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Posts tagged ‘Big Six’

Tuesday morning thoughts

Last week — was it only last week? — I wrote about how I was finding myself forced to take some downtime after finishing a novel. That need has pretty much passed, only to be replaced by the body numbing exhaustion that came from a weekend filled with graduation and commissioning activities for my son. Much as I’d like to be able to sit back and bask in the pride I feel for my son, I know I can’t. So I’m pushing through. The only real problem today is there simply isn’t enough coffee in the world to get my brain going enough to blog.

But I’m sure you’ll be relieved to know that sanity has yet to find its way into legacy publishing. How do I know? Well, the price fixing suit filed by the Department of Justice against five of the Big Six as well as Apple has yet to be settled by all parties. In fact, it looks like it will go to trial early next month, barring some last minute settlements or postponements. It is going to be interesting to see how that plays out in court, assuming it goes all the way to verdict. Of course, if the court finds for the DoJ, we all know there will probably be appeals and that means no final result for years to come.

Then there’s this article from Publisher’s Weekly about the increase in e-book sales last year. What’s interesting about it is that it, like so many of the other studies, goes by the number of dollars spent instead of number of units bought. This is an important distinction. Going by the number of dollars spent, e-books represented 11% of the market. But when you consider how much cheaper e-books are — at least if you are talking about non-legacy published e-books — than paperbacks, much less novels, you have to wonder exactly what the numbers of units sold are. I have a feeling that if we had accurate numbers, we’d see figures nearing 50% of the market for e-books. But that’s just my feeling.

There’s also been another warning for authors about the danger of posting your material online. Author Lillith Saintcrow has been posting Squirrel!Terror on her blog for some time now. Imagine her surprise when she is tipped off that someone has been posting her work, with some of the names changed, as their own over on Daily Kos. She went to the posts, made sure she had gotten good information and then posted that these were her work.

And she was attacked by followers of the purported plagiarist, being called liar and other things.

While I understand her upset at being plagiarized, and I agree that she received at best a non-apology from the other party, I have to take issue with a subsequent post she put up and that has been echoed by other writers. She basically lumps piracy with plagiarism and that is my problem. In the world of e-books, piracy is not the same thing as plagiarism (although they are certainly closely related). As she noted in her original post, whole blocks of text were lifted by the other person and the only real changes in the text were names of the characters. Plagiarism clearly, as any student who has had to write a research paper will attest.

Piracy, on the other hand, is taking your e-book and putting it up for download without permission and without giving the author/publisher the appropriate proceeds. No one likes having their e-books pirated. There are differing opinions on whether it helps or hurts sales. As most of you know, I happen to fall in the camp that it helps. I guess this is where I admit that I have been brainwashed by the late Jim Baen not only about the viability and importance of e-books but that folks might pirate one e-book, find they like it and then they will go out and buy others by that author. Why did he believe that? Because he’d seen it work that way and, frankly, I happen to agree. Of course, if you happen to believe that readers are inherently criminal, then you won’t believe this and there is nothing I can say to change your mind.

Frankly, this debate reminds me of a situation that arose several years ago when the author of the then hot YA series discovered that someone she’d given a copy of the manuscript for the next book had leaked it on the internet. She stomped and screamed and pitched a royal hissy fit — in public. Because she just knew it would kill sales of the book — and remember, this was the latest hot YA series and it is still a big seller — she withdrew that book from her publisher and went back to work writing yet another book for the series.

Now, her hissy fit was a marketing windfall for her because it kept folks talking about the series. But it also delayed, iirc, the release of the next volume because she had to go back and write something else. Can I blame her for being mad? No. But at the rate the book was selling, the leak wouldn’t have hurt her. Not really. It didn’t hurt the Harry Potter books — and they were leaked as pdf files before the print books were available and years before legal digital versions were. But she was convinced no one would buy her book.

Sigh.

The lesson from what happened to her and from what happened to Saintcrow is that we have to be vigilant. If we post excerpts, or entire stories or novels, online, we need to periodically do searches for key phrases or passages. We need to search for our titles to see if they have been put up on some torrent site. Then, if you find you’ve been pirated, send a take down notice. It may or may not work, especially if the site is hosted outside of the country. If you find you’ve been plagiarized, do a take down notice and also let the offending party know that you will be talking with your attorney, especially if they are selling your work as their own.

Your thoughts?

A settlement and another cry of “foul” from the peanut gallery

There are days when I really wonder if I’m the writer or if I’m actually a character living in some writer’s head — and the writer is a mean SOB who likes to torment me with little things meant to drive me insane. The first one of those “why me?” moments happened the other day when not-our-cat (AKA the neighbor’s cat who decided he ought to live part-time with us) decided to leave a gift of a hairball and other things on my desk, covering my thumb drive. EWWWW. Then came this morning’s rude and abrupt awakening when Mom forgot to turn off the burglar alarm, waking me with the WHOOP-WHOOP as she opened the front door. Adding insult to injury, the alarm company rep who called was perky! Yes, perky. That ought to be illegal before nine in the morning and it has to be a capital offense when it occurs before six. And, if that isn’t enough, I’ve been hit by a plot for a book that is the most demanding, insane and loud plot of any I’ve had in a long time. Yes, I’m writing it. I don’t have any choice. But I am not amused, not only because I have other books I should be working on but also because this is not the sort of book I normally write and, well, I need to be working on other things.

Sigh.

So, if I’m a bit scattered this morning, I hope you’ll bear with me and bring me another cup of coffee and maybe a Danish (no, Sarah, not THAT sort of Danish.)

