price point below which you will go out of business, and below which your replacements will go out of business (even if I hire the cheapest labor I can find, and cut QA to the bone). You may prefer not to explore exactly where that point is, if only because you like producing quality products, and because it's nice to not be one temporary sales slump away from bankruptcy. But, thanks to my grip on your distribution channel, we will now perform that experiment, on my schedule and my terms. Why hasn't this happened more often in web software? Perhaps because no monopoly controls a sufficient portion of the network. Perhaps because those with the power are scared of anti-monopolist legislation (which, in this context, we tend to call "net neutrality laws") and don't want to provoke anyone. Perhaps because software-industry mavens are very well practiced at picking up their operations and moving to a different channel literally overnight. Perhaps because software has a huge profit margin compared to print books, which provides healthy margin for emergencies. Perhaps because we've been lucky so far. And perhaps because, if and when Google does destroy entire industries by tweaking a bit in AdSense, they tend to be industries we don't like very much, and/or it tends to stay under the radar. [2] My sense is that this moment isn't so much about publishers and authors trying to stave off the arrival of the internet. It's about an attempt to stave off a monopolist's control of their pricing and distribution. --- [1] To a cheapskate. Cheapskates think all prices are high. People complain about high prices on the iPhone App Store, for god's sake. [2] Note: I haven't seen any credible evidence that this actually happens, although people do complain about it now and then.
- raganwald 17y ago
  Actually, I don't want you to back MacMillan, I want you to back everyone else who is pushing towards an open, free format for eBooks. I think this includes Apple even if they aren't selling free books today. My understanding is that Kindle books can be played everywhere, but only purchased from Amazon, because they're in the distribution business. They want to monopolize distribution and commoditize players. Apple go the other way. You can get all sorts of content for iPads, including eBooks from other sources. They want to monopolize the player market and commoditize the content. The best way to commoditize content is to make it completely open: witness their original "Rip. Mix. Burn" campaign that got them hated by the music industry, and Steve's famous call for an end to DRM. All things considered, I'd rather fight Apple over hardware than fight Amazon over DRM. JM2C.
  - cstross 17y ago
    Actually, I'm picking a third choice: I'm pushing Macmillan for a DRM-free open format based solution. (And I'm pushing on a door that's ajar, but jammed: probably most or all of their editorial and many of their executive staff know that DRM is stupid, but changing corporate policy at a large, staid multinational headquartered overseas -- Macmillan is a subsidiary of Holtzbrinck -- is difficult and takes time.) The real solution is for the publishers to switch from wholesale (via channels like Amazon) to direct retail. The agency idea is a step along the way, but not the whole way. Some publishers already have done this: Baen's Webscription web storefront, shared by some other smaller publishers, is a thriving example of Doing It Right. Interesting piece of public information that not many people know: Baen is a private company, about 30% owned by one Tom Doherty, CEO of Tor, itself a subsidiary of Macmillan.
- bonaldi 17y ago
  For the same reason you don't like WalMart putting such a low ceiling on prices that quality necessarily suffers. It depends whether you want a book, now, for $5 less, or better books for the years and decades to come. Publishing is already in the thrall of fashion; forcing them into prices that are only sustainable at huge scale means more Dan Brown and less literature.

patio11 17y ago

It can't possibly be good for consumers Amazon wants to sell me a book delivered on day 1 for $10. Macmillan wants me to choose a book delivered on day 8 for $30 or a book delivered on day 180 for $15. Remind me why I'm suppose to back Macmillan again?