For those of you who missed it, the price fixing law suit filed by the DoJ against five of the Big Six publishers and Apple is drawing to a close. Or at least it appears to be. The last of the publishers named in the suit, Macmillan, has settled with the Department of Justice. Without admitting any guilt, John Sargent (Macmillan CEO) said the company was settling because the potential penalties were more than the equity of the company. The settlement, according to Publishers Weekly, calls for Macmillan to pay $20 million. Of course, that still leaves Apple as the lone named defendant in the price-fixing suit yet to settle. Based on Apple’s history, there is no telling when — or even if — they will settle or if they will demand their day in court. All any of us know for sure is that, assuming the settlement is approved by the court, Macmillan will join the other publishers named in the law suit in having a two year period where they return to wholesale pricing of their e-books. After that, if they negotiate in good faith with the different e-book retail outlets, they are free to return to agency pricing. Yep, that’s right. Agency pricing is not dead. The original filings by the Department of Justice do not condemn agency pricing. The issue has always been the alleged collusion between the publishers and Apple. That is something so many authors and publishing professionals seem to forget in their “Amazon is bad” mentality.

Speaking of the “Amazon is bad” bandwagon, if you’ve been following Facebook the last week or so, you’ve seen a new round of Amazon hating. Authors and others in the industry have been shouting and shaking their fists to the heavens in quick condemnation over Amazon’s plans to sell used e-books. Now, I don’t know about you, but when I see something like that, I want to find the basis for their anger. So I clicked through to the Publishers Weekly post many of them were linking to. The post is a short note (two paragraphs) about a patent received by Amazon Technologies that “indicates” Amazon might be planning to sell used e-books and other digital products at some point in the future.

Now, I’ll admit as a reader, I like the idea. After all, I can go down the block to the used bookstore and sell any physical books I have that I no longer want to keep. I can browse the stock while I’m there and look for books to buy. Readers have long been asking why they can’t do the same thing with their e-books.

Oh, wait, now I remember why we can’t resell our e-books. The publishers tell us we can’t. We aren’t “buying” the book when we buy it in digital format. We are only buying a license to read it on a limited number of devices and that license does not include being able to resell it. Heck, we aren’t even supposed to give it away. That’s why the publishers load all that wonderful DRM into their titles.

So, let’s keep that in mind as we look at what everyone is claiming Amazon is about to do (mind you, keeping Amazon’s business model in mind, I don’t doubt they are looking for a way to do just that. But they also know there are limits built into e-books right now so this isn’t something that is going to happen any time soon). When you buy an e-book from Amazon, you are still buying that book with the same limitations on it that would be there if you bought it directly from the publisher’s site. Exceptions to this may — and that is a very big MAY — come from books published under the Kindle Direct program. Even then, if I remember correctly, you are still only buying a license. So, contract language is going to have to be changed before any legal transfer of an e-book can be made.

Instead of authors being upset with Amazon for contemplating reselling e-books, they ought to be looking at this as an opportunity to make more money. It is near to impossible to track the sales of used print books. Hell, publishers tell us on a daily basis that they can’t accurately track the sales of new print books. That’s why they rely on Bookscan to give them an estimate of the number of books that are sold. Worse, authors have bought into this and are only now, on a very small scale, starting to realize this doesn’t make sense.

But back to e-books. To sell an e-book, it has to go through a server. That’s the joy of digital. If it has been on a server, it is traceable and trackable. That means it is easily reported in sales. (Not that the publishers will agree with that because then they might actually have to pay accurate royalties.) But that also means if an e-book is sold as “used”, it will be equally traceable and reportable. That ought to mean more money to authors.

Now, the reality of the situation is that for that to happen, there are going to have to be contract changes on the publishing end. Changes in the contracts between the publishers and Amazon and also between the publishers and the authors. Am I the only one who can see publishers rushing to redo contracts with Amazon in such a way that these resells bring money into the publishers’ coffers and yet not redoing contracts with authors to make sure they get additional money? Remember, these are the same publishers who have been known to report the exact same e-book sales numbers to authors for multiple titles, quarter after quarter. These are the same publishers who say they can’t accurately track e-book sales because, duh, they are digital and physical and we know what a good job they do on print books (snark meter is about to break).

But, no matter what Amazon plans, it isn’t going to happen overnight. This is a patent. It doesn’t mean the technology is in place and ready to go. It doesn’t mean Amazon’s corporate lawyers aren’t telling Bezos and company they need to make sure all the t’s are crossed and i’s are dotted. Not that it will stop the Amazon haters from crying “foul” again. You have to ask yourself if Barnes & Noble had filed the patent, or if Apple had, if these same folks would be pointing their fingers and lighting their virtual torches. I doubt it, especially if the announcement had come from B&N. But then I’m a cynic. Sue me.

Space Marine!

Sorry, couldn’t help it. VBEG.

What do you think? Should we send the space marines in to knock some heads together in publishing and drag it, kicking and screaming if necessary, into the current century?

Will another one bite the dust?

One day, I’d love to be able to sit down and do the research for my next MGC post and realize legacy publishers hadn’t just done something to make me want to bang my head against the wall. For one thing, my head hurts. For another, I have a very hard head and I’m getting tired of having to patch the sheetrock where I keep beating holes in it.

This week’s head-to-wall experience began by reading an article in one of our local papers about the trouble our libraries are having with legacy publishers over e-books. We’ve discussed this before, but it bears repeating. Of the big six publishers (Macmillan, Penguin, Simon & Schuster, Hatchett, Random House and HarperCollins) only Random House and HarperCollins sell e-books to libraries. HarperCollins may express devotion to libraries, yet it lets an e-book be checked out only 26 times before a new “copy” must be purchased. And, oh yeah, libraries pay a hell of a lot more for their e-books than you and I do.

The understatement of the article appears when the reporter comments, “The publishers won’t come out directly and say it, but the reason may be that they believe that people who can read a book for free won’t buy it.”  I have no doubts this is exactly what the publishers think. They are scared of e-books, even as they see e-book revenue increasing. They are scared of them because e-books mean a change in their market shares and a change in their business plans and, let’s face it, no one likes change, bean counters and ivory tower sitters least of all.

But what publishers miss by taking this stance with libraries is that there is no difference between borrowing an e-book and borrowing a hard copy of that book. If people try a new author — or go back and try a new book from an author they used to read and stopped reading for whatever reason — and they like what they read, they will buy other books by that author. Libraries are a revenue driver for publishers. By hamstringing libraries regarding e-books, these same publishers are hurting themselves and this, ultimately, hurts their authors.

This takes on an even greater importance when you look at the latest survey out of this year’s BEA. There was a 100% year-over-year increase in publishers reporting that at least 10% of their annual revenue comes from e-book sales. Add to that the fact that four out of five publishers are now releasing e-books and it is clear e-books are not only here to stay. Yet, legacy publishers continue to shoot themselves in the foot by doing their best to keep a major outlet for e-books tied up and out of the hands of readers.

Okay, I know. Someone’s going to point out that Tor/Forge is going DRM-free and is even opening its own e-bookstore soon. With all the hoopla that surrounded the initial announcement, you’d think no publisher had ever gone DRM-free before. Well, this is where I call bullshit. Sorry for the language, but it’s the truth. Baen has been selling their e-books free of DRM for more than 10 years. Ten years in which all the other publishers, and more than a few authors, condemned them and told them how wrong they were. Those who are active on Baen’s Bar remember the failed experiment with Tor several years ago where Tor books were offered for a very, very, very short period of time in Webscriptions (Baen’s online store) before being pulled because upper management at Tor’s parent company got cold feet. So pardon me if I’m not exactly as thrilled about the announcement as some of the others. Nothing new, nothing groundbreaking.

Look, let’s be real. There is absolutely no reason for a publisher, big or small, not to have its own webstore. Not in today’s computer age. But, being the paranoid skeptic that I am, all I can see from the Tor store is yet more issues with keeping an accurate count of the number of e-books sold. Look, legacy publishers can’t give their authors an accurate count of hard copy books sold even though they should be able to track without any problem the number of books printed, number of books sold to bookstores, number of books returned. But they can’t handle that simple accounting issue, relying instead on a third party they pay big money for and that only estimates at the number of books sold. Of course, the fact that those estimates run in the publisher’s favor instead of the authors’ may be why.

And then there’s the response to the price fixing lawsuit the Department of Justice filed against Apple and five of the big six publishers. BN argues that the proposed settlement will not only cause prices to increase for e-books, but that it will harm just about everyone who ever considered an e-book and will void agency agreements in use in other industries. The problem with this is that the proposed settlement doesn’t void agency agreements as a whole. In fact, it is noted that agency agreements can be entered into, immediately by non-defendants in the suit and ultimately even by the named defendants. No, the problem with agency agreements in this instance is the alleged collusion that took place between the defendants. Once more, those who see Amazon as the great evil that must be destroyed, are doing their best to play smoke and mirrors, hoping beyond hope to confuse the issue.

Folks, I’m tired. I’m tired of the legacy publishers treating readers like criminals. What other reason is there for the continued use of DRM, something that doesn’t work to begin with and that only adds to the cost of an e-book?

I’m tired of legacy publishers treating their authors like dirt, and worse. The inclusion of contractual clauses that can tie an author to a house forever and never let them write for anyone else smacks of the old studio policies in film in the 30’s and 40’s. I have visions of publishers trying to be paid by other publishers to “loan” out an author, whether the author wants it or not. And let’s not forget that the author, the creator of the product, gets paid less than minimum wage for their work and will never get an accurate accounting of his sales without demanding an accounting and being willing to take the legacy publisher to court to get it. Frankly, until a group of authors band together and file a class action law suit to do just that, it’s not going to happen because of the expense of litigation these days and because so many authors still operate under the belief that they will be blacklisted if they dare question their publisher.

Folks, wake up. Authors have other avenues available to them now. Instead of authors being worried about being blacklisted by publishers, it should be the other way around. Publishers should be worrying about what’s going to happen to them when the authors they’ve relied upon for years to make them money suddenly taken control of their own publishing lives and wave goodbye to the legacy publishers. THAT is what should have the publishers shaking in their boots instead of the growing popularity of e-books. Without the mid-listers that have been consistent money-makers for them, and the best sellers who have the name to bring in sales even if the book is only mediocre (at least until word of mouth gets around), publishers can’t survive with newbies and unknowns.

I’m tired of authors acting as sock puppets for their publishers, especially with regard to the DoJ law suit and the proposed settlement. Instead of parroting what their publishers and agents tell them, they need to read the pleadings for themselves. Yes, your eyes will cross. Yes, it’s boring because it’s legal writing. But until and unless you read it, and read the responses to it, all you are doing is parroting what others tell you to say. I don’t care if you are for or against it afterwards. But for Pete’s sake, make an informed decision and quit doing the knee-jerk thing just because you want to please your publisher.

I’m tired of media and blog coverage that crows loud and long when something like the Tor announcement comes along, proclaiming it a major new development in publishing. Nope. It’s not. Not when Baen has been doing it for more than ten years. Not when other publishers, publishers that might be smaller than Tor but publishers nonetheless, have been doing it as well. Tor isn’t breaking any new ground here. All they are doing is following in the steps of others before them. And yet, to read the coverage of it, you’d think no one had ever sold a DRM-free book before, much less had their own webstore.

I’m tired of publishers treating me like a crook because I want to read my e-books across different platforms and in different formats and the only way I can do it is to either buy multiple copies of the same book in different e-formats or break DRM. I won’t tell you what I do beyond saying I have all the apps on all my devices.

Basically, it all comes down to this: there are a handful of publishers that have controlled the business for decades who are now running around like Chicken Little, scared the sky in falling. Instead of embracing the new technology and trusting their customers, they are digging in and doing their best to resist change. They are being enabled in all this by the media, which is facing much the same challenges and is even more scared than are the publishers, and authors who have their own reasons for not embracing the changes. Until these publishers either pull their heads out of the sand, tear up their current business plans and start forward-thinking instead of not thinking, and until they start treating their authors as partners in the venture, things will continue to look dark for them.

And it doesn’t have to.

Publishing will survive this upheaval called e-books. There will always be print books, but their market share will continue to fall over the upcoming years as more and more people turn to digital formats and as the price of print books continues to increase. They will become a niche market like e-books used to be. What may not survive, at least not in their current configurations, are the large publishers. They have some very hard decisions to make. It’s up to them to decide whether to make them now or to wait until it is too late and they go the way of other companies like Borders.