michael_dorfman 17y ago
Actually, according to their Open Letter, Macmillan wants to sell you a book on Day 1 at $12-$15.
raganwald 17y ago
If Amazon is writing the book, fine. But if Amazon is saying that somehow magically they will sell you a book for $10 when MacMillan needs $12-$15 to make money, then MacMillan or the author are going to starve while Amazon makes all the money. That is not a win for anyone except Amazon.
- adamc 17y ago
  If Amazon is saying that they don't like MacMillan's terms and decline to sell their books, how are they doing wrong? Like it or not, Amazon is not an actual monopoly, and readers who really want to find those titles can look elsewhere (such as bn.com). MacMillan has no particular right to sell through Amazon.
- patio11 17y ago
  It isn't magic: Amazon takes a loss on certain Kindle books with the goal of changing customer behavior, in much the same way that WalMart loses money on most new titles it sells to bring customers in the door. MacMillan would rather they dictate prices to Amazon so that they can avoid channel conflict. To enforce this, they told Amazon that if Amazon doesn't play ball with their dictated prices, MacMillan will use their strict legal monopoly on sale of MacMillan books to make it impossible for Amazon to sell them in the crucial post-release window. Amazon said "Two can play at that." (MacMillan doesn't "need" $12 to $15 to make money, but if they demanded it, Amazon would pay $2 a book during the new release window to make boku bucks on the hardware, midlist/backlist titles, and non-book services.)
  - cstross 17y ago
    MacMillan doesn't "need" $12 to $15 to make money Actually, you'd be surprised. The author's cut is a royalty based on the suggested retail price, which for a hardback offering would be 10-15% of $24, or for a first ebook at $15 would be 25-30% of $15. The production cost of an ebook is non-zero; there's a lot of editing, copy-editing, proofreading, typesetting that goes into it, not to mention commissioning cover art (arguably obsolescent) and other marketing activities. Rule of thumb is $7000-$20,000 for a book, which must be recouped somehow. Typical book sales are much lower than most folks imagine -- midlist hardcover SF novels sell 3000-8000 copies at $24 discounted to $16, paperbacks sell 15-30,000 copies at $8 discounted to $6 (but with a hideous level of wastage such that typically 20-50% of the print run will be pulped due to not selling within 90 days). Suppose the $15 ebook somehow sells as many copies as the $16 (after discont) hardcover. The iBook cut is 30%, leaving $10. The author's cut is another 30% of $15, leaving $5 for the publisher. They then have to defray $7-20K of production costs before they're into profit; an expensively produced book that sells for $15 but only moves 4K copies is thus a loss. You want to know the grisly truth? Right now, ebook sales are lucky to make it into three digits. Even Baen, who are Doing It Right, are happy to shift 4000 ebooks at $6 each. And Amazon isn't taking only 30% of the cover price: they're wanting 30% with a cap of $10, and they get to set the retail price, or 70% of retail price (current books). Let me say it again: in publishing, about 70% of the revenue stream is soaked up by rent-seeking intermediaries between author/publisher and reader.
mechanical_fish 17y ago
I would point out that, if I owned a Kindle, and yesterday I could buy a given book, but today I log in and find that said book isn't available anymore because the vendor of my Kindle is flexing their monopoly power, I'm not sure how happy I would be. Now, let's try a metaphor. It will be a little clunky, since the situation isn't the same. But go with it for a second. I see that Bingo Card Creator sells for $29.95. That seems awfully high. [1] But suppose I've got my hands on the channel through which 50% of Bingo Card Creator's sales are flowing. (Perhaps I'm Google, and I both (a) run AdSense and (b) own a lot of the pipes down which your content flows.) And I'm starting up an app store. My deal for you is: You will license Bingo Card Creator to me for republishing at my app store, where all apps cost $19.95 flat rate. If you refuse, I'll cut off all the ads and distribution that connect you to over half of your customer base, and we'll see how long you can afford to defy me while your cash flow has been cut in half. Of course, if you say yes to $19.95, your customers will be very happy. They will flock to my app store where the prices are lowest. Soon 75% of your customers will arrive through my channel. At which point I might decide to lower the price on your app to $9.95, flat rate. I'm assuming that there is a price point below which you will go out of business, and below which your replacements will go out of business (even if I hire the cheapest labor I can find, and cut QA to the bone). You may prefer not to explore exactly where that point is, if only because you like producing quality products, and because it's nice to not be one temporary sales slump away from bankruptcy. But, thanks to my grip on your distribution channel, we will now perform that experiment, on my schedule and my terms. Why hasn't this happened more often in web software? Perhaps because no monopoly controls a sufficient portion of the network. Perhaps because those with the power are scared of anti-monopolist legislation (which, in this context, we tend to call "net neutrality laws") and don't want to provoke anyone. Perhaps because software-industry mavens are very well practiced at picking up their operations and moving to a different channel literally overnight. Perhaps because software has a huge profit margin compared to print books, which provides healthy margin for emergencies. Perhaps because we've been lucky so far. And perhaps because, if and when Google does destroy entire industries by tweaking a bit in AdSense, they tend to be industries we don't like very much, and/or it tends to stay under the radar. [2] My sense is that this moment isn't so much about publishers and authors trying to stave off the arrival of the internet. It's about an attempt to stave off a monopolist's control of their pricing and distribution. --- [1] To a cheapskate. Cheapskates think all prices are high. People complain about high prices on the iPhone App Store, for god's sake. [2] Note: I haven't seen any credible evidence that this actually happens, although people do complain about it now and then.
raganwald 17y ago
Actually, I don't want you to back MacMillan, I want you to back everyone else who is pushing towards an open, free format for eBooks. I think this includes Apple even if they aren't selling free books today. My understanding is that Kindle books can be played everywhere, but only purchased from Amazon, because they're in the distribution business. They want to monopolize distribution and commoditize players. Apple go the other way. You can get all sorts of content for iPads, including eBooks from other sources. They want to monopolize the player market and commoditize the content. The best way to commoditize content is to make it completely open: witness their original "Rip. Mix. Burn" campaign that got them hated by the music industry, and Steve's famous call for an end to DRM. All things considered, I'd rather fight Apple over hardware than fight Amazon over DRM. JM2C.
- cstross 17y ago
  Actually, I'm picking a third choice: I'm pushing Macmillan for a DRM-free open format based solution. (And I'm pushing on a door that's ajar, but jammed: probably most or all of their editorial and many of their executive staff know that DRM is stupid, but changing corporate policy at a large, staid multinational headquartered overseas -- Macmillan is a subsidiary of Holtzbrinck -- is difficult and takes time.) The real solution is for the publishers to switch from wholesale (via channels like Amazon) to direct retail. The agency idea is a step along the way, but not the whole way. Some publishers already have done this: Baen's Webscription web storefront, shared by some other smaller publishers, is a thriving example of Doing It Right. Interesting piece of public information that not many people know: Baen is a private company, about 30% owned by one Tom Doherty, CEO of Tor, itself a subsidiary of Macmillan.
bonaldi 17y ago
For the same reason you don't like WalMart putting such a low ceiling on prices that quality necessarily suffers. It depends whether you want a book, now, for $5 less, or better books for the years and decades to come. Publishing is already in the thrall of fashion; forcing them into prices that are only sustainable at huge scale means more Dan Brown and less literature.