Until then, I’ll stick to small presses and self-publishing.

 

The Glamour’s Worn Thin

by Amanda S. Green

I’m a little late posting this morning because I’ve been going round and round about what to write. Dave did such a wonderful job yesterday discussing his thoughts on Mike Shatzkin’s blog about what he thinks will happen if the Department of Justice’s possible antitrust investigation into Apple and five of the big six publishers causes the agency pricing model to disappear. I’ve already covered my thoughts on Scott Turow’s letter about the issue. Then I made the mistake of reading some of the comments from the “enlightened” on it and, well, you guessed it. I’m weighing in again on the issue.

I’ll admit, part of the reason for this post is a thread started by what I can only term a publishing troll on one of the boards I read every morning. This person posted a defense of big publishing comment that included a statement that the people “attacking” legacy publishing are doing so because they don’t have the talent to be published by a “real” publisher.

I beg your pardon? Oh, and that grinding sound you hear is the sound of the teeth of innumerable mid-listers who have suddenly been cut loose by their publishers because, even though their books are still on the shelves more than a year after publication and even though there are continued demands from their fans for more in a series, the publisher claims they just didn’t connect with the public. And that evil laugh you hear is me as I contemplate what will happen when these same mid-listers, free of the fear of upsetting their publishing masters, finally demand full audits and the publishers are caught between a rock and a hard place because of their “creative” bookkeeping methods.

So, yeah, I’m in a pissy mood this morning. I’m tired of legacy publishers thinking they can pull the wool over the eyes of authors who should know better. I’m tired of them also thinking readers, those good folks who buy their products, as so dumb they can’t see what is happening. With that in mind, I’m going to revisit Shatzkin’s blog and some of the sources it cites.

From the opening paragraph:  But if this does mean the end of the agency model, it would seem to be a cause for celebrating at Amazon and a catalyst for some deep contemplation by all the other big players in the book business.

Duh. Of course it will be “a catalyst for some deep contemplation”. The problem is, they should have been doing this “deep contemplation” years ago. Market trends and technology have been changing for the last three plus decades and yet the publishing industry hasn’t really embraced these changes. The publishers should have been concerned when the big box stores came onto the scene and forced the smaller, locally owned bookstores out of the market. But publishers weren’t. Oh no, not at all. They embraced these new stores, loving the fact they could do larger orders and write bigger checks. But now, with the economy and other trends causing these large stores to close down, publishing is running scared and blaming Amazon for the problems faced by these brick and mortar stores. But the truth of the matter is, Amazon is only one small part of the whole equation. Unfortunately, neither the big box stores nor publishers did any “deep contemplation” before things became so bad their entire companies are in danger of failing.

Agency pricing, for those who have not been following the most important development in the growth of the book market, enabled the publishers to enforce a uniform price for each ebook title across all retail outlets

Okay, pardon me while I laugh for a bit. Is he really saying agency pricing is the most important development in the growth of the book market? Sorry, but no. E-books are the most important development in the growth of the book market. If you’ve followed the sales numbers over the last few years, the only segment of the market to consistently grow, usually in triple digit percentage points, has been e-books. The only thing agency pricing has done is artificially inflate the price of certain e-books and that, in turn, has opened the market to small press published and self-published e-books.

This was Apple’s desired way to do business, and it addressed deep concerns the big publishers had about the effect of Amazon’s loss-leader discounting.

Okay, whether he meant to or not, he just admitted that agency pricing is something dreamed up by Steve Jobs and agreed to by five of the big six publishers. And, if you read the link included in the quote above, you will see this wonderful piece of logic from Macmillan: The agency model would allow Amazon to make more money selling our books, not less. We would make less money in our dealings with Amazon under the new model. Our disagreement is not about short term profitability but rather about the long-term viability and stability of the digital book market. Am I the only one to see all sorts of wrong in this statement? How in the world is lower profits for the publisher–which would mean less money for authors under most contracts–be good for the publisher? How is this sort of an agreement going to safeguard the “long-term viability and stability of the digital book”? It makes absolutely no sense. My opinion is that they went along with this because they wanted into iBooks/iTunes and the only way to do so was to accept Steve Jobs’ terms and that meant forcing Amazon, B&N and other e-book retailers to adopt the agency pricing model. Remember, the key to the agreement with Apple was that these publishers would not allow their e-books to be sold for less anywhere else. So Amazon isn’t the only market where these publishers would be making less money. Funny how folks seem to overlook this little item.

Back to Shatzkin: Although the WSJ article and Michael Cader’s follow up in Publishers Lunch make no “agency is dead” declaration and there are quotes from publishers and others indicating that there are a range of possible outcomes, including a version of agency that is modified to allow some discounting, everybody in the industry now has to contemplate what it would mean if the agency model is legally upended.

Again, why weren’t they already considering this? For one thing, the contracts signed with Amazon, B&N, etc., weren’t for perpetuity. There would soon be a time when they came up for renegotiation. For another, The European Union, not to mention more than a few states’ attorneys general, were already looking into the legalities of agency pricing. The fact that the industry hasn’t been considering “what ifs” simply shows how out of touch it is with the reality of the market these days.

To Amazon, it would mean they would be free to set prices on all books again, including the most high-profile and attractive ones that come from the big trade houses. That is an opportunity they are likely to seize with loss-leader discounting of the biggest marquee titles.

Ah, evil Amazon. Conducting its business as, gasp, a business. The ability to sell a product wanted by the public at a lower price has been an age-old tactic of shop owners and merchants. It gets folks through the doors, be they physical doors or cyber doors. And isn’t this basically what the brick and mortar stores did when they burst onto the market? They were able to price hard covers much less than the mom and pop bookstore could. That’s why the public initially loved these larger stores. It’s also why publishers loved them. These lower prices meant more units being sold. Funny how the publishers have forgotten that.

To Barnes & Noble, it would mean they have to devote cash resources to ebook discounting that they might have preferred to dedicate to further development of the Nook platform, maintaining the most robust possible brick-and-mortar presence, and improving the user experience at BN.com. 

This very well may be true. The problem with this statement is that it omits the part about BN waiting too long to enter the e-book market. It forgets that BN spent too much time selling third-party e-book readers instead of developing and putting on the market its own e-book reader. It also ignores the fact that the BN online presence is not user friendly, especially not when it comes to e-books. It also lacks the vibrant online community Amazon has built.

Unconfirmed stories abound that B&N is about to announce an international expansion. Whether that will produce cash flow immediately or require it for a while is not yet known. For B&N’s sake, it would always better if it were the former, but if they’re about to fight discounting wars, it might be critical.

I seem to be saying, or at least thinking, “too little too late” a lot as I re-read Shatzkin’s post. BN needed this international expansion long ago. The fact that it may, finally, occur probably is too little too late. I’ll note here that this possible expansion is for e-books, not brick and mortar stores. Again, why has it taken this long? I’ll also note that the source Shatzkin cites is from August of last year. So far, to the best of my knowledge, that expansion has yet to occur.

To Kobo, it would mean that they also will need to devote cash resources to subsidizing price cuts to match Amazon. With their new ownership by Rakuten, they should have the capital they need to fight this battle. They must be glad that deal got done before agency was upended.

Nope, sorry. For those of you familiar with Kobo, you know they don’t always match Amazon prices. There are a number of titles Kobo offers for substantially higher prices than the same title is offered for on Amazon. And, before you ask, I’m talking about legacy published e-book titles. So I don’t see them trying to match prices with Amazon except on certain titles.

To Google, it would mean that the bookstore service piece of their ebook business will suddenly be highly challenged. Many independent stores might be pushed out of the ebook game completely; it certainly would be extremely difficult for them to support competition with Amazon’s prices. To Google itself, with their new Google Play configuration, it means they will have to both spend more margin and more management energy to be a serious competitor in the retail marketplace. There’s no clear evidence that they have the interest at the top to do that, although they certainly would have the resources.

Yes, I’m laughing again. Google’s e-book business is already highly challenged. They’ve dropped the number of stores able to take part in their program. Their interface for authors and small presses leaves a lot to be desired. As for Google Play, why is Amazon the only reason they would have problems? Doesn’t Shatzkin remember a little company called Apple and its iTunes store? Or does he not see the parallels between Google Play and iTunes?

To Apple, it would mean that their entire iBookstore model is in question. They apparently didn’t want to take on all the normal responsibilities of a merchant, which would include setting prices. Now they may have to.

Oh, cry me a river. If Steve Jobs hadn’t presented the agency model to publishers and said “accept or else”, we’d not be having this discussion. But then, I’m just a bitter small publisher employee who can’t put our e-books directly onto iTunes/iBooks because we use PCs and not Macs, something required to use their interface. And, btw, they are the only storefront for e-books that we’ve come across that requires a certain computing platform in order to upload a file.

To all the big publishers, including Random House (the one of the Big Six not being sued, because they stayed out of agency for the first year and therefore were not considered part of the “collusion”) it would mean that they will have to painfully reverse the re-pricing and systems adjustments they went through to implement agency in the first place.

“Painfully”? How can it be painful if they can return to a pricing model where they made more money? Remember the quote from the Macmillan post above. It was admitted then that agency model pricing meant less money for publishers.

Smaller publishers and distributors might be beneficiaries if agency is eliminated, but they might not. The agency model is a great advantage for those publishers who are able to fully implement it. But that is only six publishers — the Big Six — because Amazon has simply refused to let anybody else sell to them that way.

I ask again, how is ia great advantage for publishers when these same publishers admit they don’t make as much money from agency pricing as they did before? As for Amazon refusing to let anyone else use agency pricing, good for them. It means Amazon is looking out for the economic well-being of the company and making sure it keeps its shareholders happy. It also means Amazon is looking out for its customers. But that’s a bad thing I guess because, gasp, it isn’t saving legacy publishing from the follies of the boardrooms in NYC.

That creates problems for the smaller publishers but an even more threatening one for distributors. All but the Big Six, if they want to sell to both Amazon and Apple, must operate a “hybrid” model, selling Apple on agency terms and Amazon on wholesale terms. The two are inherently in conflict. What is ultimately a threat to the distributors is that distributees that desire agency terms, and many would. might seek distribution deals from one of the Big Six. (It might be coincidental, but it is worth noting that IPG, the company having a fight with Amazon at the moment over terms, is a distributor.)

Okay, here is where I have to watch myself. It doesn’t create a problem for small publishers. We set our own prices both with Amazon and with Apple. If one lowers the price for promo reasons, the other can and does the same. As for the two being inherently in conflict, thank Apple. As noted before, Jobs required the first five of the big six to accept agency pricing or not sell in iBooks. Blaming Amazon for something it had no control over is ridiculous.

As for the threat to distributors, get real. I’ll admit distributors have a role in publishing, but not when it comes to e-books. Sorry, but there is no reason a small press has to use a distributor to get into Amazon or BN. The process is simple and relatively pain free to upload titles to either of these stores. Given the proper Apple computer, I assume it is for iTunes/iBooks as well. So I have no sympathy for IPG or other distributors moaning the fact Amazon won’t let them go to agency pricing. As an author I have even less sympathy because I know publishers take out the cost of distribution before figuring royalties. Why would I want to lower my already too small royalty payments?

Of course, we don’t know how the Big Publishers will respond if they’re forced off agency. It’s long been my opinion that the 50% discount for ebooks is unworkable. It leads to ridiculous and unrealistic retail prices. (Publishers operating on the hybrid model have to have two retail prices: one on which to base the wholesale discount and another at Apple operating agency-style. It’s crazy.) Would the big publishers, if they couldn’t do agency, keep the 30% discount and their current prices? Would they go back to the 50% discount and jack the suggested retail prices back up? If they did the former and nothing else changed, the smaller publishers could be at a much greater disadvantage than they are now.

Ah, the economic double-speak. First of all, small publishers won’t be at a “much greater disadvantage” because we will still be pricing below major publishers. Why? Because our overhead is much smaller. Also, for those of us with a limited paper-side publishing, we aren’t trying to artificially prop up the hard copy publishing arm with the digital arm. And that is exactly what the legacy publishers are doing. They are trying to use their e-book sales to keep the print side alive.

The other thing Shatzkin keeps overlooking is the fact that publishers aren’t making as much per sale under agency pricing as they did before. So, going back to the previous pricing method would actually give them more money in their pockets. How that is a bad thing, I don’t know.

Over time, the biggest losers here will be the authors. The independent authors will feel the pain first. Agency pricing creates a zone of pricing they can occupy without much competition from branded merchandise. When the known authors are only available at $9.99 and up, the fledgling at $0.99-$2.99 looks very attractive and worth a try. Ending agency will have the “desired” effect of bringing all ebook prices down. As the big book prices are reduced, the ability of the unknowns to use price as a discovery tool will diminish as well. In the short run, it will be the independent authors who will pay the biggest price of all.

This guy really should try his hand as a comedian because he’s killing me here. First of all, do any of us really see legacy publishers pricing their books under $5.99, much less as low as $2.99? And let’s forget about the fact that they already have e-books in the $7.99 range.  The loss of agency pricing will simply allow best sellers and new releases to come down in price to something more readers will be willing to pay. This will be, in my opinion, back in the $9.99 range and there simply aren’t that many self-published or small press published titles that are in that range.

With regard to his comment that the lower prices will make it harder for “unknowns” to price their titles low enough to be discovered by the average reader, wrong again. I would be very surprised if legacy publishers will price any book, much less a new release, at less than $7.99. Remember, they are using e-books to prop up their print divisions. If they price low enough to shut out these so-called “unknowns”, they will have to do some major cost cutting somewhere and that isn’t going to happen. They like their plush offices and they’ve already cut out or outsourced so much of the editorial process that it isn’t funny.

But, in the long run, all authors will just get less. They will join the legion of suppliers beholden to a retailer whose mission is to deliver the lowest possible price to the consumer.

Authors already get less. Most authors are not paid royalties based no cover price, not really. Publishers take out expenses. So, if an e-book has a price of $12.99 and the publisher gets 30% of that under agency pricing, that starts the share of the pie the author gets to look at at $3.90. Believe me, the author is not getting much of that at all. Once more, I remind you of what the Macmillan post said. Agency pricing means less money for publishers than the previous pricing plan paid. Less money for publishers means less money for authors.

Seth Godin has recently made the argument that this is simply inevitable. Perhaps it is. The laws of supply and demand would support that contention. But from my personal perspective, I don’t like seeing the government hasten the process along.

Could this be because he works with/for publishers? I am not, and never have been, one to want our government interfering in business. However, we do have laws and the Department of Justice is tasked with upholding these laws. If there has been collusion between the publishers and Apple — and I think it is pretty clear there has been — then those laws need to be applied to them.

The truth of the matter is simple. Agency pricing has hurt publishers and hasn’t done what they wanted–it hasn’t saved their print divisions. Those sales continue to fall while e-book sales continue to rise. Amazon is not the only reason for the problems publishers face. Despite what one commenter on the thread that got me started on this this morning said about publishing’s business model not being broken, it is. Until legacy publishers address ALL the issues facing them and not just try to save things by artificially inflating e-book prices, the industry will continue to flounder. Just a few of the issues they need to address are:

1. the failure of agency pricing to do as they wanted

2. low royalty rates to authors

3. cutting of mid-list authors, traditionally the work horses of the industry, as a cost-cutting means to allow them to continue paying higher advances to their so-called best sellers (note here that those advances have fallen just as have the advances to mid-listers)

4. lack of push or promotion for books

5. decline of physical bookstores (yes, Amazon has had a hand here, but so has the economy, over-expansion of the big box stores after pushing the locally owned stores out of the market, mismanagement of the big box stores, etc.)

6. decline in the quality of their product (publishers have cut their editorial staffs, often use interns to do copy edits and proofreading, lower quality bindings and paper, etc)

7. economic downturns that have people unable or unwilling to pay $10 for a paperback or $30 for a hard cover

There are a number of others as well. But agency pricing is not the savior of the industry. Amazon is not the big bad that a few outspoken publishers and authors would have us believe. Publishing is plagued by what could almost be termed a perfect storm, a combination of factors that it failed to see coming and that it has failed to effectively deal with once those factors could no longer be denied.

 

(cross-posted to The Naked Truth and here)

Dice are rolling, the knives are out

by Amanda S. Green

Let me start with an apology to Sarah for channeling the soundtrack to Evita this morning. But, as I try to put this post together, that scene from the musical is what comes to mind. Except this time, the players are the big publishers and Apple. The publishers, in the role of Juan Peron, are worried because the Department of Justice is now–finally–doing what several states’ attorneys general and the European Union are doing: investigating them for price fixing. Apple is cast in the role of Evita, reassuring Peron that nothing will happen, even as the world is crumbling around them.

A little background first. Several days ago, the Wall Street Journal reported that the Department of Justice had warned Apple and five of the big six publishers that it planned “to sue them for allegedly colluding to raise the price of electronic books.” The five publishers are:

  • Simon & Schuster Inc.
  • Hachette Book Group;
  • Penguin Group (USA);
  • Macmillan;
  • HarperCollins Publishers Inc.

The article goes on to say that at least some of the publishers have been in talks with the DoJ. These talks have not yet resulted in any agreement between the parties. In fact, Apple Insider reports that the talks have taken “many turns” and that any sort of agreement is still a long way off. According to the Wall Street Journal, the investigation stems from the fact that Steve Jobs, wanting to secure the new iPad’s place in the market “suggested moving to an “agency model,” under which the publishers would set the price of the book and Apple would take a 30% cut. Apple also stipulated that publishers couldn’t let rival retailers sell the same book at a lower price.”

The allegation of Jobs’ trying to stifle the market is strengthened by information included in Jobs’ biography by Walter Isaacson. Specifically, by the following quote: “We told the publishers, ‘We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway.”

All of this comes on the heels of a class action law suit against Apple and the publishers alleging price-fixing and the EU’s anti-competition investigation into the agency model of pricing.

Needless to say, the cries of “foul!” have arisen, not in support of the consumers or even in support of DoJ enforcing the country’s anti-trust laws. Now, the cries have come from the same folks who have been so vocal in the Amazon is Evil diatribes. Without knowing the full reasons behind the DoJ investigation, without knowing just how deep the alleged collusion might run (assuming there is collusion and, in my opinion, there is), these writers are saying DoJ is looking at the wrong party. No, Amazon is the bad guy. Quit picking on the saints of publishing and its savior. Okay, maybe they don’t say exactly that, but it is what I read between the lines.

I was going to let this slide with nothing more than a passing mention in my regular Tuesday post . . . until I read Scott Turow’s open letter over at The Author’s Guild. Like any good author, he tugs at the heartstrings with the header for the letter: Grim News. Talk about a hook. But, in my opinion, it all goes down from there. Bear with me as I go through parts of the letter.

Yesterday’s report that the Justice Department may be near filing an antitrust lawsuit against five large trade book publishers and Apple is grim news for everyone who cherishes a rich literary culture.

So, I guess it’s okay for publishers and distributors to do whatever they want, break whatever commercial laws they want as long as we maintain a “rich literary culture”. It’s also all right, apparently, to do so even if it is screwing the readers who buy your books. Let’s forget about the fact that books sales continue to plummet and that the agency pricing model was supposedly put into place in order to save the hard cover sector of the industry. That’s worked real well, hasn’t it? (yes, the snark meter is starting to go off).

The Justice Department has been investigating whether those publishers colluded in adopting a new model, pioneered by Apple for its sale of iTunes and apps, for selling e-books. Under that model, Apple simply acts as the publisher’s sales agent, with no authority to discount prices.

True, Apple is acting as a sales agent. But, what Turow seems to forget is that this is a role Apple took to the publishers and said it would fulfill IF they agreed to Apple’s terms and IF they agreed not to allow their titles to be sold for less anywhere else. Gee, that sort of sounds like price fixing to me. But then, I’m just a writing hack, not one who will ever put out anything to enrich our “literary culture”.

We have no way of knowing whether publishers colluded in adopting the agency model for e-book pricing.

Again, true. None of us were in the room with Steve Jobs and the publishers. However, we can infer based on the evidence we’ve seen. Oh, and then there’s that pesky quote from the Isaacson book. But let’s not muddy the waters with reasonable inferences and the evidence of Jobs’ own words.

We do know that collusion wasn’t necessary: given the chance, any rational publisher would have leapt at Apple’s offer and clung to it like a life raft.

Just because it wasn’t necessary doesn’t mean it didn’t happen. And, correct me if I’m wrong, but isn’t Turow saying here that those publishers not adopting the agency model were evidencing irrational behavior?

Amazon was using e-book discounting to destroy bookselling, making it uneconomic for physical bookstores to keep their doors open.

There it is! The Amazon is evil and the source of all of publishing’s problems. Now, before you start objecting, I know Amazon isn’t pure. No company is. However, the problems facing bookstores started long before Amazon. They started when the big box stores arrived on the scene. They came in and, with their ability to buy in volume, put the locally owned bookstores out of business. Then they built too many stores. Then the economy took a downturn. Then the economy started an upswing and Amazon took off. Did Amazon have an impact? Sure. But it wasn’t the big bad guy so many want to make it out to be.  But I’ve blogged about this before and won’t go in-depth into it now.

Just before Amazon introduced the Kindle, it convinced major publishers to break old practices and release books in digital form at the same time they released them as hardcovers. Then Amazon dropped its bombshell: as it announced the launch of the Kindle, publishers learned that Amazon would be selling countless frontlist e-books at a loss. This was a game-changer, and not in a good way. Amazon’s predatory pricing would shield it from e-book competitors that lacked Amazon’s deep pockets.

Wait a minute. What other players? There were no real players at the time, certainly not with a dedicated e-reader. Sorry, I don’t count Sony because the general public wouldn’t think to go to a Sony site to buy books of any sort. Did Borders have a digital sales site at that time? No. In fact, remember the first time Borders did list digital sales? It didn’t sell the e-books itself. No, it linked over to Amazon. Barnes & Noble didn’t have digital sales at that time. In fact, the leader in the e-book sales foray was Baen and Jim Baen was vilified for not only offering e-books but for doing so free of DRM.

Critically, it also undermined the hardcover market that brick-and-mortar stores depend on.

Again, Amazon is evil. It is offering a product at a price the public can pay. Sorry, publishers, but most folks can’t afford $30 for a hard cover and certainly not for several at a time. But, again, there are other issues as well. The big box stores didn’t pay attention to market trends and they overbuilt in urban areas, flooding the market and, therefore, decreasing each store’s market share. But let’s not allow logic to taint our thinking.

Amazon quickly captured the e-book market as well, bringing customers into its proprietary device-and-format walled garden (Sony, the prior e-book device leader, uses the open ePub format).

Oooh, and nothing here about the DRM the publishers insist upon or the limitation of the number of devices an e-book can be on. Oh, and let’s forget about the fact that this so-called ePub format was through Adobe and let’s see a show of hands of folks who can no longer read those files because you have switched computers and that computer isn’t “activated” for the old Adobe account.

We’ll skip a small bit here.

By the end of 2009, Amazon held an estimated 90% of the rapidly growing e-book market. Traditional bookstores were shutting down or scaling back. Borders was on its knees. Barnes & (sic) Noble had gamely just begun selling its Nook, but it lacked the capital to absorb e-book losses for long.

Again, all this was happening for more reasons that just Amazon and the Kindle. Although, I guess any good story needs a villain and Amazon has been dubbed it. I guess Amazon is responsible for the fact that Borders was badly managed and B&N took so long to get into the e-reader market. Remember, for months and months prior to entering the e-reader market, B&N sold other companies’ e-readers.  Then there is B&N’s less than ideal search engine. But, Amazon is evil.

Enter Steve Jobs. Two years ago January, one month after B&N shipped its first Nook, Jobs introduced Apple’s iPad, with its proven iTunes-and-apps agency model for digital content. Five of the largest publishers jumped on with Apple’s model, even though it meant those publishers would make less money on every e-book they sold.

Wait just one minute. Maybe I’m a bit dense, but where is the economic sense in agreeing to a deal that means these poor publishers “would make less money on every e-book they sold”? Am I the only one who sees a bit of a problem with that statement?

Publishers had no real choice (except the largest, Random House, which could bide its time – it took the leap with the launch of the iPad 2): it was seize the agency model or watch Amazon’s discounting destroy their physical distribution chain.

So, we are now doing the apples and oranges. Remember, folks, this was when these very same publishers were still saying e-books were a passing fancy that would soon go away. But that doesn’t matter, at least not to Turow and those who believe this link of bunk, because Amazon is the root of all evil, at least when it comes to publishing. As long as they have Amazon to blame, they can turn a blind eye to the poor business practices of the bookstores and publishers.

Bookstores were well along the path to becoming as rare as record stores.  That’s why we publicly backed Macmillan when Amazon tried to use its online print book dominance to enforce its preferred e-book sales terms, even though Apple’s agency model also meant lower royalties for authors.

So, even though print sales had been declining before the general upswing in e-book sales (and this means for Amazon as well as for the brick and mortar stores), Authors Guild sided against it’s members’ economic futures. Oh, I hear the cries that I don’t understand, but I do. AG, publishers and too many authors were ignoring market trends, just as they do now. The change in technology and customer demands scares them. But guess what, you adapt, you evolve, or you go the way of the dinosaurs. You don’t stand there like the little Dutch boy with your finger in the dike because, guess what, that dike is going to give way sooner or later. I’d rather not get caught in the flood and be washed away when it does.

Our concern about bookstores isn’t rooted in sentiment: bookstores are critical to modern bookselling.  Marketing studies consistently show that readers are far more adventurous in their choice of books when in a bookstore than when shopping online.  In bookstores, readers are open to trying new genres and new authors: it’s by far the best way for new works to be discovered.  Publishing shouldn’t have to choose between bricks and clicks.  A robust book marketplace demands both bookstore showrooms to properly display new titles and online distribution for the convenience of customers.  Apple thrives on this very model: a strong retail presence to display its high-touch products coupled with vigorous online distribution.  While bookstores close, Apple has been busy opening more than 300 stores.

The key to this is BOOKstores. Not stores that sell a few books. What Turow doesn’t address here is the fact that these same big box bookstores he is so intent on protecting don’t look and feel like bookstores any longer. Their staffs, on the whole, aren’t knowledgeable about their products. Books aren’t on the shelves long enough to build a following. Managers aren’t able to buy based on their market. No, their stock is determined by regional or, worse, national buyers.  Oh, the other thing he forget — the hue and cry that went up from those authors who see Amazon as the Big Evil when Amazon announced it was going to open a boutique bookstore. Gee, how dare Amazon open a bricks and mortar store even when that is what they say is needed to keep the industry alive. Double standard, no?

For those of us who have been fortunate enough to become familiar to large numbers of readers, the disappearance of bookstores is deeply troubling, but it will have little effect on our sales or incomes.  Like rock bands from the pre-Napster era, established authors can still draw a crowd, if not to a stadium, at least to a virtual shopping cart. For new authors, however, a difficult profession is poised to become much more difficult. The high royalties of direct publishing, for most, are more than offset by drastically smaller markets. And publishers won’t risk capital where there’s no reasonable prospect for reward. They will necessarily focus their capital on what works in an online environment: familiar works by familiar authors.

Again, true–but only to a point. Publishing, and agents, have been moving away from new authors for ages. Ask any of us who have been trying for years to get in. We get the nice, often personalized rejections saying how good our book is but there’s just no spot for it. And this is after it’s sat on a desk for months or years. Ask the mid-listers that have been the backbone of traditional publishing for ages. These are the authors publishers knew they could always count on for X-number of sales. Now, in order to take a risk on the so-called best sellers (who, btw, aren’t always), mid-listers are being cut loose. Basically, what Turow is describing here is an industry afraid of change and growing stale because it won’t take chances.

Let’s skip a bit here because it’s just more of the same.

Let’s hope the reports are wrong, or that the Justice Department reconsiders. The irony bites hard: our government may be on the verge of killing real competition in order to save the appearance of competition.

I guess my biggest issue with stances like the one presented by Turow is that, even though they say they are looking at the whole picture, they aren’t. Not really. What they are doing is trying to maintain the old order, even though that order has been in decline for decades. Do I want to see bookstores disappear? No. But the big box stores probably will. Does that mean the brand will disappear? Not if they are smart. What they need to do is go away from the high overhead, huge footage stores that they have to sell toys and knick-knacks, etc., to help meet the rent. Go to smaller venues where the bills are easier to meet. Return to local or regional ordering. Let stores stock what their customers want, not what some list across the country says they should be buying. Hire folks at a reasonable salary WITH benefits and knowledge about the books they are selling. Go back to thinking about the customer and not just the bottom line because, with the customers coming through the door, the bottom line will be taken care of.

Again, Amazon isn’t pure in this. It has had a hand in the continuing decline. But it isn’t the only cause.

But, what is telling and what every author should consider, is that this letter is supporting action that reduces the money publishers receive for e-book titles and that, in turns, means less money for the authors. Why are you supporting something that takes money from your pocket?

And, before you go back to the old saving the hard cover sales argument, ask yourself this: when is the last time your book was published as a hard cover? There simply aren’t as many hard covers being published anymore and, again, this trend started before Amazon. So, before you start lighting your torches and preparing the pyre for them, look at the issue dispassionately and think. Think about what is best for you in the long run. For me, the answer is simple: like change or not, we have to adapt or we will be left behind. That change, now, is making our e-books available at an affordable price and without DRM. It isn’t insulting our readers by trying to get them to pay more for a digital book than they would a hard copy version of the same book.

But then, I’m just a hack who knows what my bank account will allow me to do.